Prime Time: How Amazon is Impacting Home Prices in Northern Virginia
Amazon Headquarters in Northern Virginia may still be a couple of years away from being completed, but that doesn’t mean that its economic impact on the community hasn’t already started to take effect – especially in the housing market.
According to data from the Northern Virginia Association of REALTORS®, (NVAR) home sales are dropping precipitously and prices are rising exponentially as current homeowners are looking to cash in on the wave of new Amazon employees who will be looking for somewhere to live once the Crystal City headquarters will be opening their doors.
The NVAR data show that in the cities of Arlington and Alexandria – now some of the most competitive housing markets in America – the number of home sales dropped 14.2 percent and 10.9 percent respectively from August 2018 to August 2019.
Yet, in that same 12-month time span, the median sale price of a home in Alexandria has increased 6.5 percent and in Arlington it has shot up 12.3 percent, and they don’t seem to be slowing down.
The median home price in Arlington was $565,000 in August 2018, it spiked to $635,000 in August 2019, a $70,000 increase.
“While housing inventory is declining, there is not enough supply to meet the demand pushing up home prices,” said Nadia Evangelou, Senior Economist and Director of Forecasting for the National Association of REALTORS®. “It seems that some sellers are opting to hold on to their homes and wait to benefit from the Amazon effect.”
While Amazon estimates to add 2,500 new jobs in the Washington, DC area annually during the next 10 years, demand is expected to increase further in both Arlington and Alexandria.
“We should bear in mind that whenever a new job is created, additional jobs may also be created via increased demand for local goods and services,” Evangelou said. “Assuming the size of the multiplier effect is between two and four additional jobs for each job that Amazon creates, then 7,500 to 12,500 new jobs are expected to be added in the Washington, DC area.
“As a result, we estimate that permits of an additional 1,800 to 3,000 single-family and 1,600 to 2,700 multifamily units will be needed each year for the next 10 years in the Washington, DC area in order to accommodate the higher demand.”
And it’s not just home prices that are seeing an increase.
According to a report by CBS News, rents are already starting to spike to a level that is chasing people further away from these communities located just across the river from downtown Washington D.C.
“We’re seeing increases in monthly rents of $100 to $150 a month. That’s forcing a lot of people to leave their communities,” Danny Cendejas, an organizer with the local social-justice group La ColectiVA told CBS News. “In the past three months alone, there have been six or seven families who have moved out to parts like Maryland or suburbs in Prince William county.”
Affordable housing is already an issue in Northern Virginia, and with Amazon coming in, it’s only going to become a bigger problem.
Cities like Alexandria and Arlington have pledged to put $150 million into affordable housing over the course of the next 10 years, more than five times the amount pitched to Amazon as an incentive to come to Northern Virginia following a local government vote.
In Alexandria, a vote to change zoning laws passed that allows for smaller homes, usually described as in-law quarters, to be built on existing properties to try and create more availability.
Yet, despite the financial commitment and the zoning changes, this might not be enough.
Amazon’s main headquarters are in Seattle and that city’s issues with housing affordability and availability should be seen as a harbinger of things to come for Northern Virginia.
Sales prices in Seattle have doubled in the past decade. The city also faces housing density and affordability concerns. Not to mention, quality of life has taken a hit in Seattle as traffic has become a headache and public transit is in need of expansion.
The Washington D.C. area is even more compact and congested and will have to address these issues in advance of Amazon opening its doors or run the risk of becoming a place that most people can’t afford to live.