Amazon Is Putting Pressure On Arlington's Housing Market, But Some Worry State Could Pull Back Funding

Arlington County's growth over the past decade is expected to accelerate with the arrival of thousands of Amazon employees and the development that the tech giant spurs in the surrounding area.

The Amazon HQ2 development in the National Landing area could drive up rents and housing costs and make it difficult for lower-income residents to afford to stay in the county unless thousands of new units are added to alleviate the pressure on the market, county leaders and developers said last week at Bisnow's Future of Arlington event.

The county needs a combination of market-rate housing and affordable housing development, the speakers said. And the affordable housing will require funding from a variety of sources, including local, state and federal government, plus nonprofits and even private companies such as Amazon itself.

While most of those sources have been increasing their affordable housing funding, the future of Virginia's state contributions became less clear following last week's election. Republican Glenn Youngkin won the race for governor and his party also won the lieutenant governor and attorney general races and flipped the House of Delegates. 

Arlington County Board Member Christian Dorsey, a Democrat, said he worries that Youngkin could halt the efforts that Democratic Gov. Ralph Northam has pursued to increase the state's affordable housing contributions from the Virginia Housing Trust Fund. 

"It’s still very fresh, but I think the legislative work on the housing trust fund, I would not expect that that would continue given the change that happened on Tuesday," Dorsey said on a panel at the event, held at the renovated Rosslyn City Center. "I wouldn’t expect that any efforts to affordable housing would be designed to benefit Northern Virginia. I think we're probably looking at, if not a total erosion of support and help that’s come our way from the state the last couple years, certainly we won’t be seeing any progress."

Walsh, Colucci land use attorney Andrew Painter said in past periods when Virginia was led by Republican governors and legislatures, the party has tended to favor other parts of the state over Northern Virginia. 

"Now at least in the House of Delegates, the Democrats may not be the party in control, which is going to have, no matter your party affiliation, a deleterious effect on the impact on Northern Virginia versus downstate," Painter said. 

Greystar Managing Director John Clarkson, a developer who is working on two multifamily projects in Arlington's Courthouse neighborhood, referenced Bisnow's report Wednesday that Youngkin's campaign website didn't include a housing platform.

"The governor-elect doesn't have a housing policy platform, so we're not really sure what's going to happen," Clarkson said. 

The level of affordable housing support that Arlington receives from the state and other funding sources is especially critical now as the county looks to address a housing shortage that could be exacerbated by Amazon HQ2.

Arlington was already growing quickly before Amazon began hiring employees. The county's population grew by 14.9% between 2010 and 2020, adding more than 30,000 people during the decade, according to U.S. census data released in August and reported by ARLnow. That growth rate was roughly double the Virginia average of 7.9% and the U.S. average of 7.4%. 

Amazon has begun moving employees into leased space as it builds out the first buildings of its HQ2 campus, and it said in September it had hired more than 3,000 HQ2 employees. It is currently hiring for another 2,500 jobs, and it ultimately plans to reach 25,000 employees in Arlington.  

Comparing it to the growth that Amazon spurred around its Seattle headquarters, Clarkson said Arlington and the overall region will need to add tens of thousands of housing units in the coming years to accommodate the new workers. He said the need will eclipse the housing development that is currently in the pipeline. 

"The big issue is housing; we lack housing," Clarkson said. "You’re going to have this massive influx of people making over $150K, buying up homes and driving up rents if we're not able to fill the significant gap in housing. We’ve got to use every tool that we have." 

LCOR is one of the multifamily developers hoping to accommodate that influx, with a 19-story, 306-unit project under construction and a 451-unit project that delivered in 2018, both across the street from HQ2 in Pentagon City. LCOR Executive Vice President Harmar Thompson said it is difficult for market-rate developers to build affordable units into its projects because they aren't eligible for the same financing tools that builders of all-affordable projects use. 

"We want tools to create more affordable housing, but as a market-rate developer those tools aren't available to us," Thompson said. "One thing Arlington doesn't realize is how expensive it is for us to create affordable housing in projects. They underestimate what it costs per unit to create these high-rise buildings."

Thompson referenced the affordable housing investments Amazon is making in Arlington as part of its $2B Housing Equity Fund. The tech giant committed $339M in below-market loans and $42M in grants to the Washington Housing Conservancy to acquire and preserve the affordability of the Crystal House apartments, and it donated adjacent land to the county to build a new 550-unit affordable housing project. 

"What we see now with Amazon coming in and making a commitment to the community, market-rate developers aren't going to solve the problem," Thompson said. "We can be part of the solution, but we need groups like Amazon, Nestlé, or other corporations in the market to come and be part of that solution as well as having the resources, whether it's federal or county resources, because we all need to be a part of the solution."

National Landing BID President Tracy Sayegh Gabriel also said private employers like Amazon can play a significant role in helping support Arlington's affordable housing stock. She also cited the importance of efforts like the Washington Housing Initiative from JBG Smith, the developer that owns much of the property in National Landing and is partnering with Amazon on its HQ2 development. 

"There’s a tension with having as much growth and development and the creation of an innovation district, and the desire to solve the equity equation at the same time," she said. "So much of that is delivering affordable housing in centers of economic opportunity like National Landing."

Dorsey said that there are a series of federal programs and there is philanthropic support for housing the lowest-income residents, but he said new solutions are needed to provide housing for middle-income people.

He said people in the 80% to 120% area median income range are often staying in housing that costs much less than what they can afford, because there aren't many options within their price range. This trend reduces the supply of naturally occurring affordable housing for lower-income residents. 

"We've got this issue with a lot of people whose incomes are far greater than what those units cost, but they're holding onto them because they don't have anywhere else to go," Dorsey said. "We have to do a better job of creating units in that 80 to 120 [AMI] range so we can actually free up stuff that's in the market for people at certain income levels."

Dorsey also said he is working to make sure Arlington isn't alone in accommodating the growth that Amazon will bring. Officials from D.C., Maryland and Virginia in 2019 committed to housing production targets that would meet the Metropolitan Washington Council of Governments goal of adding 320,000 new units in the region between 2020 and 2030. 

"We’ve got regional commitments thus far, and we’ll see how it plays out in reality," Dorsey said. "We’re hoping we see significant increases in housing supply delivery in those areas so we're not dealing with the crunch of Amazon driving up prices out of reach."

He added that not all Amazon employees need to live in Arlington, and there are many neighborhoods on the Yellow or Blue Metro lines that could make sense for employees to commute to HQ2 without having to switch trains. 

"We want to focus growth on areas that are going to make sense from a transit proximity standpoint to be attractive to Amazon workers," Dorsey said. "We look at one-seat rides to National Landing throughout the region."

The need for housing in Arlington can also be accommodated in the high-density neighborhoods along the Rosslyn-Ballston corridor. 

One census tract in Ballston had the highest population density in the D.C. region, ARLnow reported, adding that its density of 96,758 people per square mile is comparable to the Upper West Side of Manhattan. Ballston BID CEO Tina Leone said the neighborhood's apartments are near full occupancy. 

"We're 94.7% leased at our apartment buildings in Ballston, so we need more," Leone said. 

Adding more housing can also help attract new companies to the area, as the ability to have short commutes can entice employees to come back to the office. American Real Estate Partners Managing Director John Chesley, whose firm redeveloped the Rosslyn City Center property where Thursday's event was held, said Arlington is ideally situated for employers looking to bring employees back to the office. 

"Now with the challenges of the return to work, you need to be closer to home," Chesley said. "You don't want to sit in a car. So being in Arlington is that key right there. We have tons of residential, tons of talent and tons of education here in Rosslyn and right up the hill. This is a phenomenal place to be, and I think the future is really bright."