Homeowners’ Loan Corporation Risk Map for the City of Richmond
Richmond Regional Housing Framework
In 2015, PHA worked with Virginia Tech’s Center for Housing Research to produce a study that assessed the Richmond region’s housing needs. As part of the Framework, Virginia Tech conducted a five year update to the 2015 report, providing a thorough outline of our region’s housing challenges and changing demographics. These findings cover both the rental and homeownership market while also examining housing needs by race, age, and income. As a result, the Framework provides a detailed analysis of where we have been, where we are, and where we are going.
The Homeownership Market
Over the past century, owning a home became one of the most successful ways for Americans to accumulate wealth and gain financial independence. Unfortunately, homeownership remains out of reach for many people throughout the region because our incomes aren’t keeping up with rising prices created by an extremely limited supply. Young professionals, working families, and seniors alike face major challenges looking for a home to buy in the Richmond region.
Furthermore, decades of discriminatory policies created—and continue to perpetuate—major barriers for Black and Latino people to purchase homes. This racial homeownership gap is a national problem, and the Richmond region is no exception. Today, our region’s homeownership rate for African Americans is a full 25 points lower than the white homeownership rate. Without intentional intervention to address housing patterns and the barriers to homeownership, the Richmond region will continue to be highly segregated and the racial wealth gap will remain.
“I’ve seen my property values go up 492% over two years...there are going to be bigger challenges in the future.”
—Resident of City of Richmond
Where We’ve Been
Major public and private efforts to expand homeownership in the 1930s helped White households at the expense of Black households and neighborhoods of color.
In 1937, the Home Owners’ Lending Corporation (HOLC), a federal agency, graded Richmond neighborhoods from “A” through “D” to designate where government-backed home loans should be made. Communities with high concentrations of Black households, regardless of neighborhood quality or stability, were consistently rated “D”—the least desirable for investment. Marked red on maps, these “redlined” neighborhoods were systematically denied access to the same financing tools and wealth-building opportunities provided to White communities.
Why is redlining relevant today? One example: in 2016, the median household income in Richmond’s “A” neighborhoods was $95,800. In the redlined “D” neighborhoods, it was $32,800.
Homeownership Rate by Race/Ethnicity
The Black homeownership rate in Virginia is lower today than it was 50 years ago, severely impacting the ability of Black households to grow, accumulate, and pass down wealth.
The Fair Housing Act of 1968 made discrimination in the housing market a federal crime. As of the 1970 Census, the homeownership rate for Black Virginians was 51.5%. Nearly half a century later in 2017, the Black homeownership rate in the state was 47.8%.
In the Richmond region today, three in four White households own their home, while fewer than two in four Black households do. While the total number of Black homeowners in Chesterfield, Hanover, and Henrico has steadily increased over the past two decades, there are nearly 4,000 fewer Black homeowners in the City of Richmond now than in 2000.
Change in Median Home Sales Price
Home prices in the region have rebounded strongly since the recession.
The average sales price of a home in the Richmond region in 2009 was $210,000. Nearly a decade later in 2018, an average home sells for $261,290. Every locality’s average sales price rose between 21% and 24% over that time, except for the City of Richmond, which increased a significant 56%.
Where We Are
Home prices are still on the rise, but incomes continue to lag behind.
Change in Income and Housing Costs: 2009 to 2018
Owning a home is not as easy today as it may have been a decade or two ago. Incomes for many occupations—including skilled, full-time positions—have grown far slower than home prices. As a result, many of our region’s workers cannot afford homeownership without enduring fiscal stress.
The starter home inventory is extremely tight.
Median Days on Market by Sales Price in 2019
Buying a home may be more expensive now, but that does not stop buyers from looking. Young workers with decent savings and good-paying jobs are looking for starter homes—just like their parents before them. Ironically, many of their parents are looking to downsize into the same home: a smaller, more affordable house closer to amenities.
According to data from the Central Virginia Regional Multiple Listing Service, starter homes in the $150,000 to $200,000 price range took an average of 32 days to sell five years ago in 2013. In 2018, they sold in 8 days. By the spring and summer of 2019, these homes were selling in less than a week.
The racial homeownership gap gets larger every day.
Homeownership Rate by Race/Ethnicity
In 2017, an average of twenty-six homes were purchased by White buyers in the region each day. For Black buyers, just six per day. For Latino buyers, fewer than two per day. As racial disparities in homeownership continue, so too will the racial wealth gap.
Nonprofit production of new affordable homes is strong, but not close to meeting demand.
Nonprofit community development corporations (CDCs) leverage federal, local, and private funding to deliver high-quality homes for sale to low-income buyers in the Richmond region. Prices typically range from $140,000 to $185,000. Over the past three years, the CDC industry has built or rehabilitated and sold, on average, 65-70 homes annually. Those account for just over 2% of all new single-family homes built during that same time.
Where We’re Going
Today’s new construction homes are unlikely to meet the needs of tomorrow’s families.
Change in Households by Size and Family type: 2000 to 2017
In 2018, the average new construction single-family home had four bedrooms, two and a half bathrooms, was 2,600 square feet in size, and sold for $381,000. This home was designed for an upper-income family with more than one child, but the only two household sizes with net growth since 2010 are 1- and 2-person households. And half of all the new households projected to form between now and 2040 will be seniors, many of whom will be looking for smaller homes in neighborhoods with greater density.
• Localities and developers must recognize that buyers of the future will likely be older; or, younger with smaller families. These demographics seek similar housing that is smaller, denser, and closer to amenities.
• Longstanding federal civil rights protections are not enough to bridge the racial homeownership gap. If localities want to increase ownership opportunities for minorities, strong intentional policies are needed.
• There exists a strong opportunity for regional collaboration to streamline home purchase opportunities for low-income buyers. Educational and financial resources could be coordinated across localities and nonprofits to remove duplicative efforts, save costs, and expand homeownership.
• Alternative homeownership models may help grow wealth-building opportunities. Community land trusts, cooperatives, and other shared equity programs are proven strategies that make ownership more accessible to low-income households.