Land for residential development sold for an average of $47,500 per acre last year in the Southeast, according to the latest survey from the Realtors Land Institute. That's by far the most expensive in the nation and more than twice that of most of the rest of the United States.
Last year, Habitat for Humanity groups across the state, including here in Hampton Roads, had to suspend applications because they couldn’t afford to buy land to build on.
Frank Hruska is the executive director of the Habitat for Humanity of South Hampton Roads.
He said applications are open this year and his group has several house projects in the pipeline, but mounting land values and economic uncertainty continue to complicate the group’s efforts to provide affordable housing.
This interview has been edited for length and clarity.
WHRO: What's Habitat's biggest limiter or bottleneck to actually getting homes built?
Frank Hruska: The bottleneck is several, like driving on the interstate, the different places where you hit choke points. The first one is land. The acquisition of land is a starting point for any home construction and as we see here in Hampton Roads, land prices are still going higher every year because we're becoming landlocked.
Cities like Virginia Beach, Norfolk, Chesapeake, even Portsmouth (are) now landlocked. The opportunities are out in Suffolk and going out west to Smithfield are where the opportunities are.
The issue about land out that far west is most of the jobs are here in Norfolk and Virginia Beach and Chesapeake. The low-income families do not want to make that commitment to get far away, which puts pressure on us to buy land closer to where the employment centers are.
WHRO: How do these increasingly expensive land prices impact Habitat's mission?
FH: Our homebuilding has not suffered. What actually suffered is a quality of the families need to be higher now. Where, beforehand, we could take people on the lower end of the income bracket, we need to go to the high (end) now. As land prices increase, the property taxes on the houses increase, so therefore it puts more pressure on the homeowner's monthly budget.
The average Habitat homeowner has between two and three children, so for a single mother with two children, the minimum income is $48,000 and the maximum income is $76,000. The homes are not free. The homeowner buys it based on their income, and we charge them 30% of the gross income. So someone making $48,000 a year, that's $4,000 a month, 30% is $1,200. After you take away the property taxes and homeowners insurance, which are both increasing as you see in the news, that leaves less and less for the mortgage.
So at the end of the day, if that family needs $500 for property taxes and homeowners, that only leaves about $800 for the mortgage. Habitat cannot recoup our expenses at that level. So we either need additional donations to make up for that delta, or we’ve got to find someone near the high end of the bracket, someone making $72,000 (so) they can afford $600 a month.
At the end of day, we try to help the best families, but once in a while, economics come into play. And that’s why I need more support from the community. (If) I can get donations to offset the price of construction, that’s less money I've got to recoup at closing.
WHRO: Land is your biggest expense for building new homes, but it's not the only one. Building materials spiked during the pandemic, and now tariffs are threatening to increase costs even more. How are you navigating that?
FH: Habitat is a small business. Although we are nonprofit, we're a small business. We have a small construction fund that people donate to that gives us the ability to pre-buy materials when needed.
We saw the same thing during the COVID, when we had supply chain (issues) and prices went up and they came back down. And then a couple of years ago, we had a little bit of inflation run away, and prices went up. And now, with the threat of tariffs, pricing may go up again.
What we have done, we're about to break ground on two houses in Norfolk, hopefully in June, and not by July. We pre-bought our lumber. When President Trump made an announcement on April 2, we contacted our vendor and we bought enough lumber to buy those two houses. And that was only possible because of a construction fund that people donate to. That allows us to have working capital, so we take advantage when the prices are lower.
And I think you see that with any small business or any large business, they buy when they can, and they're trying to avoid buying when they have to.
