News that the Exxon and Verizon land parcels are in play for development into high-density apartment homes has many Laurel Mews owners concerned about the impact on their home values and community living.   Homeowners close to proposed high-density apartment development often argue that the development will  intensify traffic problems, lower home values, overcrowd schools and harm the environment.  

There is considerable research that indicates that few if any of these concerns are well-placed.  The Laurel Mews HOA has looked at an extensive body of commentary and research in the areas of land use and real estate economics.  Most of the information points to the conclusion that adjacent development will have a net positive effect on our home values and community living.  A study completed by former Virginia Tech Professor Arthur C. Nelson, concluded that over the long run, well-placed market-rate apartments with attractive design and landscaping actually increases the overall value of detached houses nearby.  Importantly for Arlington County, where the school system is busting at the seams, high end apartment homes do not necessarily lead to more families with children and additional burdens on local schools.

Considering the Verizon parcel, the research is clear; vacant lots take away from the attractiveness of a neighborhood, and replacing vacant land with land that contributes human and economic activity is overwhelmingly positive for the local community.   Having well-managed housing adjacent to yours is indisputably a net positive.  What is being contemplated for the Verizon parcel is a mid-rise apartment building with mostly market-rate rent.  Research has indicated that renters do not necessarily bring down financial or livability values in adjacent owner-occupied housing.  Moreover, research has shown that that in an unconstrained rental market, nearby house prices will accelerate.

Adjacent development increases the desirability of an area.  Accumulation of investment equity in our particular area beyond the housing itself, i.e., I-66, the Orange and Silver lines and whatever retail, will accelerate already rising demand in Arlington County.  Greater investment in our area, especially in medium to high density housing, is a tax revenue bonanza, and thus can place moderating effects on marginal property tax rates for the rest of us.

Basic economic reasoning would suggest that increasing housing supply in Arlington County would tend to drive down prices.  Arlington County already has low housing inventory, and supply is struggling to meet demand.   Arlington County needs to increase supply as an affordability policy.  Affordable housing  has been shown to have a weak positive effect on adjacent home values.  Affordable housing can mean a lot of things to a lot of different people, but unequivocally if supply does not keep up with demand then prices will rise and affordability will suffer.  Lack of affordable housing increases burdens on public transportation and has other ultimately negative effects on a community’s overall health.  There is a formula (based on density) for increasing housing supply in a way that does not add pressure on resources, most notably more children enrolling in local schools,  but provides tax revenue to support those schools nevertheless.  

Laurel Mews owners could see a situation where the value of our homes goes down if we do not maintain our property to match the managed curb appeal of those apartments.   But even in that situation the value of the dwelling can go down, but the value of the land will continue to appreciate.   Location and upkeep of the house have the strongest impact on price.   The former can’t change, and the latter we can control.

So the question for the HOA is how does it collect enough via assessments to maintain, modernize and upgrade the common elements,  but not so much to seriously constrain owners from doing the same with their individual unit.  The answer may be to take more seriously our spring inspections, and try to get some pool pricing via some contractors or some exterior upkeep services, e.g., painting, roofing, window replacement, etc.  In the end our location is valuable.  But even if we fail in the upkeep of our homes, the value of our land will continue to appreciate as investors look to replace our down-market housing with more upscale units.  

All these arguments are applicable to the plan for the Exxon parcel development.  But we should consider the effect of losing a nearby gas station.   The question is,  would losing the Exxon gas station reduce competition and thus force local residents to spend more on gasoline? 

While crude oil and wholesale prices are the main drivers of gasoline pump prices, the brand of competing stations and their relative geographic proximity to each other are important factors in explaining price variation across gasoline stations, as opposed to just the number of competing stations.  

Gasoline retail prices are heavily influenced by the station’s amenities.  Our Exxon station has the amenity of a spacious, clean and well-stocked convenience store.  When the Exxon parcel is developed into apartment homes, gasoline shopping and convenience store shopping will be decoupled there as the gas station will likely go away.  But a convenience store will likely be part of the retail mix in the new building, notwithstanding a possible loss of retail parking. 

So to make gasoline purchases nearby, we will have to go further east on Lee Highway.  This might be a good thing for Laurel Mews residents.  Research shows that there are significant retail price effects when gas stations are adjacent or at least closely clumped together.  Gas stations most intensely compete with stations less than 1 mile away and that the intensity of competition diminishes with distance.  Our Exxon station is relatively isolated as a gasoline outlet.  One mile away from our Exxon station (6730 Lee Highway), there are 4 gas stations in the 5600-5800 blocks of Lee Highway (Shell, BP, Sunoco and Westover Service).   There may be many explanations for this, but gas tends to be cheaper at each of these 4 stations compared to our Exxon station.

There is a disputed effect that suggests that gas stations that are very close to each other may actually collude, thus can force up prices.  But compared to transient consumers at the Exxon, residents in this area have the time and information to make informed choices in gasoline purchases.   Transient consumers, i.e., those entering or exiting I-66 may not know about, or willing to drive further down Lee Highway to purchase gas.  That can change however with the advent of smart websites and mobile applications that can inform motorists of station locations complete with price information. 

Can we as consumers along with our government guard against collusion?  Can extra traffic on Lee Highway between I-66 and Harrison be tolerated?  Can the Shell, BP, Sunoco and Westover Service stations meet the transferred demand from the lost Exxon station?   The answers probably depend on a number of factors, including what is done with other nearby land parcels; for instance, a new plan for the Shreve parcel, which as an apartment home development has run into critical stumbling blocks.  A single retail outlet that sells multiple brands of gasoline and allows consumers to purchase via the internet (like movietickets.com) and redeem at the pump via a pre-authorized code or card would be a very interesting development for the Shreve site.  There is also a parcel at the intersection of Fairfax Drive and Little Falls Road that conceivably could become a gas station. 

Going back to the original topic, in the end the proposed development of the Exxon and Verizon parcels are investments in our Washington Blvd, Lee Hwy and Sycamore Street island that is something we should rather have over non-investment.  The developments will likely accelerate the appreciation of our home values, especially development of the currently vacant Verizon parcel.  The Exxon development may force changes in choices for our gasoline purchases, though possibly in our favor price-wise.  Deleterious effects may come with this particular change in terms of increased traffic along Lee Highway and congestion at the stations that take up the demand previously met by the Exxon station.

The key for the Laurel Mews HOA is to get out in front of the issues and envision features and outcomes that we want from these developments, e.g., community gardens and green space, appropriate retail and parking, traffic calming, safe pedestrian walkways as well as consistency with and reasonable updates to the Arlington East Falls Church Area Plan.  Then we must develop the knowledge, strategy and skills to negotiate win-win community benefits. 

–Lawrence