Recommendations

County Stability


James City County has the economic horsepower to remain fiscally strong, but there are two potentially serious threats to the County’s stability:

First, the County’s economy is increasingly service-sector-oriented, but its housing market is not accommodating the workers on whom the continued success for many employers (Riverside Regional Hospital, Busch Entertainment, Walmart, Ball, Eastern State) depend. With more than 3,000 health care workers, nearly 4,000 in the lower end of the service and retail sector, another 3,000 in food and accommodation services, and more than 10,000 low- to moderate-wage workers, there is substantial demand for housing that is affordable17

About one third of workers in James City County (29.4% or 7,634) earned $7.81 per hour, which is $1,354 per month or $16,245 per year if they are working full time. A person earning $1,354 per month can afford $406 per month for housing at most. If they are doubled up with someone earning equal wages they can afford $812 per month. Housing that these workers can readily afford is scarce and the greater the distances these workers must commute to secure housing, the more vulnerable the County will be. The bottom line is that it takes an annual household income of at least $35,000 to secure decent housing in the County, and every worker falling under that line is a household that is likely to commute (and thus add to congestion) or under-maintain their housing (and thus contribute to a weaker tax base). Read more about how housing can impact local tax revenue.

Second, the County’s natural and historic setting, its charm and resulting quality of life, are among its most marketable attributes. These are all predicated on the preservation of open space and small town semi-rural life. These attributes are threatened in direct proportion to the degree to which auto-oriented, single-use development continues. Furthermore, persistent suburbanization of James City County carries not just the risk of undermining the County’s beauty and charm, but of both failing to produce a final product appealing to Millennials and further distancing service sector workers from employment centers.

The County’s goal should be to align the supply of housing in James City County, including price, quality, and location, with the County’s long-term economic interests. Jobs and housing should generally be co-located by policy. This co-location will reduce commuting pressures, and result in less pressure to develop remaining rural land. Undeveloped, rural land contributes to the County’s brand as a beautiful place to retire, visit and live. Employment-oriented, development with a mix of uses will reduce commuting pressures and increase the marketability of places attractive to Millennials.

Objectives


  1. The median combined housing and transportation costs for the average James City County household is between 46%-56% (HUD Location Affordability Index). This index score reflects generally affordable housing costs but high transportation expenses in the County. High transportation costs indicate that housing that is affordable isn’t located near jobs. Resolving this problem is an important step to ensuring long-range County economic vitality. Therefore, the County’s objective should be to reduce the median combined housing and transportation costs for the average James City County household. A future reduced average rate would be reflective of reduced household commuting costs and an improvement from today’s inefficient spatial distribution of housing and jobs that presently limit James City County’s economic potential. Learn more about the connections between housing and economic development here. This is a measurable objective in both absolute and relative terms.
  2. 3,340 households in James City County presently pay more than 50% of their annual income for housing; these are among 4,695 households that are housing cost-burdened (paying more than 30% of their income for housing). Many cost burdened households who are working in the service sector in James City County – and whose incomes are insufficient to commute significant distances across a county without transit – resort to substandard options. Others in substandard conditions frequently include the elderly on fixed incomes. Several hundred low-income working households in the County find housing in dilapidated mobile homes while many others secure housing in older, distressed single-family rentals, because these options are the only affordable ones near their job. For seniors, meager fixed retirement incomes translate into substandard conditions since the decision to pay for a house repair may mean going without food, clothing or paying for utilities. Therefore, an objective should be for the percentage of severely cost-burdened households in the County (11.39%) to be reduced each year. This is a measurable objective in both absolute and relative terms. Learn more about cost-burdened households in James City County.
  3. Many income-limited households in James City County live in substandard housing. In fact, at least 946 of the County’s residential structures (about 5%) are in poor condition. These units constitute a percentage of an existing supply of affordable housing, and if upgraded and preserved, they will be a tremendous inventory. However, such conditions often violate existing codes, reduce property values, and breed problems. Therefore, the objective should be to reduce the number of households living in marginal to substandard conditions by enabling households to upgrade these structures or to seek alternatives of better quality, or both. This is a measurable objective in both absolute and relative terms. Review the results of the driving field survey.

Strategies


In light of historic land use patterns (especially in the period 1975-2005), inherent private sector disposition to migrate upmarket where margins are greater, demographic changes, a shift towards tourism and service, and the resulting broader economic development challenges the County will now face, James City County has a three-fold housing imperative:
  1. Implement an incentive-based framework of housing development-oriented public policies that help encourage the private sector to jump in as a genuine partner and robustly participate in the co-creation of a full housing ladder, affordable housing options for all income levels. These incentives are essential building blocks for long term economic vitality in the County and are presently absent. Implementation would mean intentionally aiming to co-develop through public-private partnerships a bottom-to-top inventory of affordable options for both owners and renters that spans a range of building types, from single family to multifamily to mobile homes. Read more about housing and economic development.
  2. Implement sets of both land use policies and corresponding design guidelines that together set and clearly communicate public sector expectations about the location and quality of future development. This set of planning instruments is a critical part of the portfolio of tools the County needs to ensure land per housing unit ratios result in James City County being able to attract Millennials, finance infrastructure, and preserve open space – all of which are crucial to the County’s long-term vitality. The county must intentionally plan for future development, with the twin aims of co-locating housing and jobs, preserving the County’s natural assets, and stimulating the development of Millennial-attracting places. For example, Pennsylvania is in deep financial stress because decades of policies aimed at the short-term interests of retirees are now being expressed in bills that have come due in the form of infrastructure, excess housing, and too many submarkets unappealing to Millennials. Similar fates await Maine, Idaho, Arizona, Western New York and New York’s Southern Tier, and elsewhere. With the right tools and strategies, James City County can avoid following in their footsteps. Read more about Millennial housing preference.
  3. Implement aggressive catch up (zero out the deficit of affordable housing units in the County) and keep up commitments (establish a set of on-going inclusionary arrangements with developers that will result in any new market rate development coming on line along with appropriate ratios of affordably priced products). Such commitments are based on a tightly woven connection among public sector development incentives and public sector land use, plus development quality guidelines.
By committing to an aggressive catch-up and keep-up regimen, the County will – over time – reposition its housing stocks to be more marketable, and do so in ways that expand rather than constrain expansion plans for James City County businesses. This balance will keep the County center stage when it comes to tourism and retirement demand.

Such a commitment is predicated on a preserve the affordable stocks we now have principle, which we recommend be adopted as an amendment to the comprehensive plan, and further strengthened through amendments to the County’s zoning regulations in the form of inclusionary incentives. Preserving what already exists is always a lower cost approach.

By committing to catching and keeping up, the County will also make it possible for low wage and other service sector workers employed by James City County businesses to live near their work, reducing commuter pressures and lowering combined housing-transportation cost burdens. When such burdens are reduced, residents will be better positioned to invest more in their homes, ensuring long-range property value strength, the foundation for countywide fiscal stability. Right now, too many low-income households put the few discretionary dollars they have into food, transportation, and clothing, depriving housing stocks of essential upkeep.

Figure 1: JCC Goals and Objectives


Copyright 2016 czb, LLC
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Where to Start?

 

Rehabilitation of Existing Homes in Deteriorated Conditions 


Many low-income households in James City County – whether young families, work with low-wage jobs, new retirees or the elderly on fixed incomes (often with health care challenges) – live in substandard conditions. Raising the quality of these properties can be a place to start.
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By czb estimates, there are at least 82 dilapidated single-family residential structures built before 2000 in the County. Each will cost, on average, $50,000 to stabilize and bring to a habitable, though not necessarily readily marketable condition. Raising all to such a standard is potentially a $4.1 million decision. Instead of a $4.1 million one-time allocation, the County could aim to provide low-cost affordable financing and grants to low-income owner occupants of these structures at a rate of five per year ($250,000), securing a share of future equity that accrues to grant recipients. This work should be done in designated high value target areas. Upgrades should be facilitated using a combination of HOME and CDBG funds, grants as available from VHDA, and, from local resources. Whenever possible, upgrades should not be scattered, but co-located and concurrently timed. They should also be consistent with infrastructure upgrades. The objective is to help improve conditions for low-income households while enabling them to stay in their homes and retain their ownership positions. This way, they can also establish equity while strengthening the blocks they live on, thereby increasing the County’s fiscal stability and decreasing the pressure on low-income households to commute greater distances.

There are another 864 distressed homes in poor but not uninhabitably bad conditions; these will all trend towards complete distress, creating a large inventory of blight that will have negative consequences for the County. These, like the 82 in the worst condition, are generally scattered, but they do exist in clusters. To prevent these properties from further degrading, and to inoculate nearby properties against decline, it is important to strategically factor in the location of these worsening, at-risk properties. In that context, there are 3,385 average quality single-family homes within 500 yards of these distressed properties. In these instances, proximity to blight reduces property values and undermines James City County’s long term fiscal strength. It is strategically important to pay attention to these sites, where to cure a distressed property near one that is still healthy should take priority. It will always cost less to take a “4” property to a “3” condition than to mitigate the distress once it degrades to a “5”, which 100% of these properties are on course to do. Intervening is also an opportunity to preserve a sizable volume of affordable stock that now exists, and generally – and favorably – is located in a mixed-income market context. What the County absolutely does not want to wind up with is thousands of properties in degraded condition that, owing to their troubled state, function as a de facto portfolio of affordable but poor quality housing.

Redevelopment of Existing Low Quality Mobile Homes and Sites


Mobile homes provide a valuable affordable housing option for many in the U.S. and in James City County, which has more than 1,000. Often however, the condition of the mobile homes has deteriorated and they present health hazards, and are expensive to heat and cool. Review the results of the driving field survey of mobile and manufactured homes.

Planning for Long Term New Affordable Housing Development


The County should undertake a Master Plan for the corridor along the Merrimac Trail that intentionally aims to specify the construction of a meaningful volume of owner/developer-financed affordable workforce housing as a precondition for development.

An example of how the County might implement this plan can be illustrated by considering the County-led redevelopment of an older motel, executed in conjunction with the redevelopment (and establishment of a Land Trust) of a near-by mobile home park. 1940s-era one-story, garden-style roadside motels with short-term rental options that need attention and are located near low- and moderate- wage employers could be transformed into a 60+ unit mixed-income rental apartment complexes, with a quarter of the units priced for households between 30-50% of Area Median Income (AMI), another quarter of the units for households between 50-70% of AMI, and the remaining half of the units for households between 70-80% of AMI. Such a development would require significant incentives from the County ranging from low interest financing to tax waivers to density bonuses so that the private sector could profitably partner.
Czb and VCHR recommended that such incentives be conditioned on the following combination of public sector requirements:
  1. New developments need to be mixed-income with never more than 40% allocated for households with AMI < 50% and never with an allocation of less than 10%
  2. Equity contributions from the public sector that generate equity stakes that accrue to the public sector from future cash flow or sales proceeds.
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Policy and Development Actions


Existing Entitlements


czb recommends that the County commit to address its substantial legacy problem of 11,000+ entitlements. These are properties that retain development rights from an era preceding the current comprehensive plan and the current zoning code. These are fully vested rights that entitle current owners to develop their properties as previously allowed. The vast majority of these are permitted to be developed as PUDs consisting of single-family detached homes on large lots.
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The pause in consumer confidence owing to the recent recession accounts for many of these entitlements remaining undeveloped. Should demand return sufficient to prompt development of these entitlements, there will be implications for housing affordability in the County. On the plus side, if these entitlements are fully built out at median values, czb projects a more than $4.2 billion in taxable value and transactions, a basis sufficient to generate more than $36 million in property taxes annually. 11,000 households capable of such purchases could conceivably support 4 million square feet of retail that in turn could generate another $8.1 million in annual sales tax revenue. To illustrate the enormity of the consequences of such a build out, 2 Walmarts, 2 Home Depots, 4 full-sized grocery stores and a large number of smaller businesses that could theoretically employ more than 1,900 service sector workers at $9 an hour. The impacts of this build out are neither all good nor all bad, but the implication is clear. If 70% of new service sector workers doubled up, the County would still have a net increase in need for more than 1,290 affordable units with monthly rents or mortgage payments of less than $1,100.

The bottom line on legacy entitlements is that for every one hundred market rate single-family detached homes ($390,000) not yet built but now entitled, the County can expect need to materialize for 11.7 accompanying housing units affordable to service sector workers, defined as renting for $1,100 a month (or having a sales price of about $112,000). Policies should be crafted that anticipate this need and account for it, either in the congestion consequences, housing subsidy and necessary land area requirements, or both. Every unit short of achieving this ratio is likely to result in an increase in congestion, an increase in the profitability of below standard property, or some combination of both.

If the County were to master plan the Merrimac Trail’s 302 acres as moderate density, mixed-income and mixed-use development, roughly one in five units should be set aside as affordable for new service sector workers. These units would account for a large portion of the “keep up” challenge that will accompany legacy build out. To finance the development of almost 1.2 new affordable units for every ten at market rates, subsidies will be needed to bring monthly costs for the affordable units to a monthly rent of not more than $1,100. Affordable units for service sector workers should have per unit development costs of about $125,000 (for a total development cost of about $160 million).
Number of Entitlements (estimate) 11,000
Potential Sales Price 390,000
Potential Taxable Basis 4,290,000,000
Tax Rate 0.0084
Property Tax Gain 36,036,000
Income Needed 130,000
Retail Spending Potential 476,666,667
Tax Rate 1.7%
Sales Tax Gain 8,103,333
Potential New Commercial SF 1,588,889
Potential New Service Workers 1,986
Affordable Housing Demand (.65x) 1,291

Keeping Up Going Forward

  
Based on the ratio of needing roughly two affordable housing units (affordable for James City County’s future service sector workers) for every 17 market rate units, czb recommends that all future residential development be shaped along the following lines:

  1. For every 9 market rate rental units, one affordable rental unit should be co-developed, or the net present value of the total development costs for 1.5 affordable rental units will need to be paid into a housing trust fund. Rental housing developers should be encouraged to meet the inclusionary goals on site, to generate mixed-income results. For every 5 owner-occupied homes, the development should pay the equivalent of the total development costs for one affordable rental unit into a housing trust fund. To enable such ratios to be achieved while also ensuring profitability, favorable financing and density bonuses of 20% should be made available for projects that are consistent with the Smart Growth principles and locational goals established in the County’s adopted Comprehensive Plan.
  2. Virginia law makes achieving inclusionary goals difficult. For this reason, keeping up via a mandatory inclusionary policy is a durable strategy, but hard in practice. Fairfax County’s 1990 Affordable Dwelling Unit program resulted from court challenges to its 1971 inclusionary ordinance, and czb recommends that James City County adopt a similar program.

17 US Census (County Business Patterns); JOLTS – Bureau of Labor Statistics; Virginia Employment Commission (Quarterly Census of Employment and Wages)
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