Housing Prices Soar, Jobs Disappear Southwest Virginia 2010

by Lewis Loflin

Here we will explore the housing problems in Bristol and Southwest Virginia. In this case we have massive state-driven economic development across the region versus its negative side-effects on the local population. The big losers again are the working poor.

Many of the jobs are state jobs going to people brought in from elsewhere. The jobs in many cases are not even offered to local residents. For example 3000 applications for employment at a state prison were rejected they claim because of education, drugs, or criminal records. (Mine was rejected for being over 35.) So why exactly did they locate a prison in Lee County, Virginia for example as "job creation" when they know nobody qualified for the jobs?

The same problem with a call center for the Virginia Employment Commission that created "new jobs" when at the same time they fired workers from existing jobs in same area. These were merely lower paying replacement jobs, a common theme here. The answer seems to be the State used funds slated for job creation to underwrite their other costs. So no new jobs were created for the residents that lived in the area. The jobs that paid anything went to people brought into the region.

The worst effect was inflation in the cost of everything, in particular housing. Government funding for "affordable" housing goes mainly to the welfare class while working people don't qualify because of income. Any increase in job opportunities (mainly low-end call centers and restaurants) is more than eaten-up by local inflation. The recent recession has only made matters worse as wages plummet to even lower levels than ever before. The income gap only widens while inflation hits the working poor the hardest.

To quote the Bristol Herald Courier (June 11, 2008),

"A third of Bristol's residents need affordable housing," said (Bristol, VA) Mayor Jim Rector, and "public affordable housing is the way to go. In private housing programs, the only goal is profit, while public programs do what is best for residents."

According to the Virginia Housing Coalition ( 20 percent of homeowners and 25 percent of renters in Southwest Virginia live in mobile homes. And because of the lack of affordable housing relative to income, many workers commute across state lines to the region to work. The number of renters paying more than 30 percent of their monthly income for housing increased from 29 percent in 2000 to 33 percent as of 2005.

The problem is getting "worse" due to falling wages and higher unemployment combined with inflating property values due to a widening income gap and move-in retirees. Southwest Virginia is plagued by substandard structures along with rising prices in areas that remain economically depressed. People Inc., ( says home building in Abingdon ranges from $250,000 to $400,000. This is unaffordable for working people in Abingdon.

More affordable housing is needed in Southwest Virginia, said Ron Flanary (now retired), of the LENOWISCO Planning District Commission. ( Affordable housing is "as critical to economic development as broadband, water, sewer, roads and sites," he said. "It's the closest thing to the most critical piece of economic growth - people."

What they don't address is the poverty wage scales that make a home or even renting unaffordable.

Mr. Flanary notes several reasons for this problem which he blames on local attitudes: "We don't have a sufficient culture of housing-site developers in our area, compared to the Tennessee portion of the Tri-Cities...Property owners and some counties, both of which resist mandates for zoning to protect property values and to avoid land-use conflicts and streets that must be built to state Department of Transportation standards." We also don't have the income to afford much of this.

As he complains: "We're dealing with an area that is frequently in conflict with itself - wanting new economic growth, but often unwilling to do the things necessary to get there." He fails to note that this development often benefits a few while everyone else pays the bills.

Building new infrastructure without addressing the widening income gap only makes matters worse on long time residents often forced to underwrite new development with higher utility rates and property taxes.

He noted himself in 2001 in the Kingsport Times-News that new home construction doesn't pay enough in property taxes, etc. to cover the cost. Guess who covers that cost?

According to the 2000 census 1,900 homes in Southwest Virginia lacked complete indoor toilets, but the problem has been reduced. A lot of the housing is "poor quality" and there's too many aging mobile homes. "In Southwest Virginia, 70 percent of the single-family homes purchased in the past 15 years have been manufactured homes."

Well if that is all people can afford as costly economic development inflates the cost of everything while the jobs go to outsiders, what does he expect?

The local press noted the number of people living at or below the poverty level in Southwest Virginia actually increased from 61,600 in 2000 to more than 72,000 in 2005 while the number of renters who pay more than 30 percent of their income for housing has increased by 4 percent - from 29 to 33 percent. All of that went on while millions of tax dollars were spent on economic development.

So as government funded development rages on, the human condition of the residents and their inability to earn a living undermines any potential positive outcome. Rob Goldsmith, executive director of People Inc. claims, "Affordable housing needs vary as counties and cities succeed with economic development efforts. It has impacted [the cost of] a lot of rental housing."

He cites Grundy, VA. as an example. The government spent $200 million on flood control for a Wal-Mart, fired and transferred state workers to a call center for the Employment Commission, (cutting wages in the process), etc. The end result was in three years apartment rents went form about $350-$450 per month to $700-$900 as of 2007.

As he further noted, "With the development of the law school and pharmacy school, people need housing. And that has really driven the rents way up." What he didn't mention is those jobs the taxpayers generated didn't go to long term residents, so the exploding cost only pushes more into government dependence.

The same is true in Russell County where state contractors CGI-AMS and Northrop-Grumman are supposed be hiring about 800 employees - many from outside the immediate area. (It's reported many of the call desk jobs only pay $9 an hour.) As the press notes, "Most of the housing that's been developed there is the high-end stuff, which is not meeting the needs of the lower end of the housing market." At $9 an hour no kidding.

Housing was also an issue for some of the more than 400 employees of a federal prison near Jonesville in Lee County. Those state generated jobs again went to outsiders, local residents got the restaurant jobs and the inflation. The failure of several taxpayer funded call centers only added to the misery index because those jobs (paying a lousy $8 an hour) were all that were available to the average resident.

The press notes a number of non-profits cooking up all kinds of scams to help people afford better homes, except they never address issues of low pay and political corruption. As they noted in regards to keeping rent under 30% of ones income: "For someone making $10 per hour, that equates to a monthly house or rent payment of $520 Finding a home to rent or buy for $520 a month is a real challenge."

The conclusion is government efforts at economic development rarely supplies jobs or opportunities to those most in need. Indeed, with the benefits going to mostly outsiders moving in while the cost is shifted onto everyone, the poverty rate only increases. This is just what happened in Washington County Virginia from 1997 to 2007 as the income gap widened. Yes minimum wage went up, but was far outstripped by local inflation. Note that a call center located in a government subsidized facility in Abingdon Virginia is hiring as of June 2010. They pay $8.50 an hour.

Let's put this in perspective. Minimum wage in 1974 was $2 an hour, adjusted for inflation is almost $9 an hour today. So many people in this region live on often government subsidized jobs paying around minimum wage of 1974. A manufacturing company that recently received a bundle of corporate welfare pays $9-$10 an hour. That is why the poverty rate keeps growing. This will continue until we create middle class jobs available to the average resident.

Buyers Market in 2010

It's a "buyers market" in 2010 as home sales in Southwest Virginia increased 5.5 percent over 2009. It's a buyer market only if one has money from outside the region or a government job. To quote, "95 city (Bristol, VA) homes sold during the first three months of this year, compared to 85 in the same period a year ago. The median sales price in the city was $112,690. Across the region, 174 homes were purchased with a median price of $116,708."

One explanation was the expansion of Alpha Natural Resources has boosted home buying across Bristol. This company received millions in corporate welfare to move their office down the road from Abingdon. While not supplying a single new job and only transferring existing jobs, it has further inflated housing prices in an already poor community.

As one giggly realtor noted, "That has brought in a lot of new people and opened up a good market for high-end properties, which we don't have enough of. All different price ranges are benefiting." In other words all prices are inflating while jobs are still lacking and wages are falling for the working poor. Again more jobless inflation.

Ref. BHC Nov 04, 2007 and May 1, 2010

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