High costs haven't hampered Charlottesville area's growth

by Timothy Sprinkle
Virginia Business
December 2005

You don't have to tell Rob Hull that Charlottesville real estate is a worthwhile investment. After all, the value of his property in Woolen Mills neighborhood has nearly doubled to about $140,000 in the six years he has owned his home. Still, the lifelong city resident is concerned about the effects of rising housing costs.

“I can't believe how much worse prices have gotten,” says Hull, who works as a social worker with Region Ten Community Services Board. “I've got clients that can't find anywhere to live, and quite a few of them have had to move out of the area even though this is their hometown.”

Hull isn't alone in his concerns. The increasing cost of living in the Charlottesville area has become dinner table conversation for many area residents and business leaders. The latest ACCRA Cost of Living Index study shows that the area ranks among the most expensive regions in Virginia, spending more on housing, health care and many other day- to-day expenses than Richmond, Hampton Roads and even parts of Northern Virginia.

Charlottesville’s high costs are in part the result of its attractiveness.. Last year, Frommer's Cities Ranked and Rated named the Charlottesville-Albemarle County area as the "Best Place to Live in America," spotlighting the region's "college town amenities" as home to the University of Virginia and its outstanding quality of life. That accolade only added to a long list of honors bestowed by other publications. The good publicity is attracting many newcomers, driving up the demand for housing in an area that was already expensive.

Nonetheless, rising costs have not dampened the economy. The area is adding jobs, unemployment is low, and the U.Va. is helping research-oriented entrepreneurs begin new businesses. New companies in the area find that, despite the low jobless rate and high cost of living, the pool of well-educated available workers is large. Many are “underemployed,” willing to take lower-paying jobs just so they can stay in the area.

Rising costs
The latest ACCRA report revealed that living expenses in the Charlottesville area are six percentage points higher than the national average, outpacing health-care and grocery costs by as much as 11 points. But while everyday expenses have been rising, salaries in the area have remained relatively flat, leaving many workers struggling to make ends meet.

The Virginia Association of Realtors reports that the median price of a house sold in the Charlottesville area in September was $265,900, up 11.4 percent from $238,750 last year. The area’s current home price is 45.7 percent higher than the state median of $182,450. Meanwhile, the area’s median household income is $48,664, up slightly from last year’s figure of $45,022.

“[Cost of living] is becoming more of an issue for residents,” says Robert De Mauri, executive director of the Thomas Jefferson Partnership for Economic Development (TJPED), whose organization collects local data for the ACCRA report, “and it's primarily for those folks that might fall into the average income range; the teachers and policemen, people that generally have to live off the wages generated in this economy.”

In addressing the problem, the Charlottesville area has encouraged developers to include affordable housing, or “work force housing,” in new residential developments. Albemarle County’s policy requires that lower-cost homes make up at least 15 percent of the units developed under rezoning and special use permits.

In addition, the Charlottesville Area Association of Realtors set up a trust fund last year to help workers in key public service sectors, such as health care, safety and education, buy homes in the community where they work. The organization has collected $300,000 in donations and pledges so far and helped a police officer, a teacher and a firefighter buy homes.

But many of the 200,000 people in the Charlottesville area appear willing to accept higher costs to enjoy its amenities. "Realtors always talk about the three things that are important — location, location, location," says Dennis Rooker, chairman of the Albemarle County Board of Supervisors, "and we have a location that's highly desirable. Gen-erally speaking, if you go to places that have a vibrant economy and are good places to live you're going to find a high cost of living. I think affordability is an issue not just in our area, but in many areas around the country."

Due largely to the area's reputation as a great place to live, Charlottesville has more than its fair share of affluent transplants. "A lot of folks move here and they don't depend on the local economy for their economic well being,” De Mauri says. “They either already have their money and then bring it with them or they work in jobs that give them the flexibility to live anywhere, so they choose to live where they like to live. They tend to be able to afford the higher cost of housing and the added cost of goods and services.”

This isn't a new issue for the area. Charlottesville has been an expensive place to live for many years. In fact, in the six years that the Thomas Jefferson Partnership has collected local cost of living data for the ACCRA report, Charlottesville-Albemarle has consistently ranked second highest in the state behind Northern Virginia.

Low unemployment
Despite the high cost of living, the local economy has remained strong in recent years. Last year, the metro area added more than 1,900 new jobs, while the area's unemployment rate often was among the lowest in the country. In September, only 3 percent of the work force in Charlottesville and the surrounding counties was out of work. “We had the highest rate of job growth in the state, the ninth lowest unemployment rate in the nation in 2004, and we've had probably 750,000 square feet of retail space built here in the last year,” Rooker says, “so the business climate is far from stagnant here.”

The University of Virginia, long the area's economic anchor, has emerged as a driving force for new local business. Companies spun off by faculty entrepreneurs have helped extend the university's reach out into the community and develop the area's high-tech base. (See story on INDOOR Biotechnologies on page 90.)

"From an economic development model, it's not uncommon for localities to look for ways to grow their own," says Larry Banner, vice president of the Charlottesville Regional Chamber of Commerce. "U.Va. remains an outlet for technology and research, and the better that we as a community work with them to improve this research base, the more entrepreneurial jobs they'll be able to bring to private enterprise. Then, we just have to actually convince them to stay in Charlottesville, that's definitely the goal."

Economic and population growth has not been limited to Charlottesville and Albemarle County. The surrounding counties — Greene, Fluvanna, and Orange among them — are seeing spillover development as they keep up with 4 percent annual population growth in some areas. A large mixed-use retail complex, Hollymead Town Center, just went up north of Charlottesville near the Greene County line. About 1,200 homes are planned for the Spring Creek development in Zion’s Crossroads near the Louisa-Fluvanna line, and 2,000 homes are in the pipeline in Greene.

“They're becoming kind of the bedroom communities of Charlottesville-Albemarle,” De Mauri says of these outlying areas. “As the housing costs increase and people move they tend to look at something that's more of a competitive cost situation for them. And certainly housing there is a little less expensive than it is in Albemarle, so that's where the growth is being focused.”

Changing economy
The area’s economy is changing as it grows. Once a manufacturing hub, Central Virginia has lost many high-paying jobs during the past several years as factories have closed and jobs have been moved overseas. Many of these jobs has been replaced by occupations in the service and hospitality sectors. Tourism has become a large part of the Charlottesville economy as visitors flock to U.Va., Monticello, the revitalized downtown area and the region's 22 wineries. The number of area jobs in the hospitality industry rose 6.3 percent last year, according to the U.S. Department of Labor’s Bureau of Labor Statistics.

But many of these new jobs don’t pay as well as those they replace. “The reality is that it's tough to work in the Charlottesville region and be necessarily able to afford the Charlottesville region,” Banner says.

Another problem for many workers is underemployment, explains Chris Engel, economic development specialist with the city. Many college graduates take low- paying jobs just so they can continue living in the Charlottesville area. It's a segment that Banner estimates at 10 percent of the work force.

“These are folks coming out of the university that just choose to live here that have much higher skills and education levels than they're actually using," he says. "So there's an opportunity to take those folks and find opportunities for them to be more engaged in the economy.”

Rob Hull hopes the Charlottesville area will develop a local economy that doesn’t require people to make sacrifices to live there. "City council has done a wonderful job of promoting the city as a great place to live, but not as a great place for business,” he says. "Let's bring in the jobs.”