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In Virginia, A Workforce Housing Initiative That Works
 When a police officer cannot live in the community he protects, when a teacher must travel an hour each way to school or when a firefighter has to rent and never own a home, there’s a problem. These are also the signs of a workforce-housing crisis, and the Hampton Roads region is among those in the state that have one.
There is a way to overcome this problem, but it takes government officials who are willing to act. Since Virginia passed an Affordable Dwelling Unit (ADU) law in the late 1990s, local governments have actually had the power to enact workforce housing programs, but few, if any, have.
Why the lack of progress? It appears that most business and civic leaders have been unable to make the law work for everyone’s benefit. Further, there are a number of myths surrounding workforce housing that are slowing acceptance. For instance:
- Myth #1 — Workforce housing is anti-builder/anti-profit. Selling homes below market price is certainly not going to attract many developers, but a good workforce housing initiative doesn’t have to produce that result. A smart plan includes density concessions so the risk taker, the builder, can benefit financially.
Franciscus Homes recently created its own workforce housing program — Rainbow Solutions — and proposed that the city of Suffolk, which has adopted the ADU statute, permit its inclusion in the rezoning application of its Eberwine mixed-use project.
Of the 394 single-family and multifamily dwellings in Eberwine, 75 would be designated as workforce housing. Applicants whose income falls between 85% and 125% of Suffolk’s median income would qualify to purchase one of these units at 20% below market price.
- Myth #2 — NIMBYs will derail the project. We all know that there are people who oppose moderately priced developments in their backyard because they fear that they will be of poor quality or will not be maintained, thereby reducing the value of their own properties. Through an initiative like Rainbow Solutions, however, workforce housing can be attractively designed and appear the same as other homes in the neighborhood.
Unlike many existing neighborhoods, communities with workforce housing units can have condo and property association fees to assure the long-term upkeep of structures, grounds and streets.
The alternative of requiring a developer to set aside one section of a community with smaller, less-attractive and lower-quality homes to satisfy the workforce component is not acceptable to most policy makers. This not only polarizes residents but it plants the seeds for tomorrow’s mini-slums.
If a workforce housing initiative is to succeed, the untrained eye should not be able to tell the difference between the dwellings. At Eberwine, Franciscus will offer a variety of exteriors and floor plans, with workforce housing available within each home type. The workforce homes will be identical in exterior appearance to the market-priced homes.
Of course, creating a vision of a community is one thing. Building it is quite another. Many a project begins with the best of intentions, but along the way something happens. The developer fails to articulate his vision because of a number of reasons. The key to a successful follow-through and community acceptance is keeping the team together and ensuring that stringent standards are met.
- Myth #3 — Rather than qualified purchasers in the designated income range, investors will buy the workforce homes with the intention to sell or “flip” them. That cannot happen under Rainbow Solutions because purchasers of the workforce homes must agree to execute a “silent second” lien against the property at settlement. This is a source of protection for the community’s property values. It discourages speculators since the city (or holder of the note) would receive the lion’s share of profit from an early sale.
Under the plan, if a buyer sells the property in the first five years, he must pay the full amount of the silent second trust. From year six on, the principal amount drops 5% a year until it’s eliminated by year 25. Since most people will not stay in the home more than five to 10 years, this translates into significant revenue for the city that can be reinvested into more workforce housing programs.
- Myth #4 — A voluntary program might not attract enough builders to produce the necessary workforce housing. That depends on whether political and business leaders dedicate themselves to making workforce housing a priority by providing incentives and innovative programs like the one envisioned for Eberwine.
Everyone talks about the need for workforce housing. It’s the right thing to do, but doing it requires political courage and a vision on the part of city and county leaders as well as developers who share that desire. At Franciscus, we believe that as more localities realize the value of providing a workforce component, more and more builders will be attracted to participate. We’re ready for it, because a change in the law and the attitude toward these citizens’ critical housing needs is long overdue.
Frank Spadea is CEO of Franciscus Homes in Virginia Beach, Va.
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