Arlington Is Hitting Its Housing Target, But Affordability Concerns Aren't Going Away

Arlington, Virginia, is in high demand. For three consecutive months last summer, the county held the title for the most sought-after U.S. “city,” according to a RentCafe study.

The growing demand is a boon to the county, in terms of measures like tax revenue, development potential and job growth. But it also exacerbates a supply-and-demand imbalance Arlington has long struggled with: housing.

Despite housing being a consistent priority for the county's leaders in recent years, the problem is only getting worse, panelists said at Bisnow’s Future of Arlington event earlier this month, threatening its continued growth. 

“There’s so much demand for housing because people want to be in our space, so that’s a challenge that we’re facing,” Arlington County Board Member Matt de Ferranti said onstage last week at the Hyatt Regency Crystal City. 

The housing shortage, specifically a paucity of units affordable for service and middle-income workers, is a problem the county will have to get a handle on in the coming years, as it continues to attract a diverse tenant base, panelists said. 

Arlington is the eighth-most-expensive urban market for a one-bedroom apartment, according to Zumper’s April national rent report, ahead of Los Angeles and Washington, D.C. A one-bedroom apartment in Arlington goes for an average of $2,340 per month.

“We can't grow if people can't afford to live here and create growth. People create growth,” JBG Smith Senior Vice President of Development Taylor Lawch said. “It’s one of the most important issues we have in front of us.”

JBG Smith is the developer of Amazon HQ2 and much of the surrounding National Landing neighborhood. The tech giant has been a major demand driver in the area. Its first phase brought 8,000 employees across 2.1M SF of offices. The number was expected to grow to 25,000 by 2038, with the development of the 3.2M SF second phase, but its construction has been put on hold.

Amazon is not the only large company choosing to locate in Arlington, often seen as more business-friendly than D.C. CoStar is relocating from D.C. to Rosslyn, moving 500 employees from its downtown headquarters and adding 150 more at a 31-story Central Place tower it purchased in the fall. 

Arlington County accounted for half of Northern Virginia's largest office leases in the first quarter, according to CBRE’s Q1 report.

For those at the upper echelons of the income bracket, there is plenty of high-end housing being delivered.

JBG Smith delivered twin 30-story towers this winter, both at the top of the market. Rents at The Grace and Reva, which total 808 units, start at $2,100 and $1,950, respectively.   

Mill Creek Residential’s 270-unit Modera Clarendon, which delivered about a year ago, just stabilized at 95% occupancy, Managing Director Joe Muffler said, one of Mill Creek’s fastest lease-ups in history. Similarly, Greystar’s 423-unit The Commodore, which delivered in October, is already 65% leased, according to John Beinert, Greystar’s senior director of development. 

“The appetite for that product in this market is just fantastic,” he said.

But companies are looking for more than just housing for their CEOs and highest-paid employees, Monday Properties Executive Vice President Jennifer Burns said. 

“The affordability and the access of housing is critical to employers who are pulling those students from internships and graduate programs,” she said. “They’re looking at what’s today’s need and what’s tomorrow’s need, and that may mean looking at Alexandria and other places in the area, maybe Falls Church and Loudoun [County].” 

While de Ferranti said the county may be hitting its targets for the overall amount of housing under construction, it is lacking new housing at price points that the likes of restaurant and retail hourly workers can afford. 

Housing at lower price points is especially important given the increase in service industry employees necessary to maintain neighborhood amenities for office workers and residents. 

“If you ever wonder why your neighborhood, wherever that is, doesn’t have great bistros, great restaurants, great retail, there are a lot of things that go into that, and one of the biggest things is affordability for hourly restaurant and retail employees,” said George Banks, a partner at retail consulting firm Revel.

Revel was behind JBG Smith’s new 1.6-acre Water Park, a few blocks from Amazon HQ2, which has nine local vendor kiosks and two restaurants. County Board Vice Chair Takis Karantonis echoed Banks' sentiments, pointing to the thousands of workers at Reagan National Airport who are priced out of Arlington's market-rate housing.

Universities growing in the area are adding to that need. Virginia Tech is building a $1B innovation campus at Potomac Yard, while George Mason University's graduate campus in Virginia Square plans to add undergraduate programs.

“They’re going to need a place to live,” GMU Associate Vice President of Innovation and Economic Development Paula Sorrell said.

Creating affordable housing in today’s market requires creative solutions, Insight Property Group partner Mae Klinger said. 

“With construction costs where they are, interest rates where they are, it’s hard to have a lot of affordable housing in brand-new projects,” she said. 

Insight is developing 553 units at the site of the former Macy’s department store in Ballston, but Klinger said the project didn't make financial sense if it included affordable housing. The county is instead allowing the company to preserve affordable housing on an older site in Arlington and undertake improvements there to fulfill its inclusionary housing obligations.  

Another creative solution was put up by the Arlington Partnership for Affordable Housing with its redevelopment of a former church site, also in Ballston. For Unity Homes, which opened last week, the local affordable developer paired 144 new affordable units with congregation space, a daycare and a commercial kitchen. 

“I think there’s been a lot of alignment from various sectors and at a policy level to achieve the common goals around housing affordability,” National Landing BID President Tracy Sayegh Gabriel said.

Impact funds like those from JBG Smith, which just hit its goal of preserving and creating 3,000 affordable units, and Amazon's Housing Equity Fund add fuel to the mission. 

The county is also taking steps to increase affordability. Last March, it passed a single-family zoning ban to try and increase missing-middle housing production. 

But even with work to do, panelists were hopeful Arlington is in a good place to take on the challenge. 

“We have one of the best housing agencies in the country in Virginia,” said Andy VanHorn, Dweck Properties president and chief development officer, who sits on the board of APAH. “We also have some of the most innovative affordable housing developers in the world.”