8 Assessment of naturally-occurring affordable housing
This chapter covers trends in naturally-occurring affordable housing (NOAH), or market affordable housing.
8.1 Naturally-occurring affordable housing
Not all affordable housing is supported by public subsidy. In fact, a large share of affordable housing is privately-owned and receives no government assistance. Widely referred to as naturally occurring affordable housing (NOAH), or market-affordable housing, these properties are a growing concern for communities facing housing affordability challenges.
Many experts consider NOAH to be a misnomer because there is nothing “natural” about the affordability of these properties. Some prefer “market-rate affordable”. But regardless of the choice of term, this type of housing plays a pivotal, albeit precarious, role in providing localities with a significant amount of affordable housing without government resources.
The preservation of NOAH properties has been a growing strategy to support affordable housing in communities as the ability to quickly develop new units has been stifled by labor shortages, rising land prices, and supply chain issues. NOAH is at great risk of being lost because it often requires greater investment to maintain and more likely to be redeveloped—in turn contributing to a loss of affordable housing units.
For analysis purposes, we define NOAH properties as:
- Existing multifamily properties with active leases;
- Classified as Class B, C, or unclassified;
- No public subsidy, rent caps, or other income-based restrictions;
- CoStar Building Rating of two or fewer stars out of five;1 and
- Built before 2000
8.1.1 Locations
Based on this criteria, NOAH properties are located all across the region, especially in the City of Richmond and along the borders of the city and counties, where older multifamily properties exist.
The large share of NOAH is located in the City of Richmond (11,253 units or 45 percent of all NOAH units). This is no doubt due to the large amount of older multifamily properties within city limits — most of which is located in smaller buildings. Henrico County has the second largest share of NOAH in the region with 8,983 units, followed by Chesterfield County at 3,667 and Hanover County below 500 units.
It is important to consider that the City of Richmond contains much of the region’s older housing stock. This includes many older apartment buildings that are anywhere from two to twenty units in size. While they may fall under the NOAH classification set out in this analysis, their rents may actually be higher due to the overwhelming demand for rental housing among young professionals and students in the city.
Comparably cheaper than new multifamily properties that offer amenities such as pools and fitness centers, these properties are still able to command such high rents due to their proximity to Virginia Commonwealth University and Virginia Union University, as well as other urban amenities like restaurants, bars, and retail.
In total, there are nearly 25,000 NOAH units across 194 properties in the region. This makes up a significant amount of rental inventory, as well as a valuable source of unsubsidized affordable housing. The aging of these properties, as well as the increasing demand for rental housing, puts significant pressure on these properties and their owners. For smaller landlords, the cost to renovate can be far too great — leading to worsening deferred maintenance and pressure to sell, which both can negatively impact renters.
8.1.2 Building style
CoStar places buildings into style categories based on the following definitions:
| Style | Stories | Buildings |
|---|---|---|
| Garden | 1-3 Stories | 4 or more buildings |
| Low-Rise | 1-3 Stories | 1-3 buildings |
| Mid-Rise | 4-14 Stories | 1 or more buildings |
| High Rise | 15+ Stories | 1 or more buildings |
While not traditional multifamily properties, CoStar does track some single-family and townhome rentals that are included in this data.
Roughly four out of five NOAH units are part of garden style properties, which are clusters of smaller one- to three-story buildings. Another 3,200 units in low-rise properties, which have similar but fewer buildings per community, round out nearly all of the NOAH supply in the region.
However, garden style properties have more than 210 units on average, while low-rise properties have just 12. As a result, there more than twice as many low-rise properties (273) than garden properties (95).
The map below shows NOAH properties by building style across the region. Most of the low-rise properties are within Richmond, reflecting the early 20th century small-scale apartment buildings found across many historic neighborhoods in the city—especially the Fan and Museum District.
Garden style properties, on the other hand, are more commonly found in the counties’ inner suburbs, and reflect development trends prevalent during those areas’ growth in the mid 20th century.
8.1.3 Age
With the exception of Richmond’s low-rise apartments from the 1910s to 1930s, most of the region’s NOAH units were built between 1960 and 1980. CoStar also tracks property renovations, which began for NOAH properties in the 2000s, especially closer to 2020 in Richmond and Chesterfield.
CoStar only marks a property as renovated if it:
“…has been completely restored so that the existing space becomes ‘new’ space again. […] Minor renovations, such as the improvement of a building’s lobby or exterior are not considered full building renovations.”
8.1.4 Rents
NOAH properties have not been immune from the rapid rises in rent. As of Q3 2022, the average asking rent for NOAH properties was $1,173. This is about $200 less than the average asking rent across all rental properties. Although this seems like a small difference, an extra $200 a month means more money saved for childcare or transportation costs.
From the beginning of the pandemic to Q3 2022, NOAH rent has increased by $104 — a 10 percent increase.
8.1.5 Sales
The sale of NOAH properties and ensuing new ownership often leads to rent increases and/or rehabilitation. In some cases, this may take NOAH properties out of market affordability. Over the last five years, NOAH properties have made up well over half of all multifamily property transactions in the region.
However, NOAH transactions represent a smaller share of total units sold—about one-third since 2017 Q3.
Sales volume for NOAH properties has, on average, been a small fraction of total volume in the region. However, beginning in 2021 Q4, NOAH sales volume rose above $100 million for the first time since 2018 Q3, which itself was an an outlier. NOAH sales volume hit a new record in 2022 Q1 (over $178 million), stayed at that level the next quarter, and continues to be well above average to-date in 2022 Q3.
During this timeframe, NOAH properties had an average price per unit below that of all multifamily sales until 2020 Q4. At the end of 2020, the average price per unit of a NOAH property hit a high of $221,534 — over $44,000 more when compared to all multifamily sales. Although both types of sales took a dip following the end of 2020, the higher NOAH price remained until 2021 Q2, when NOAH average price per unit once again went below all sales.
8.2 Manufactured home communities
Manufactured home communities (MHCs) are also a valuable source of NOAH across the region, but are not reliably monitors as traditional multifamily rental housing. As a result, accurate data on supply and rents are more difficult to obtain.
8.2.1 Supply
In 2016, the Manufactured Home Community Coalition of Virginia (MHCCV) conducted an assessment of all manufactured home communities across the Richmond, Virginia Metropolitan Statistical Area (MSA). That report found 4,735 homes across 54 MHCs in the greater region. Within the primary PHA area2 there are 24 different MHCs, which in all contained at least 2,742 individual manufactured homes.
This data includes homes that may be rented, as well as owned. Regardless, residents in MHCs rent the lot on which their home resides. This leaves many manufactured home community residents who own their homes in a precarious position should a community owner decide to sell or redevelop the property. Manufactured homes are not easily moved once installed, leaving many families forced to abandon their homes and seek new and more expensive housing elsewhere.
Chesterfield County has the largest supply of homes in MHCs (1,543), which is about half the total number of subsidized rentals also in the county. Hanover and Richmond both have near 500 units in MHCs, while Henrico only has one MHC with 230 units.
8.2.2 Locations
The majority of manufactured home community units are located along the Route 1 corridor. In areas where commercial and mixed-use development has accelerated, many of these properties are well-positioned for a change to a “higher and better” use. This redevelopment potential, while often in line with broader planning goals, is a threat to the long-term stability of MHCs.
In September 2020, project:HOMES, acquired a 52 unit manufactured home community called Bermuda Estates in Chesterfield County. Since acquiring the community, project:HOMES has made significant infrastructure improvements, replaced some units in disrepair, and constructed a community center. The nonprofit plans to continue investments and preserve the park as a high-quality, low-cost neighborhood.
Suburban Village, Chesterfield County’s third largest MHC with almost 250 units, was purchased by Maryland-based Horizon Land Management in August 2021 for $22.5 million. The park was previously under the same local ownership since 1986. More than 35 potential buyers expressed interest.
Shady Hill Mobile Home Park, home to more than 100 families, was purchased by a Charlottesville-based development firm for $5.1 million in August 2022. While complete redevelopment is likely, exact plans and timing are not known.