Schapiro: On housing,Youngkin’s chance to be business guy-in-chief
Glenn Youngkin knows better than most that you can make a lot of money with other people’s money.
His personal fortune as a private equity guy is built, in part, on borrowed cash. That’s SOP: Take out a loan to purchase an under-performing business. Cut expenses by laying off employees and junking unprofitable products and services. Drive up productivity and improve product offerings. When the money starts rolling in, sell at top dollar, pay off the loan and pocket the rest.
Youngkin, now Virginia’s governor, could do a lot to ease the housing crunch with borrowed money; in this instance, bonds repaid over time with interest that’s higher, making them more attractive to investors. Though he seems hesitant to throw cash at a problem that he correctly identifies as essential to economic expansion. More people working is great — unless they haven’t a place to call home because supply is short and prices are high.
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The General Assembly’s investigative arm, the Joint Legislative Audit and Review Commission, estimates the state is short 200,000 homes.
In Richmond and three surrounding counties of Chesterfield, Hanover and Henrico, housing, rented and owned, is increasingly out of reach for lower earners: office and transportation workers and those in sales and — in this foodie-centric region — hospitality, according to a study by the Richmond Association of Realtors. In contrast, high-earning people in finance and business can rent or buy pretty much anything anywhere in the area.
And the study doesn’t offer income-to-housing pairings for public employees abundant in the capital region, especially police, firefighters, emergency personnel and teachers, all of whose ranks have been depleted by the pandemic, social unrest, political rancor — or all three.
“It’s not that previous governors haven’t been supportive of housing — they have,” said Laura Dillard Lafayette, CEO of the Richmond Association of Realtors. “It’s that this governor has made explicit the connection between housing and economic development.”
Lafayette, who, as a former gubernatorial communications director, knows well the challenge of enlisting public support for an initiative that may require dollars and sense, continued, “It would be momentous if he used his business acumen and experience to create a system change for how we finance housing in the commonwealth.”
Rather than more money, Youngkin says the solution is less government; that localities should stop, in effect, erecting obstacles to new housing through stringent land-use and zoning decisions. Cities and counties take this as yet another assault by Youngkin on their limited prerogatives; this time, ones they use to ensure quality of life.
Areas that the narrowly elected Youngkin carried in 2021, many of them rural, weren’t keen that he wanted to strip them of certain tax powers. They thwarted him this year in the legislature, preserving their teensy share of the grocery tax. Now he appears to be targeting a franchise they protect perhaps even more jealously than taxation: zoning.
Youngkin has been only slightly more forthcoming on details of his evolving housing fix than he has on the dinner party Donald Trump threw at his house in Florida for entertainer Kanye West, who’s been denounced for antisemitic rants, and Nick Fuentes, an antisemite and Holocaust denier.
Youngkin has said little on the former, lest he provide a big target for opponents ahead of the election-year session of the General Assembly, and nothing on the latter, lest he become a bigger target for Trump in the early maneuvering for the 2024 Republican presidential nomination.
When it comes to putting money behind housing policy, Youngkin’s opportunities for collaboration over combat are considerable.
A new approach might come down to trying something old: state-local partnerships akin to those put in place to build regional jails and local schools. Both have been accomplished through a combination of cash and bonds.
With jails, starting in the late 1980s, Virginia dispensed grants to cover half of the construction costs. They were paired with bonds issued by regional authorities. As for schools, local bonds were secured through the state’s purchase of that paper.
There’s no shortage of cash, with the state husbanding a $1.9 billion surplus. Housing advocates suggest the state could set aside $200 million to assist local government in the hybrid financing of lower and middle-income housing.
Such a scheme wouldn’t necessarily involve Virginia’s independent, bond-issuing housing agency, the focus of which is assisting first-time buyers. Though the agency, at the request of Youngkin’s Democratic predecessor, Ralph Northam, committed about $50 million to address housing needs tied to Amazon’s East Coast headquarters in Northern Virginia.
That get brought into sharp focus the state’s housing shortage and the income disparity that puts out of reach rentals and purchases by lower earners.
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Unlike inmates or school-age children, neither of whom make huge contributions to the economy, targeted residents of new publicly subsidized, rental or purchased housing — especially lower-paid teachers, public safety and civil service workers increasingly squeezed into cheaper digs that require longer commutes — will pump dollars into their localities through their jobs, their shopping and their improvements to their property.
The wealth that creates for individuals and the value it creates for communities can strengthen the economy and localities’ ability to return to the bond markets.
Virginia’s surprisingly strong clawback from the COVID-19 catastrophe means the state, with its enduring, highest-possible credit rating, can safely generate more debt-backed bonds — another $1.1 billion atop total outstanding obligations of $52.5 billion, according the state’s debt-watchdog committee.
Some believe Virginia could responsibly wade even further into the debt markets, including for housing. Davenport & Co., which advises the city of Richmond on its finances, recently pitched to the Youngkin administration to study broader use of debt financing, arguing that fundamentals — for example, the economic base and generational change — favor Virginia.
Because you can make a lot of money with other people’s money.
Contact Jeff E. Schapiro at (804) 649-6814 or