Blog Williamsburg

Our Fragile Neighborhoods

This comment was sent to me by a Williamsburg resident. He argues that the older neighborhoods are at a critical turning point. We need to think through which way we want them to go and how we will steer them.

A number of residential neighborhoods in the City of Williamsburg (such as Indian Springs, Burns Lane, College Terrace) are at a critical crossroads. Land values in the City are soaring. Meanwhile, many of its homes are older and in need of repair and substantial and (very) expensive renovations—such as new kitchens, updated baths and central air-- if they are to be brought up to today’s standards.

A large number of owner-occupied homes are also populated by the elderly who are likely to be moving on to retirement communities, assisted living and nursing homes in the relatively near future. Will these homes be updated or sold to new families wanting to settle in Williamsburg and who are willing and able to make the substantial investments necessary? Or, will these homes be sold to investors attracted by the cash flows resulting from rentals and the potential capital gains arising from increasing land values?

The decision to invest in major renovations costing $100,000, $200,000 and more is a difficult one. Although living in downtown Williamsburg is very desirable, newer, bigger and cheaper homes more geared to today’s lifestyles are only a few miles away. The average per square foot cost of renovations is considerably higher than new construction while land values outside the City are generally lower.

Undertaking renovations can also be very risky from a financial standpoint. Should the surrounding neighborhood subsequently decline due to rentals (or non-residential encroachment), much of the renovation costs could be lost as house values (as opposed to land values) do not substantially appreciate. In contrast, converting an in-City house into rental property and not undertaking substantial renovations could still make sense. Rentals generate considerable cash flow (especially if the number of renters per house is allowed to increase), generate depreciation for tax purposes, and hold the prospect of capital gains.

Major renovations to owner-occupied homes will simply not take place unless homeowners are very confident that Williamsburg will remain a highly attractive place to settle and that its neighborhoods will retain their special character.

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