An analysis by a local nonprofit shows that building more homes and apartments won’t necessarily bring down housing prices in Hampton Roads.
Alex Fella, who runs the civic nonprofit City Work, said the common wisdom of supply-and-demand doesn’t hold true when it comes to local housing data.
“The evidence to support the theories for supply-side housing are shaky at best when it comes to thinking about housing in Hampton Roads,” Fella said.
Developers and some housing advocates argue that building more housing, regardless of type, will reduce prices.
But Fella’s research shows that, at least in Hampton Roads, the effects seem to be “quite random.”
The new City Work analysis looked at vacancy rates - how many units are available for purchase or rent at a given time - as a measure of supply vs. demand.
High vacancy rates mean there’s a lot of housing available to move into immediately, while a low vacancy rate means it's harder to find housing.
The region’s vacancy rate has dropped over the last several years, from a height of 12% in 2016 down to around 6% today.
But Fella said the drops in availability by city haven’t correlated to how rents are increasing in those areas.
For instance, Hampton had the biggest drop in availability in the region between 2014 and 2022 but only had the fourth-highest rent hike among the seven cities.
Norfolk and Newport News saw similar declines in vacancy rates when compared to Suffolk, about 2-3%, but Suffolk’s rent hikes far outpaced the other two cities.
Meanwhile, Portsmouth had virtually no change in its vacancy rates, but has seen rent price changes on par with Norfolk and Newport News.
“If rents are closely tethered to supply, Portsmouth rents should not be behaving like Norfolk’s,” Fella wrote in his analysis.
Fella said, intuitively, the argument that supply and demand should drive pricing makes sense.
“It's an economic lesson we're all taught,” Fella said. “I like to think of my job as an anthropologist is to challenge the things that might be intuitive. And when we really start to sort of poke around at the housing market, in Hampton Roads at least, we don't really find that to be the case.”
City Work’s previous research highlighted other factors that could be driving up rents in the region. The military’s housing allowance, rising interest rates and short term rentals are all things City Work has explored as possible movers.
But he noted the biggest issue seems to be corporate investment in housing and the drive for profits.
“If we look at the way that landlords are openly bragging about the profit margins they're generating on these properties, it starts to change how we think about a solution,” Fella said.
He said the region needs to look toward measures like nonprofit-owned housing or permitting faith-based groups to build.
YIMBY Hampton Roads, a local group that’s argued for the supply-and-demand idea, has also advocated for allowing churches to build their own housing..
