By Dave Phillips
Anyone who lives in the Charlottesville area knows that the highest prices in the regional housing market are in Albemarle County. But why? There are few major reasons that seldom get mentioned during discussion about housing prices. Most people think that the prices are high simply because this is a great place to live. While there is some truth to that, it does not make the top three (at least directly). It is fair, however, to say that the top 3 reasons housing is so high in Albemarle all contribute to making this a great place to live. The question that needs to be asked is whether or not the high costs or these “reasons� are worth the increase they have to our quality of life.
Top 3 Reasons Albemarle Houses Cost So Much
- Excessive Government Oversight and Regulation of Development – The Albemarle County staff, elected officials and appointed regulators have a reputation for making even the most simple construction process difficult and expensive. We have an Architectural Review Board, a Planning Commission, and a Board of Supervisors who all place hurdles in the path of home construction. In addition, the county staff is VERY difficult to navigate. The results of the process is generally many additional costs for everything from environment protection to very large cash proffers. Currently, the County is on the cusp of adding $25,000 to the price of every home to pay for the additional “burden� on the infrastructure. That is wrong on many levels, but that is the subject of another post. About five years ago, the California Builders Association estimated that regulations added $90,000 to the cost of a home. I’m guessing that number is about right for Albemarle County.
- Delays In Approval of New Developments – You may have heard the expression “time is money.� This is the second greatest reason Albemarle houses are so expensive. The longer a project is delayed, the more money the developer has to spend. One developer/builder recently told me that delays add about $1000 per month to the cost of a home. If it takes a development three years to be approved and another year to be built, that adds $48,000 to the cost of each home. Delays also restrict the supply of homes for sale which drives up prices, but that is the subject of another post.
- Dividing the County into Growth and Rural Areas – Albemarle County was divided into “growth� and “rural� areas many years ago. This was essentially a restriction to the marketplace and anytime a market gets restricted, prices go up. The City of Charlottesville is a great example of a restricted marketplace. The City is only 10 square miles and can not grow. That natural limit on the availability of property to develop causes prices to be higher than they would if the city was 100 square miles. Albemarle has 495 square miles but only 5% is in the growth area. By restricting growth to such a small area, prices were forced up. If the growth area had been set at 10%, then prices would not have been forced up so much. A side affect of this policy combined with the reasons above, have encouraged people to build more in the rural area where prices are cheaper and the hassles are smaller. For the past several years, single family building permits in the rural area have exceeded permits in the growth area – but that is the subject of a future post.
Now before you jump to any conclusions, I am NOT saying that we don’t need any regulations, proffers, or growth areas. Rather, my point is that each of these has a direct affect on the cost of housing. Albemarle has taken all three of these concepts to a level that has far exceeded the cost/benefit apex. If the only people who can afford to live in Albemarle are those that are able to pay artificially inflated prices, then the fabric of our community is downgraded. The county must make it easier to build homes in the growth area, or we will see these artificially inflated prices continue to price many people out of the county and into surrounding counties. That will put additional burdens on transportation/roads – but that is the subject of another post.Â
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By Dave Phillips
The Virginia Association of REALTORS® has put forth an effort in this year’s general assembly to increase the continuing education requirements for real estate licensees. Their intent was to improve the quality of licensees. It seems to makes sense that more education would create better agents. A rising tide lifts all boats. But, you always have to look at the unintended consequences of any initiative. Increasing CE hours for REALTORS® (and all licensees) has an unintended negative effect as well.Â
I believe that the increase in CE will keep real estate agents from taking classes that would have more benefit to the quality of service provided to the consumer. You see, the purpose of CE is to protect the public from the real estate agent making mistakes that would be harmful to the consumer. Certainly a necessary requirement. But the reality is that real estate agents, just like the rest of us, only have a limited amount of discretionary time. Any professional only allots a certain amount of time to training based on what the marketplace (the consumer) demands. The problem with the reputation of real estate agents will not be fixed with all the CE in the world – because consumer protection is not the problem.  Bad service is the problem.
 By adding more CE, we will reduce the likelihood that a real estate agent will take an education course that might actually benefit (as opposed to protect) the consumer. There are only a certain amount of hours an agent is going to dedicate to education and adding CE just uses up those hours. What we need to do is create consumer demand to have agents voluntarily take real education courses that will teach them how to better serve their customers. We need to create a demand with the real estate buying and selling public to expect a higher level of education from their agent.Pre-licensing courses teach agents about the industry, post licensure teaches them about the basic practices in the profession, and CE teaches them what they need to know so they will not screw up and harm their clients and customers. Where do they learn to provide superior service, deliver effect communications, and determine their client’s needs? Some of this training comes in designation courses like CRS, ABR and GRI, but the public has no expectation or understanding of these designations. The REALTOR® organization will spend $30 million in 2007 to inform the public that REALTORS® are ethical, and valuable, but being ethical is expected and we are so bad at customer service that it is hard to see the valuable part of what REALTORS® do.Â
Maybe we should take the money spent on image advertising and use it to inform the public about how valuable it is to use a REALTOR® with a designation.  We would raise the consumer’s expectation and drive REALTORS® to become more educated in topics that might actually help the REALTOR® image. Think about it: does the consumer want to know their REALTOR® has had the standard 2 hour fair housing training for the 8th time, or that they know the latest Internet marketing techniques? The consumer only cares about the REALTOR® knowing the latest twist in the agency law when something has already gone wrong, but if the REALTOR® fails to call them back in 30 minutes they think the commission is too high.Â
If we started running ads telling the public to only use a REALTOR® with at least the GRI designation, REALTORS® would flock to training that would actually help the industry’s reputation. Of course I am not Pollyannaish enough to think such ads would be popular with the members.  In fact I guarantee the members would hate such ads, especially when compared to the feel-good ads currently being run. The chance of my plan actually being approved by the REALTOR® organization is slim at best, but until we are ready to embrace a consumer driven demand for education, we should stop fooling ourselves about more CE being the answer to the public perception problem. We have enough CE to protect the consumer, what we need is training on how to provide outstanding customer service.
It seems like everyday the local newspaper – the Daily Progress – features a letter to the editor about stopping growth in our area. Actually, these are really nothing more than feeble cries of people who can not deal with change. They want our community to stay the way it is because they “likeâ€? the way it is and are afraid that change might mess up their little world. Basically, they are living the story of Who Moved My Cheese,â€? but that will have to wait for another post.Â
To illustrate how silly the ideas they support to stop growth (read change) in the Charlottesville area, I have come up with my own top-five list of ideas. My ideas will seem unbelievable to any rational person, but understand they follow the same flawed logic used in many “legitimate� arguments being made. The underlining theme is “I got mine and you have to give up yours so mine won’t change.�
- Limit births to one baby per couple. This approach has proved popular in China. One of my favorite no growth advocates is Rich Collins and he has 5 five kids and (I’m guessing) a bunch of grand kids. Don’t worry Rich, you are grandfathered in, so no need to select which kid gets to stay.
- Your entire family – grown kid (remember you only get one) and any living parents, grandparents and great grandparents – has to live in the same house. This will greatly reduce the number of houses we need, but we may need to bring in more mental health professionals.
- When UVA wants to bring in a new professor, one current family must leave. This family will be selected at random and will be given six months to leave the area.Â
- If anyone wants to start a new company, they have to buy out an existing company. If they need to bring in outside employees, an equal number of employees of the current company must leave the area. In addition, the new company must use the same building as the existing company.
- There will be a limit of two cars per household for anyone moving into the area. This will reduce the need to build new roads (which we already don’t build) and single-handedly reverse global warming. Existing residents may own as many vehicles as the want.Â
I have a bunch more of these “goodâ€? ideas, but I think I have made my points. If these ideas don’t scare you, then you may suffer from the “I got mine and you have to give up yours so mine won’t changeâ€? syndrome.Â