Would former Smithfield Foods Chairman Joseph W. Luter III’s proposed “Grange at 10Main” development help alleviate Smithfield’s lack of affordable housing, or would it exacerbate the problem?

Luter purchased and razed the former Little’s Supermarket and 1730s-era Pierceville farm in 2020, proposing in 2021 to turn the 56.8 acres at the western edge of Smithfield’s historic district into a mixed-use development named for its location at Main Street and Route 10, which would include a permanent farmers market, a hotel, three- and four-story apartment buildings, single-family and duplex homes, commercial space and more than 1,000 parking spaces.

Luter’s son, Joseph W. Luter IV, wrote to Smithfield’s Town Council in 2020 that his father envisioned “a high-quality development” with multifamily housing “for all income levels.”

But according to a fiscal impact study prepared by Ted Figura Consulting for LSMP LLC, Luter’s holding company for the Grange project, one-bedroom apartments in the development would rent for $1,525 a month — well above the median $995 monthly rent the 2020 Census listed for Smithfield.

The study estimates the average sale price of the single-family homes at $575,000 — nearly double the $299,200 median value the Census lists for owner-occupied Smithfield homes. Even the duplexes would carry an average sale price upward of $500,000.

“Average household incomes are projected to be about $78,400 for apartment dwellers and about $109,650 for residents of the single-family community,” the study states.

While neither Luter has made a formal application for rezoning or permits to date, Smithfield Planning Commission Chairman Charles Bryan said on April 14 it was his understanding that the intent of Luter’s project was to provide “young professionals that work in this community” with “some place to live.”

But would they be able to afford what’s proposed?

In 2020, the median annual household income for all ages in Smithfield was $83,977, according to Census data. Per person, it was $43,680.

For Isle of Wight County as a whole, the 2020 median household income for all ages was slightly lower at $77,870, but still higher than the statewide $76,398 median. Per person, county residents earned a median of $39,024.

County residents ages 22-24 earned an average salary of $32,808 in 2021, according to data supplied by Isle of Wight County’s Department of Economic Development. For ages 25-34, the average salary was $46,080.

“Locally and nationally, we are seeing more first-time Millennial and Gen Z buyers,” said Smithfield-based Realtor Jay Hassell, referring to people born in the 1980s, 1990s and early 2000s. The two generations, he said, make up about 30% of the current housing market.

According to Hassell, the current average home price in Isle of Wight County and the city of Suffolk is $278,000 for townhomes and duplexes, and $360,000 to $405,000 for detached single-family homes.

Fannie Mae and Freddie Mac, two federal government-controlled companies that provide money for the U.S. housing market by buying residential mortgages and packaging pools of those loans for sale to investors, were offering 2.73% interest rates for homebuyers with a 740-759 credit rating as of January, Hassell said. Over the past three months, interest rates have risen to 5.23%.

“As rates go up, it’s not going to create less demand, but it will change the ‘buying power’ and it will force most buyers to move down in the pricing brackets,” Hassell said.

A $400,000 home at January’s 2.73% interest rate, he explained, would equate to a monthly mortgage payment of $1,550. At the current 5.23% rate, monthly mortgage payments for the same home, at the same sale price, would rise to $2,120.

For the average earner in Isle of Wight or Suffolk, “that would limit the buyer to about a $1,972-per-month payment” factoring in the mortgage principal, interest and taxes, Hassell said.

That payment, at the current 5.23% interest rate, he said, would limit the buyer to a home in the $250,000 to $300,000 range — giving them roughly $100,000 less buying power then they would have had a year ago.

There are only 27 detached and attached homes in that price range currently available for sale in Isle of Wight County and Suffolk. Of these, only seven are located in Isle of Wight, he added.

“The average buyer in Isle of Wight and Suffolk can no longer afford the average home in the area,” Hassell said. “Finding a home they can afford just got a lot tougher in this already tight housing market.”

A Feb. 16 draft of Smithfield’s new comprehensive plan, which is slated for adoption later this year, further alleges a racial disparity in Smithfield’s housing market. According to the draft plan and the Census, 12%-17% of Smithfield’s residents live below the poverty line, compared to 9%-10% statewide.

Across the United States, “Black residents are more likely to fall below the poverty line,” and “that trend is more prevalent in Smithfield,” the plan states. In the town, 9.2% of white residents and 31% of Black residents fall below the poverty line, compared to 10.3% of white residents and 21.2% of Black residents living in poverty nationwide.

According to the fiscal impact study, the Grange “may seek” financing through the U.S. Department of Housing and Urban Development, in which case 20% of the apartment units would be set aside as affordable housing for households earning 80% of the area median income — in Smithfield’s case, $67,000 or less. But “no presentation is made to this effect.”

HUD defines “affordable” to mean no more than 30% of an occupant’s gross income going toward housing costs, including utilities. According to the draft comprehensive plan, 44.4% of Smithfield’s apartment dwellers already pay 35% or more of their income in rent.

Despite the high rents, Smithfield has seen a shift of five percentage points in its breakdown of renters versus homeowners. In 2010, 75% of Smithfield’s residents were homeowners and 25% were renters. By 2019, the town’s share of renters had increased to 30% and its share of homeowners had fallen to 70%.

“The increase in Smithfield is twice the national average, and may be the result of increased home prices and lack of affordability,” the plan states.

According to the Census, housing growth in Isle of Wight County has far outpaced the state and the region. In 2020, the number of housing units in Isle of Wight rose by 16,441, or 12.4%, compared to 2010. Meanwhile, the number of housing units in Southside Virginia rose by only 1.4% during the same time period compared to 7.6% statewide.

“While interest rates are rising, and despite new construction efforts, we still have a shortage of almost 2 million homes (nationwide),” Hassell said, “which means we are likely to see an unbalanced seller’s market for years to come.”