Could data centers be the answer to affordable housing?
That was the question at the heart of a breakout session at last week’s Regional Housing Summit at the Fredericksburg Convention Center.
Hosted by the Regional Housing Assembly (RHA), an advisory group facilitated by the George Washington Regional Commission (GWRC), last week’s summit brought together local and state agencies, nonprofits, real estate professionals and others interested in housing solutions and strategies,
Henrico County Manager John A. Vithoulkas, and his chief of staff Cari Tretina, were joined by Eric Leabough, director of community revitalization for Henrico County, and Jovan Burton, executive director of the Partnership for Housing Affordability (PHA), for a session on how Henrico County is using partnerships to create affordable housing.
“How is this county, who is very fiscally conservative, get into this topic? By allocating revenue — cash — to this problem. We had a new board of supervisors come in this January, and they asked us where our residents are with affordable housing. So we framed out the problem and we brought forward a solution,” Vithoulkas said.
The American Dream is out of reach
Virginia is experiencing similar housing challenges across all different regions, Tretina said.
“Incomes have not grown… to catch up to the cost of homes,” she said. “Your income needed to have grown to keep up with the pace of housing by 76% and we know that it’s absolutely not the case.”
“Your next-door neighbor is struggling to buy a home or even stay in their home and maintain their rent,” Tretina said. “Our police officers, dental assistants, childcare workers — people that play a critical role in our workforce — have extreme difficulty finding not only homeownership opportunities to create generational wealth, but just rents in general.”
Utilizing statistics from its local home builders association, county staff had a third party validate the data they were seeing and present it to their board of supervisors.
“There is no supply and the supply that does exist is larger homes,” Tretina said. “The $1 million homes, the ones over $500,000. That’s where the supply is.”
Kim McClellan, public policy director for the Fredericksburg Area Association of Realtors, shared a similar message at the summit’s opening address.
“There are more homes for sale over $1 million than there are under $300,000,” McClellan said.
The regional median home price was up yet again in September continuing a streak of 17 straight months of regional home price appreciation, according to the most recent release by FAAR. The median sold price settled at $472,000 in September 2024 compared to $435,000 in September 2023, representing a nearly 9% year-over-year increase.
Twenty residential properties in the Fredericksburg region sold last month for $1 million or more, according to data provided by FAAR. The two highest-priced ones (both $2 million or more) were on Lake Anna, followed closely by a home in downtown Fredericksburg that went for $1.99 million.
“We do not have enough supply to keep up with demand,” Tretina said. “The sweet spot for years has been six months of supply. We have less than three months now.”
Added Burton: “The bulk of our workforce in the Richmond region, three out of five of the most common occupations can’t afford median rent. This isn’t something that impacts a small segment of the population. It’s people we interact with on a daily basis and people we depend on every day.”
In Virginia, homebuyers would require a household income of at least $128,400 to afford the median-priced home in 2023 without spending more than 28% of their income on housing.
Funding a solution
Aiming to combat homelessness and unaffordable housing in Henrico, the county established partnerships with nonprofits in the region to find innovative solutions.
“We’ve been doing a lot over the last 15 years in the housing space,” Leabough said. “We look at it as a continuum of options. While we may be talking about home ownership today, we’ve been working to help those who are homeless, as well.”
One success story was an apartment complex called Cool Lane Commons in the City of Richmond. Working with the nonprofit Virginia Supportive Housing, the former Seven Health Care Center building was renovated into a $24 million community with 28 of the 86 units reserved for individuals exiting homelessness. All of its residents have incomes that are 50% or less of the area median income.
Leabough also spoke about the county’s senior living community, Carter Woods, which was built with Low-Income Housing Tax Credits (LIHTC), providing affordable rental units for various income levels.
“We don’t look at it like you graduate from a homeless shelter to affordable rentals,” Leabough said. “Based on whatever circumstances, the situation in their lives, they can go into any one of these options. We can create more ownership opportunities to move out of affordable rentals into ownership and freeing up space for others who may need supportive housing.”
Leabough and Burton stressed that getting land owners and developers to “buy in” is important to address the housing shortage.
“Part of our strategy is to preserve existing affordable housing,” Leabough said. “We’ve done that by executing agreements with apartment owners who are in the process of recapitalizing their development… we partner with six different opportunity loaners and we’ve preserved about 19% of our affordable housing portfolio.
Through tax relief and employer programs, the county is aiding seniors and those with disabilities through its Real Estate Advantage Program and the Real Estate Cap Program.
One idea that Fredericksburg-area officials wanted to know more about was using a new revenue source to fund these kinds of programs.
The explosion of growth in the data center industry — both in Virginia and the U.S. — means a lot of money up for grabs, Vithoulkas said.
“We have a lot of data centers that have been approved in the county in a tech park that had existing zoning and there’s going to be a lot of revenue that comes from that industry to our county for many years,” he said. “So my instructions to staff as the old fiscal guy has been that we’re going to do something different with this revenue. We’re not going to just infuse it into the general fund and that was the proposition that we put forward to the Board of Supervisors.”
In July, Henrico County established an affordable housing trust with $60 million in cash and a dedicated revenue stream from new economic development to make homeownership possible for a larger percentage of the area’s workforce. The funds come from unbudgeted revenues from data centers, providing grants to nonprofit and for-profit entities to offset the costs of residential lots or other developments that meet program requirements.
Although no data centers have yet to be approved within the City of Fredericksburg, at least eight projects are in the pipeline in Stafford County and another 10 in Spotsylvania County. A pre-application from Maryland developer, Penzance, for a data center was sent to city staff in August.
Fredericksburg’s Economic Development Authority voted unanimously in September to allocate up to $225,000 of its funds toward a feasibility study with Dominion Energy related to a potential data center in the Celebrate Virginia South area of the city.
Henrico County, in partnership with the nonprofit Partnership for Housing Affordability, will manage the housing trust program; they aim to build 100 to 150 new homes each year. The land trust will own the lot even after a house is built and sold, keeping monthly mortgage costs lower for homeowners and ensuring the property stays affordable in the long run. To help reduce costs, Henrico will waive fees for water, sewer connections, and building permits, and will speed up planning reviews for developments that include affordable units.
“We still need 12,000 to 30,000 units, so we need to do something different,” Leabough said.
Burton hopes that by waiving fees, helping with grant applications, fast-tracking development and developing strong relationships will help entice these for-profit builders and developers to make their plans work.
“How can we incentivize the private sector?” Burton added. “If we are going to get to scale with housing, it can’t just be the nonprofits. You have to have the for-profit industry involved.”
