Community Highlights
Local jurisdictions in the greater Richmond area have collaborated to develop a Market Value Analysis (MVA) of Richmond's housing market.
Editor's Note: This article is part of an occasional series highlighting promising community-based practices that relate to the Richmond Fed's work supporting low- and moderate-income communities and which policymakers, communities and other stakeholders may wish to explore.
The Richmond Fed recently held an event at our Richmond location on "The Highs and Lows of the Housing Market" to discuss the factors affecting housing availability and affordability in the United States. One of the points the panelists made was that regardless of the policy approach to address these issues, regional collaboration at the local level could be beneficial. That's the direction that local jurisdictions in the greater Richmond area have taken in developing a Market Value Analysis (MVA) of Richmond's housing market.
All real estate markets are local. And as many will recall from their most recent housing search — be it to rent or own — each local housing market is comprised of many submarkets. Members of the public and policymakers alike have access to real estate market and neighborhood data like never before. But with so much available information, it can be difficult to determine the most meaningful characteristics and trends. For reasons like this, many communities will conduct analyses on their regional housing markets to inform policymakers and community members on housing issues.
Between June 2021 and April 2022, Richmond Memorial Health Foundation (RMHF), with the support of PlanRVA (Richmond's regional planning district commission), worked with the Reinvestment Fund — a Philadelphia-based community development financial institution - to conduct a MVA in the greater Richmond area. In the MVA, the Reinvestment Fund leveraged administrative and publicly available data to gain insight into Richmond residential real estate market indicators related to property values and investment, distress and vacancy, and neighborhood and housing characteristics.
The MVA is not a needs assessment or a policy document, although the data from the MVA can be used to inform both. Ira Goldstein, President of Policy Solutions for the Reinvestment Fund, explains the difference: "A needs assessment tells you how many of something you need; an MVA tells you where it could happen and where it might have the most magnified impact beyond that of the beneficiaries of housing units created."
Richmond's 2022 MVA followed a previous MVA from 2017 and incorporated an increasing level of community and expert input. RMHF made a concerted effort to bring participants to the table who do not ordinarily have a presence in this area of public policy research. Groups of planners, real estate professionals, and community residents met multiple times to review interim analyses and validate experts' interpretation of the data.
As a multi-jurisdictional effort, stakeholders joined from Chesterfield and Henrico counties in addition to the City of Richmond. Participants from neighboring jurisdictions, who were actively involved in existing initiatives that aligned with the MVA, helped assess how the MVA could support and inform those initiatives.
The MVA used a cluster analysis approach to subdivide the Richmond area's residential real estate market into nine distinct market types. According to Goldstein, the MVA tells us how to "differentiate the real estate market, objectively, with data." So, for example, if a person wanted to compare two very different housing markets, one in a high-income neighborhood versus a low-income neighborhood, they would be able to look to the MVA to see how the two neighborhoods differ based on measurable characteristics.
The goal is not to identify "good" or "bad" neighborhoods. For many metrics included in the MVA, the question of whether a certain indicator is good or bad depends on a person's perspective. Take the example of median home sales price: a relatively low median sales price in a neighborhood would not be favorable to current homeowners looking to sell, but at the same time would indicate that homeownership is relatively affordable for prospective buyers. From a policymaker's perspective, Michael Smith, Program and Strategy Officer with RMHF, shared, "The MVA is agnostic to the market. It does not indicate whether traditional or ongoing market activities should continue or not."
Instead, the goal of the MVA is to provide an unbiased picture of local conditions. These data contribute to a baseline understanding of the status quo. According to Sarin Adhikari, Principal Data Manager with PlanRVA, "It allows policymakers to identify areas where a small change would result in a big outcome, as well as weaker markets that may require a considerable policy shift." Policymakers will be able to use information to both craft and prioritize local policy interventions.
From Goldstein's perspective, the MVA allows users to understand and build upon positive attributes of every neighborhood within the City of Richmond, Henrico County, and Chesterfield County. "The MVA is predicated on the notion of building from strength," says Goldstein. "It creates a framework for investment in a city… It's not about avoiding places, but about figuring out what nodes of strength are within places and then building off of those nodes to affect constructive market change."
The MVA also allows for organizational decision-making. "To affect significant policy change takes significant organization. The MVA greatly adds to the ability to do that work," says Smith. Planners can take policy prescriptions and determine where in the Richmond area they would have the greatest impact. For example, planners can use the MVA for scenario planning. Layering in community amenity data, they can identify how to create new opportunities for residents beyond what they have at present.
A considerable amount of the discussion around the MVA has focused on the restricted number of the regions' neighborhoods that are affordable to homebuyers with modest incomes. The housing affordability component of the MVA indicates how affordable neighborhoods are to residents earning between 50 and 200 percent of the county median income. The analysis shows that higher income homebuyers can afford to buy in a larger number of neighborhoods, and that homebuyers earning 50 percent of the county median income are priced out of most neighborhoods.
The MVA can be used for both forward-looking and retrospective analyses. An example of a forward-looking analysis would be to identify naturally occurring affordable housing (NOAH) at risk of becoming unaffordable. Policymakers could target those areas for code enforcement to keep housing in the hands of owner occupants. An example of a retrospective analysis would be to compare the 2017 MVA to the 2022 MVA to explore issues around market transition and neighborhood change. According to Adhikari, "Every iteration of MVA gives us the opportunity to measure if we are moving the needle."
Disclaimer: The Richmond Fed will highlight community organizations in this occasional series in an effort to share community practices that align with the Federal Reserve mission to support low- and moderate-income communities. Our reference to these organizations is not an endorsement of their mission or services by the Federal Reserve Bank of Richmond or the Federal Reserve System.
