THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, October 22, 1995 TAG: 9510210370
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
DATELINE: CHESAPEAKE LENGTH: Long : 116 lines
The housing boom that propelled Chesapeake into the state's fastest-growing city has waned.
After peaking in 1994, the city of 181,000 is now experiencing its steepest and longest decline in residential construction in at least five years. Meanwhile, neighboring Suffolk continues to snag more of the region's housing growth, luring builders with cheaper land and fewer zoning and water restrictions.
There are likely several causes for Chesapeake's home-building decline, but it's difficult to point a finger at any one. Some say the drop may be natural, a sign that the city is maturing. But others point to market trends and Chesapeake's growth problems. Still others say developers may be bypassing Chesapeake for more builder-friendly Suffolk.
``I think there is a demand for housing, and the demand will be met in places where it can be accomplished,'' said developer Lyle Wermers, president of Chesapeake-based Genesis Group. ``We are a market-driven business.''
Developers began building apartments, houses and townhomes at a feverish pace in Chesapeake during the 1980s. Consider this: In 1982, they built $35 million in new homes. Two years ago, residential construction totaled $244 million.
But home-building recently plummeted in the locality dubbed ``the fastest growing city in Virginia.'' In the first eight months of the year, residential construction dropped off 30 percent to $105.3 million. Even huge increases in commercial, industrial and office building weren't enough to account for the severe decline in new homes.
Across South Hampton Roads, residential construction declined 13 percent to $276.3 million in the first eight months of the year, according to the Builders & Contractors Exchange Inc. of Norfolk. But no regional, statewide or national market trend could alone account for such a steep drop in Chesapeake's home-building figures.
Instead, economic officials say the decline may be partly natural, related the ebb and flow of cities. Simply put, Chesapeake's housing market, like Virginia Beach's, might have reached its peak.
``I think Chesapeake is on the beginning curve of maturing,'' said Donald Z. Goldberg, the city's economic development director.
Indeed, Virginia Beach's home-building spree slowed as land zoned for homes became scant and more expensive. Chesapeake's neighbor also refused to allow development of wetlands and nixed plans - again - because of water problems.
Chesapeake officials say they have more than 5,300 acres of land zoned for residential construction, but developers say there aren't enough inexpensive, large tracts to create giant, affordable subdivisions. Many large tracts are hands-off, they say, because the city has begun to control growth by refusing to rezone agricultural land.
Wermers said many of the new housing projects in Chesapeake are now smaller, with pricier homes.
``For affordable housing, there's no place for it,'' he said. ``It's zoned for agriculture, and there have been mighty few rezonings approved.''
And that's fine to many city residents, who've been packing Planning Commission and City Council meetings to complain about the city's failure to keep up with the growth.
Chesapeake residents say the roads are too narrow, the schools are overcrowded and the water funneled to two major communities hasn't been upgraded to rid of the salty, briny taste.
Houston Eldridge, who lives in Chesapeake's Greenbrier section, said the water is so bad that - if he had to move again - it might be to Suffolk.
``If I had to move back into this area, I'd think twice about it,'' said Eldridge, a security consultant.
And builders are paying attention. While water like Chesapeake's would not be a deciding factor, it certainly plays a role, they say.
Nearly half the city's residents lately have been receiving salty, briny water from the Northwest River. When it doesn't rain enough, salty water from the Currituck Sound backs up into the river.
``Water is a factor,'' said developer Lyle Wermers. ``We have to look at all aspects of life.''
One problem with the slowdown in residential development is that retailers and industries, who accounted for most of the construction increases in Chesapeake so far this year, might take note of the downward spiral and take off, too.
``The riskiest part of it is that businesses and corporations build here with the expectation that the city will grow,'' said Jim Bradford, a planner with the Chesapeake engineering company Hassell & Folkes. ``When the city slows its rate of growth, the malls and retailers realize less revenue.''
While Chesapeake's residential building has plummeted, Suffolk has been the new frontier in South Hampton Roads. In much of 1995, while the region's real estate market slumped, Suffolk shined and snagged a bigger share of the area's residential building growth. From January to August, new home-building in the city rose 24 percent to $42.7 million.
Wayned Whitehurst, building official for Suffolk, said the Interstate 664 cleared a pathway for development. Much of the new housing divisions have been in Suffolk's northern section, which abuts I-664.
Suffolk wasn't the only South Hampton Roads city to pick up in growth. While still small, Portsmouth home-building numbers showed surprising gains, up 54 percent to $13.5 million in the first eight months of the year.
Portsmouth's increases were largely due to several new housing developments, including Bishops Greene, a subdivision in the Churchland community where homes will start at about $100,000, said Larry Dennis, building inspector for the city's Environmental Services Department.
Declines in residential construction in both Portsmouth and Norfolk are anticipated because both cities are older, have established downtowns and have limited land for new and large housing developments.
Virginia Beach and Chesapeake still led the pack this year. Together, the two cities accounted for 74 percent of the value of new construction in South Hampton Roads from January to August this year.
Suffolk is rapidly catching up.
``Let me put it this way,'' said Whitehurst, Suffolk's building official. ``In 1988, the record was 315 homes built in the city. And that record held fast until the year before last . . . This year, I'm expecting well over 800.'' ILLUSTRATION: Map
RESIDENTIAL BUILDING PERMITS ISSUED
JOHN CORBITT/The Virginian-Pilot
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