A talking point of upzoning supporters is the allegation that Charlottesville has not been able to add housing units in recent years. More specifically, zoning has prevented the addition of multifamily housing units. A new analysis of Charlottesville’s certificate of occupancy database has allowed us to compile hard numbers to assess the validity of this claim. The numbers, which are detailed below, strongly suggest the contrary. Charlottesville has added housing units at a pace consistent with population growth and above housing unit growth across the state. What is more, the housing unit growth has been heavily tilted toward multifamily units.
Housing completions in Charlottesville have moved up and down over the last decade, as one would expect in a cyclical industry. However, overall, the numbers show robust completions with a skew toward multifamily housing. The drop-off in 2020 is notable. Nothing of consequence in the zoning code changed between 2019 and 2020. What happened was a pandemic that shut down construction, inspections and much of the global building materials supply chain. 2021 construction numbers were not available during the FLUM debate, which led to an unfortunate and inappropriate extrapolation of COVID-distorted 2020 numbers to postulate a trend of declining construction. Now, we see a healthy rebound in 2021, and for 2022 through February we have completions almost equal to the whole year of 2021. The city is making up for lost time.
Over the same time period, we see that housing unit growth rate exceeded the population growth rate. According to decennial census numbers, from 2010 to 2020, the city’s housing unit growth annualized at 1.1% and population growth at 0.69%. The population growth number was likely depressed by COVID undercount of students, but our earlier work on making adjustments for that distortion only brings up the population growth to an annualized rate of 1%, still below housing unit growth.
It is instructive to compare the city’s housing unit growth rate to that of Virginia as a whole (using Census BPS data for the state). Charlottesville’s unit growth handily exceeded Virginia’s over the period, and only dipped below in 2020. Note that there is a small inconsistency in the timing of Charlottesville and VA numbers. While the city numbers are keyed to issuance of certificates of occupancy, the VA numbers are for permit issuance. That explains the lack of a dip in 2020 for the state. The disruptions due to COVID had stronger implications for completions than for starts.
As an aside, it is instructive to zoom out and look at the longer history. For that, we can use Census Building Permit Survey data, which we could obtain back to 1980. The story pro-FLUM advocates tell us is of housing production grinding to a halt, based on zoning restrictions. But the reality is that in the last two decades, housing production per capital has been far above where it was before. It is highly misleading to compare (as one City Council member has repeatedly) the unusually high production of the mid-aughts housing bubble to the bust period therafter. The “bust” still shows higher production than in the 1980s or 1990s. The simple explanation is that Charlottesville supply is fairly elastic. In the 1980s and 90s, Charlottesville was not an attractive place to live, and so housing production slowed down. As the city rebounded in the 2000s and in conjunction with a national housing boom, production picked up: large fluctuations, totally unrelated to zoning. We will soon be releasing the results of a more systematic study of supply elasticity — spoiler alert! — and what we have found is that Charlottesville supply is at the high of the range for US cities. The fluctuations in production visible in the graph are really echoes of fluctuations in demand.
The same pattern is visible when we compare rates in Charlottesville to those prevailing statewide. The period of Charlottesville’s lagging production was decades ago.
The new data set allowed us to look at assessments and sale prices for these new housing units and to compare them to citywide averages. Proponents of the FLUM suggest that upzoning will produce affordable housing. Critics have pointed out that for-profit developers tend to focus on the high end of the market, and that affordable housing will only be produced by intentional production that arises from mission-oriented development or via subsidies. If the critics are right, we would expect to see higher-than-average prices for the added units.
That is precisely what we see: a consistent premium for newly-added units. Of course, multifamily units other than condominiums are rentals and may not show up in sales statistics, unless the entire project is sold. We decided to look at assessments for multifamily units to see if this materially changed the picture. In this case, we looked at the assessment of each new project (calculated on a per-unit basis) in the year subsequent to C of O issuance and compared to the average assessment per unit in existing multifamily projects for that same year. Given the smaller sample size, the newbuild numbers are noisy. Still, they show a broadly similar story.
The claim that Charlottesville doesn’t produce housing; the related claim that Charlottesville “bans” multifamily housing — they are easily debunked canards. The forecast that increased building resulting from upzoning (and whether upzoning will increase construction is a contested claim itself) will produce affordable housing will be born out or disproven only with time, but the historical data raises serious doubts. As the city prepares to write a new zoning ordinance, city staff and council need to engage with the numbers rather than rely on just-so stories.