Wealthy Loudoun Needs Denser, Cheaper Housing As Market Pressure Builds

Loudoun County, like outer-ring suburbs around the country, has experienced a sustained spike in demand for housing, driving prices skyward and exacerbating the county's long-standing shortage of affordable options across a variety of housing types.

The county's Board of Supervisors has finally developed a plan to address the issue, adopting the Unmet Housing Needs Strategic Plan at its September meeting.

Local real estate experts, speaking at Bisnow's Future of Loudoun County Digital Summit last month, said the UHNSP — along with a recently passed comprehensive plan that allows for more housing density and mixed-use development — is a critical first step to fix the county's market imbalance. But it is far from a solution.

"The fact is there appear to be fewer and fewer units actually coming through," said Donald Knutson, the CEO of developer Knutson Cos. and a member of the county's Housing Advisory Board. "I think the county forecasts demand of 2,000 units a year over the next 20 years ... This year there are about 1,500 for-sale units coming through the pipeline. So I think we need to figure out how to get projects engineered and on board sooner."

Loudoun County is one of the nation's wealthiest, with the average median income for a family of four of $126K last year, according to the UHNSP. But only 23% of the county's for-sale residential market is affordable to a median family, the county found — a result of years of building almost exclusively large houses.

"The county’s pretty homogenous in terms of, I think, 90% of owner-occupied housing is four bedrooms or more," Knutson said. "That’s really not the future in terms of the growing demand pool. Forty-five percent of the households have one or two occupants, so you can sort of see the dichotomy. We have lots of four-bedroom houses, and the future is going to be an extremely different type of house."

One of the largest projects in the county, Kincora, would add 2,400 units near the interchange of Route 7 and Route 28. But previous county priorities have hampered developer Tritec Real Estate's ability to start construction sooner, principal Daniel Coughlan said during the summit.

"Our affordable housing project here at Kincora was the first project we did here, and it was painful in some ways, honestly," Coughlan said.

Tritec applied for tax credits to help fund the project, but because of the county's previous rules against clustering housing in a mixed-use development, the developer's need for a zoning variance delayed its ability to secure a tax credit for another year.

Coughlan said he is supportive of the UHNSP, but said county leaders need to be more supportive of developers after years of anti-development and anti-density policy.

"It is something the county has to realize they have to work with the developers on," he said. "At the end of the day, affordable and obtainable housing is a supply issue. If you don’t have the supply, it’s going to exacerbate the situation."

The situation is already brutal for first-time homebuyers or middle-income households: The typical home value for a house in Loudoun County was $669K in August, according to Zillow, a 16.8% year-over-year jump. Five years earlier, the typical home in Loudoun was worth $487K.

While Loudoun lacks for a variety of housing options, it doesn't lack for retail, which has created a challenging dynamic, said Susan Bourgeois, senior director for retail real estate specialist Rappaport. She thanked Knutson, Coughlan and Nick Over, the vice president of development for RPAI, which owns the One Loudoun development, on the panel for creating more space for customers.

"Without housing, retail cannot survive, because we need bodies," Bourgeois said. "Seeing this attainable housing in particular come into Loudoun County is just going to continue to help the retail environment."

Bourgeios, who manages more than 1M SF of retail in Loudoun, pointed out that Fairfax County has roughly half the retail space per capita of Loudoun, which has given some retailers pause before they expand farther west.

"We may get a national retailer that does come to Loudoun County, and they have a facility in Fairfax County, and they may say, 'But wait, Fairfax does so much better than Loudoun, why is that?' And it comes back to the housing," she said. "It’s a density issue."

She said Loudoun's requirement that mixed-use developments have a significant retail component has made it more difficult to fill space in a market still feeling the effects of the pandemic.

"Let’s lay low a little bit on the retail that is required in the projects, because we’ve got plenty," she said.

Walsh Colucci Lubeley & Walsh land use planner Michael Romeo, who moderated the panel, said the county is already debating tweaking those zoning ratios, which were adopted in the 2019 comprehensive plan. That document, which also cleared the way for the UHNSP, designated One Loudoun, Kincora and most other in-the-works developments in Loudoun as suburban mixed-use districts, which must designate 35% of space to be nonresidential use, he said.

"There’s a bit of a pressure on these projects to try and meet plan policy, but also meet what the market is demanding. You don’t want to create a whole lot of retail and have it sit vacant, because that helps nobody at the end of the day," Romeo said. "I think the board is recognizing that. There’s a process that will need to occur there, but I think that’s certainly something that’s being considered now."

CORRECTION, OCT. 12, 4:50 P.M. ET: A previous version of this story misspelled the name of Tritec Real Estate principal Daniel Coughlan. This story has been updated.