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Isle of Wight County’s zoning laws and tax methodology may be contributing to a lack of affordable housing, according to a study funded by a grant from the Peninsula Realtors’ Association.

Isle of Wight supervisors directed county staff in 2021 to apply for the grant, which was to provide an independent housing analysis. The association tasked Thomas Hall, a Christopher Newport University professor of finance and economics, with completing the study.

The U.S. Department of Housing and Urban Development defines “affordable” housing to mean no more than 30% of an occupant’s gross income is going toward housing costs, including utilities. According to Hall’s findings, which he presented at the supervisors’ Dec. 8 meeting, roughly a third of Isle of Wight renters are paying 35% or more. To fall below the 30% threshold, a household would need to earn $75,000 a year or more.

Homeownership is likewise out of reach for many. According to Hall, there were just over 1,100 Isle of Wight residents were earning between $25,000 and $34,999 as of July, which would afford them a house valued at roughly $125,000. But only 263 homes at or below that price point sold from 2011 through 2021.

The availability of homes only starts to exceed demand when the price points rise upwards of $410,000 – which would take a household income of $75,000 to just under $100,000 for a family to comfortably afford.

Taxing land with structures at a higher rate than vacant lots, imposing minimum lot sizes for new housing developments, maximum building height restrictions and requiring a minimum number of parking spaces per residential unit – all of which Isle of Wight presently does – can constrain housing stock and drive prices high, Hall contends.

The county’s zoning ordinance specifies a minimum of 40,000 square feet, or just under one acre, for new lots zoned “rural residential.” “Suburban residential” lots require 30,000 square feet, or roughly two-thirds of an acre, if they have private water and sewer, or 20,000 square feet (just under half an acre) with public utilities. Urban residential lots presently require anywhere from 30,000 square feet to 12,000 (roughly a quarter acre) depending on their water and sewer setups.

The county’s zoning ordinance further mandates that no building exceed 35 feet, or three stories, in height. For parking, the ordinance mandates two spaces per dwelling unit, 2.25 spaces for three-bedroom multifamily units, and one visitor space for every five units in a condominium building.

Hall then held up Pittsburgh, Pennsylvania, as an example of a locality with an innovative real estate tax solution for encouraging development. Pennsylvania, according to the National Association of Home Builders, allows localities to adopt what is known as a “split-rate” real estate tax, which places a higher tax on land while reducing or eliminating the tax on structures.

“Pittsburgh did this; they taxed the land and not the structures, and their economy recovered much better than neighboring communities in Pennsylvania that did not do this, that were also suffering from the decline of the steel industry,” Hall said. “So essentially we have a test case; we have a proof of concept.”

According to Hall, the idea of a split-rate real estate tax is also under consideration in Richmond. In a September interview with ABC affiliate WTVR, Richmond City Councilman Andreas Addison called for “decoupling” the city’s real estate tax methodology to separate the home versus the land, and taxing “what the land is worth.” The change, Addison said, would create an incentive for developers to build on vacant lots.

Isle of Wight, by comparison, has several “agricultural and forestal districts,” which are voluntary creations of county governments that allow landowners special land use rates when their properties are assessed for real estate taxes in exchange for a pledge to keep their land in agriculture, forestry or open space use for a set number of years, usually 10.

“Not everybody’s going to benefit from this; if you’re a person with no income and you own 50 acres land, and you’re just sitting on it … it was in your family for hundreds of years, this will not be in your benefit,” Hall said, but noted that “the role of government from the utilitarian perspective is to advocate for policies that do the greatest good for the greatest number.”

“No matter what purpose you put to the land, if the land itself is being taxed, whoever ownes that land will figure out how to pay that tax and maximize their profits. … But if the person who owns the land is not being taxed on the land then they can sit on it forever and ever and never build anything there, and people don’t have houses, and that’s where we are right now,” Hall added.

The supervisors, however, were skeptical as to whether the Pittsburgh proposal could work in largely agrarian Isle of Wight County.

“Eighty-five percent of our county is rural,” said Supervisor Dick Grice, also noting that the county’s funding of its government – to include Isle of Wight County Schools – is presently dependent on real estate taxes the way they’re currently assessed.

Supervisor Don Rosie then noted there’s been “a lot of pushback on too much housing.” Over the past several years, when housing development proposals have come to the supervisors or Smithfield’s Town Council for approval, area residents have spoken up during the required public hearings to argue that more houses will overburden Isle of Wight’s already congested roads and schools.