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Washington area is short 40,000 homes affordable to average earners

Families are being priced out of the Washington-area housing market. Or at least they’re being driven to the far edges of the region and forced into long commutes to and from the area’s employment hubs. That’s the message in a new report about to be released by the Urban Land Institute’s Terwilliger Center for Workforce Housing.

It’s not exactly news to anyone of average income looking to buy a home in the area — or to drivers stuck on clogged local roads. But the Terwilliger Center report quantifies our misery — and says things are likely to get worse if someone (ahem, government) doesn’t do something to make it profitable for developers to build more affordable homes. Those homes would accommodate families earning between 60 and 100 percent of the area's median income and be located close to jobs in the region’s six employment cores: Alexandria (including Crystal City and Pentagon City), Bethesda, downtown Washington, Reston/Herndon, Rockville and Tysons Corner.

In the Washington area, 60 to 100 percent of the median represents a healthy paycheck. For a single person it’s $43,140 to $71,900; for a couple, $49,320 to $82,200; for a three-person household it’s $55,440 to $92,400; for four people it’s $61,620 to $102,700, and for five it’s $66,540 to $110,900. Almost a quarter of Washington-area households--what the report defines as the “workforce”--falls into these income ranges.

We now have a shortage of about 40,000 for-sale homes within a 30- 45-minute commute of those employment hubs that are affordable to people earning these incomes, according to the report. The report predicts that the shortage of affordable for-sale homes will grow by 5,000 units per year between 2010 and 2030. And recent declines in area home prices haven’t helped much, the report says, because housing close to those employment hubs took less of a hit than homes farther out in the suburbs.

What about all that housing development that has sprung up around Metro stations? Convenience makes them expensive — and much of that housing is geared toward singles, not households with children. The report says we have a balance or an oversupply of for-sale homes for singles in this income range in downtown Washington, Bethesda, Tysons Corner and Alexandria. However, they say there is not enough affordable housing for singles near jobs in Reston/Herndon and Rockville.

There’s some irony in the fact that this declaration that the close-in homes are unaffordable for a large swath of the population comes from the development industry itself--ULI is funded by urban planners and developers. But J. Ronald Terwilliger, founder of the Terwilliger Center and chairman of Trammell Crow Residential, the giant apartment developer, says the private sector can’t build homes for this market without government intervention. The land is simply too expensive to make the finances work for private-sector developers, he says.

“The problem, of course, is an economic one,” Terwilliger said in an interview. “You can either mandate it, or you can incent it.”

He’s proposing the mortgage-interest deduction as a source of revenue that could offset the cost of government incentives. “Eliminate the deduction for second homes, which includes boats, and restrict the ability to deduct interest,” he said. “That would be a way to pay for a tax credit for the workforce.”

By Elizabeth Razzi  |  October 29, 2009; 6:00 AM ET
Categories:  Buying , Neighborhoods , New construction , Statistics , The economy , The market  
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Ahh...the ol' "Bait and Switch". Land is too expensive to make it work for private sector developers huh?

I did a couple of deals with Pulte and Centex homes (once two different companies) during the 2000-2004 time frame. Part of the deal was that I "see the books", profit margins etc on similar product they were already offering in the area. They were consistently and unabashedly making profit margins of 30-50% on each and every one of their sfh and townhomes. Yep...for every townhouse that you bought for 500K out in Chantilly, it only cost them ~250K buy the land, design, permit and build. Multiply that by the 1000 or 1200 homes they would sell locally and that adds up to a bunch of profit.

Hey, everyone can make a profit and sell their wares for whatever someone will pay, but lets cut the crap shall we. Hedging your inability because of "expensive land" rather than the fact that you are simply greedy and need 30% 50% profit margins is just childishly disingenuous.

Posted by: Nosh1 | October 29, 2009 8:11 AM | Report abuse

Don't give me that its not affordable garbage. I had my condo-- 1br/1ba in Eckington for sale, for a modest 195k (VERY Affordable for anyone in the Federal Government like me, single wage). It is darn near right around the corner from the RI Ave metro (so commuting is a breeze) and not one person came to look at it. Not my problem if people want to be stuck in their cars. Of course, now that our neighborhood has been designated as a 'great streets initiative', I'm glad I held onto it.

Posted by: Aimhigh2000 | October 29, 2009 8:24 AM | Report abuse

Remove the height restrictions in Anacostia and start building condos, not luxury apartments, where those median income people get gouged at unrealistic monthly rates.

Posted by: anarcho-liberal-tarian | October 29, 2009 8:38 AM | Report abuse

And in other breaking news, that big yellow thing in the sky is called the "Sun" and provides light and heat to all living things.

Posted by: Axel2 | October 29, 2009 9:38 AM | Report abuse

I wonder how long the outdated 20th century model of work-life will persist in this country. All we hear about these days is global warming, energy crises, and on a local level, traffic, traffic, traffic. The solution to all of these problems is quite obviousy and within reach- teleworking. There is simply no need for 80% of the working population in this country to commute to an office every day. Office buildings are probably the least energy efficient edifices ever designed. They simply hemorage energy, and while you're at work, your furnace and air conditioner are busy heating and cooling an empty home. It's time to completely rethink the way we live and work. No more half-assed solutions like cap-and-trade or road expansions. Design homes with work centers. Invest in infrastructure technology and security. This is commmon sense.

Posted by: pswift00 | October 29, 2009 9:51 AM | Report abuse

Or maybe houses would be affordable if the government stopped propping up house prices.

Posted by: gene7 | October 29, 2009 9:59 AM | Report abuse

R u seriously trying to tell me there isn't affordable housing in silver spring, aspen hill, or wheaten. If poor immirgrant family's on minimum wage can afford to live there why cant the people who are forced to live exurbs

Posted by: skinsfan15 | October 29, 2009 10:39 AM | Report abuse

There is a new company that is changing the housing industry called AmeriSus. They will start selling smaller, affordable, super efficient, sustainable homes in 15 states including all of the surrounding DC area begining this coming january with the goal of 15,000 homes in 24 months. They have teamed with some of the biggest names in home materials and products and redesigned the process to cut out all the fat & profit in homes of traditional builders. As a start up their official new web site comes out around Thanksgiving. I'm told that they are viewed as a phenomoenal investment opportunity and without even starting sales or marketing they have 400 homes committed to.

Posted by: ritaf | October 29, 2009 10:39 AM | Report abuse

There are plenty of affordable ($200,000) single family homes in Prince Georges County. PG county has a bad reputation but it's changing. Many of the people looking for housing refuse to even look in PG county based on their impressions. I think you'd be suprised the great hidden gems inside the beltway with easy commutes in Prince Georges.

Posted by: davisdustin | October 29, 2009 11:19 AM | Report abuse

The other irony here is that housing prices have been dropping for the last couple of years, making housing more affordable. Since prices are dropping, many want the first time tax credit, which is propping up sales extended. Kill the tax credit and let the market sort it out. Buying a home is not a right. If it's too expensive, don't buy it. Look how well that's worked for the last 2 years.

Posted by: kaw11 | October 29, 2009 11:29 AM | Report abuse

I wonder if they took safety and crime into account? I think there is an awful lot of affordable housing in DC proper, but much less of it is in safe areas with good schools and grocery stores and such. So many neighborhoods are full of abandoned houses it seems, drive across NE, SE, SW and you'll see.

Posted by: mendelsonmustgo | October 29, 2009 11:39 AM | Report abuse

Nosh1.....sounds like our pay-czar needs to step in and lighten the take of the developers. I wonder what the homes the top executives of the local and regional developers look like, and where they are. Got any insight on this Nosh1?

Posted by: jsabol | October 29, 2009 1:01 PM | Report abuse

ritaf wrote:

ritaf, you had me until that last statement. As "a phenomoenal investment opportunity", that alone will not let such homes be affordable for long. The creators of this company will have to start answering to investors, who will demand bigger profits. That will start driving the low prices of these homes higher. Then these same start-up developers who were trying so hard to be altruistic, will then feel the need to raise their own salaries because of all the new hassles. Prices will go up on these "affordable homes" even more. Then comes the sell out to Lennar or Toll Brothers....

Posted by: jsabol | October 29, 2009 1:12 PM | Report abuse

kaw11 hit on it. The key here is:

---Decent schools

Right now PG County doesn't have that reputation, nor many areas of DC, like Anacostia.

Posted by: steve_o_2 | October 30, 2009 3:04 PM | Report abuse

Does the $8,000 tax credit not help with this and other problems we face as a civilization. I thought that was like the cure for all the problems --- free money falling from the sky!

The solution is simple .... allow people to borrow the amount builders need for close in areas. After 6 months [payments paid by builder as part of the sale - i.e. pricing is bumped to accommodate the 6 months of payments] - the person goes through debt restructuring and gets the loan reduced to what they can repay - as simple as that -- with that approach everyone can find what they want, where they want and we are all set!

Posted by: free_np | October 30, 2009 8:30 PM | Report abuse

We are a one-income family. We want to move back to D.C. so that I can find work again, but that is near impossible. If it wasn't for the nearly $400/mo that we pay for healthcare, I'm sure we'd be able to find a 2 or 3 bd apartment in a nice area, but as it stands now, every search we do is trying to put us in the worst neighborhoods in D.C. or P.G. to live. Why should we have to sacrifice safety and decent schools so that I can have an opportunity for a job? And no, we're not critical because of news reports or anything. We've actually lived in or near those neighborhoods or had to visit someone in those neighborhoods. Hell, in one of those neighborhoods, my hubby (before we got together) was heading home after walking a girlfriend to her home and a stranger cracked him in the head for no apparent reason. Just because. Those are the kind of neighborhoods we don't want to live in just because we can't afford to pay $1200/ mo.

Posted by: fantasyjoker | November 2, 2009 4:05 PM | Report abuse

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