Comprehensive Housing Plans and Mixed-Use Development

NVAR recommends comprehensive zoning changes and incentives that facilitate the voluntary market-driven production of a wide range of housing choices at all price levels to suit our diverse population, including encouraging mixed-use development.

It is essential that comprehensive plans provide for the development of owner-occupied housing, to meet existing and forecasted housing demand without unreasonable zoning and land use restrictions that lead to increased costs for housing. Updating zoning ordinances and maps to encourage mixed use with higher residential density in existing commercial areas can provide new home ownership opportunities without affecting existing residential neighborhoods.

Commercial to Residential Conversions

Pandemic-related changes in commuting patterns and office use have led to widespread office vacancies and the call for “adaptive reuse” or office to residential conversions. With the U.S. in the midst of a housing crunch—and home affordability at historical lows—both commercial real estate developers and public officials are looking for solutions. Converting underused commercial space into multifamily housing is one potential approach that has many supporters, but it is not suitable for all commercial locations.

Financial and environmental questions surround all conversion opportunities, but zoning is often the biggest hurdle for adaptive reuse. NVAR recommends local governments identify barriers in local zoning ordinances that impede commercial, industrial and office -to-residential conversions and how to amend the ordinance to not only allow, but to incentivize conversions.

Eliminating Barriers to Accessory Dwelling/Living Units

Accessory dwelling or living units can provide a significant benefit by increasing density, often without the need for major zoning changes, and with a more limited amount of construction activity in residential communities. For these programs to be successful, it is important for accessory dwelling laws to focus on removing cost and time barriers. Northern Virginia localities have made significant progress in recent years in allowing accessory units, but more work is needed to truly realize the potential of accessory dwellings as a housing supply solution.

NVAR recommends local governments enact mechanisms to streamline and expedite the permitting process; remove minimum lot size restrictions for both attached and detached accessory dwellings and reduce setback and lot coverage restrictions applicable to accessory dwelling units.

Reduce Requirements on Lot Sizes, Parking and Setbacks

Perhaps the largest barrier to creating housing that is affordable and attainable, is the fact that we live in Northern Virginia, and under all our homes is land that is extremely valuable. Across the region, our localities require residential properties to be built on a minimum-sized lot, and within that lot, structures must be located or “set back” certain minimum distances from lot lines. This varies by locality and zoning district, but the lot sizes and setbacks can be significant. Localities also include minimum parking requirements, whether it is off-street parking in single-family zoned areas, or parking structures for condo and apartment buildings. These policies may represent major barriers to housing density and the production of attainable, affordable and accessible housing. Minimum lot sizes often require homebuyers to purchase more land than they need which lowers density and increases the costs of housing. This is especially true in cases where lot sizes may be significantly larger than are necessary, or near areas where increased density would be beneficial, such as retail or transit corridors. If setback requirements are too large, then the remaining buildable land may be too small for certain types of housing or for the placement of accessory units. Parking costs money to provide and requires substantial lot coverage (often not permeable) which could be more beneficial for housing or as green space.

NVAR recommends local governments reexamine each of these policies (Setbacks, Lot Coverage, Minimum Lot Size, Parking Minimums) and make reasonable adjustments to ensure they allow for adequate density in the hope of producing a greater supply of housing that works within each community.

Incentivize Owners to Sell Their Homes

Recent tax law changes and home price inflation has eroded the value of federal tax incentives for individuals selling their homes, especially for older homeowners who have lived in their home for 20 years or more. Many of these homeowners who are considering downsizing or moving to a retirement facility are facing gains well in excess of current exclusions, which can leave them owing many thousands of dollars in tax and reduces their ability to afford their new home. Couple that with higher interest rates than we have seen in the past decade, and we are faced with many homeowners making a decision not to sell their home.

Additionally, some 10 million owner-occupied homes were purchased by investors of all types and sizes and converted to rentals in the wake of the housing crisis of 2008, significantly lowering the supply of homes available for purchase. These investor-owners are also getting older and are interested in exiting the housing provider space, but again are limited by the tax implications of selling an investment property.

New Virginia tax incentives (housing tax credit, recordation tax exemption, etc) aimed at unlocking a segment of inventory previously unavailable to prospective buyers would help to unlock housing inventory desperately needed for those who want to live and work in our Commonwealth.

NVAR recommends creating a tax incentive for landlords who sell their investment property to the current tenants renting the property. This incentive would prevent displacement while incentivizing owners to sell to mostly first-time homebuyers.

NVAR also recommends providing incentives to individuals who sell their principal residence to buyers who will utilize the home as a principal residence. This incentive would preserve owner-occupied housing stock and prevent institutional investors from scooping up all of the available housing.

Prefunded Veteran Property Tax Exemption

Under the Virginia Constitution, for any dwelling that is the principal residence of a Veteran with a 100% service-connected, permanent and total disability, the surviving spouse of such veterans, or the surviving spouse of any member of the United States armed forces who was killed in action, is eligible for a property tax exemption. Currently, disabled veterans and their spouse cannot apply for their exemption until after they own the home. Because they are not exempt during the underwriting process, taxes have to be counted against them when qualifying for their mortgage. Thousands of dollars are collected at closing to pay tax bills that will simply be refunded at a later date.

NVAR supports legislation to allow disabled veterans and surviving spouses to apply for the real estate tax exemption after going under contract, but prior to taking ownership and getting to the closing table. This change will increase the buying power of disabled veterans and surviving spouse by tens of thousands of dollars.

Statewide Accessory Dwelling Development

Recent nationwide trends have shown that allowing accessory dwelling units is an achievable first step for increasing market-rate affordable housing options within traditional single-family neighborhoods. Accessory dwellings are an attractive option to expand attainable housing options within existing neighborhoods predominantly characterized by single-family dwellings, as well as to stabilize neighborhoods where an increase in equity and income for homeowners can ease potential displacement pressures. This is because accessory units in most localities can be rented out as an additional source of income. They are generally more affordable than other forms of housing because they are smaller and can be built relatively quickly without the same expense as other housing forms. Local regulations and community resistance (NIMBYism) significantly hinder the construction of accessory dwellings, and construction financing can also be a barrier, particularly since many lenders do not view accessory dwellings as a formal housing unit.

Without guidance from the General Assembly, localities are left to implement varying ordinances that confuse homeowners, home buyers and developers and suppress the access and availability of accessory dwellings. Without action by the General Assembly, action is left to local elected officials who are limited in their actions by the vocal minority of residents who do not support any development in single-family neighborhoods.

NVAR recommends statewide enabling legislation which permits the by-right development of an accessory dwelling unit located within any single-family dwelling and requires localities to adopt administrative approval processes for all attached and detached accessory dwellings.

Reform Inclusionary Zoning Enabling Legislation

Inclusionary zoning policies allow local governments to use their land use regulatory powers to require or incentivize the production of affordable housing. The Nation’s first inclusionary zoning ordinance, still in effect today, was adopted right here in Fairfax County, in 1971. Since then, more than 800 communities across the country have adopted inclusionary zoning policies.

However, only a handful of Virginia localities (fewer than 20) have inclusionary zoning ordinances. In Virginia, localities are permitted to adopt inclusionary zoning programs under Virginia Code § 15.2-2304. This law permits adoption of inclusionary zoning ordinances that offer builders a density bonus in return for developing moderately priced housing but allows flexibility for localities to tailor their inclusionary zoning programs to local needs and considerations, including parameters of both density bonuses and number requirements for affordable units. This power is limited, applicable to certain large counties and cities in Virginia. In all other Virginia localities, a more prescriptive and restrictive Virginia Code §15.2-2305 governs inclusionary zoning programs which is a barrier to localities adopting inclusionary zoning as part of their local housing solutions.

NVAR recommends amending Virginia Code § 15.2-2304 to apply to all local jurisdictions across the state, rather than only a handful of localities, while also establishing a statewide definition of housing affordability to provide certainty and guidance to localities in establishing their own inclusionary zoning policies.

Capital Gains Exclusion

REALTORS® recommend incentivizing more owners to sell their homes by increasing the maximum amount of capital gains a homeowner can exclude on the sale of a principal residence and annually adjusting it for inflation. Bipartisan legislation on this issue has been introduced in the House of Representatives in the “More Homes on the Market Act” (HR 1321).

Tax Credits for Building and Rehabilitating Owner-occupied Homes

REALTORS® recommend attracting private investment for building and rehabilitating owner-occupied homes by offering tax credits that create a pathway to neighborhood stability through sustainable homeownership. Providing this powerful incentive to build and rehabilitate homes for low- and moderate-income homeowners can fill the gap in areas where it is often more expensive to develop or rehabilitate than appraisal values will support. Bipartisan legislation on this issue has been introduced in the Senate through the “Neighborhood Homes Investment Act” (S 657).

Commercial to Residential Conversions

REALTORS® are seeking to incentivize the conversion of unused commercial buildings to residential and mixed-use properties. Many commercial properties can be adapted to better suit the needs of communities and create job opportunities, including adding multifamily and affordable housing, warehouse and industrial properties, and mixed-use spaces. Legislation has been introduced in both the U.S. House and the U.S. Senate that would provide a limited tax credit for adaptive reuse, The Revitalizing Downtowns Act. The Act would provide a 20-percent tax credit for qualified property conversion expenditures. The credit is modeled on the historic rehabilitation tax credit and can be used for office buildings that are at least 25 years old at the time of the conversion.

Expand Participation in Housing Choice Voucher Program

REALTORS® recommend creating incentives for housing provider participation in the Department of Housing and Urban Development’s (HUD) Housing Choice Voucher (HCV) program. Legislators should also increase funding to assist homeless veterans living on tribal land, update HUD’s methodology for determining rents paid to housing providers participating in the program and reduce burdensome inspection delays. Bipartisan legislation on this issue has been introduced in the Senate through the “Choice in Affordable Housing Act” (S.32).