While we normally are on the lookout for great business news and stories of success, along with solutions to tougher economic challenges – it’s getting difficult to ignore the negativity in the economic headwinds, and it seems the page has turned on reluctance to do so. We’ll just say, before you read about this eye-opening discussion – if you’re a local business owner, step up your cost optimization strategy, circle the savings and loan wagons, pragmatically harbor and reward your best employees, learn to hire, train and support younger, more novice employees, cement your business partner and vendor relationships, focus on your most durable products and services, and by all means grind on and invest more in differentiated digital marketing.
At a recent economic outlook event hosted by the Mount Vernon Springfield Chamber of Commerce, Northern Virginia business leaders confronted a litany of challenges that portend a troubling economic future for the region. Dr. Terry Clower from George Mason University’s Center for Regional Analysis opened the session with a dire assessment: “Anything you knew about economic strategy, you can throw the books away,” illustrating the profound economic shifts and ongoing issues such as rising insurance and childcare costs, credit card balances and costs, plus stubborn inflation rates. As well, there’s a significant shift in jobs away from the DC area, particularly to high-tech competition in AZ, TX, OH and NC, along with jobs growth numbers that reflect much lower-value, temporary and non-professional roles – not those attractive to companies needing skilled workers. As he says, “we’re getting our butts kicked by competition around the country” in growth and development, notably pulling from the previously robust ranks of cybersecurity and associated AI professionals.
Dr. Clower pointedly criticized the regional governments for outdated policies, particularly calling out Alexandria for regulations that fail to meet current housing needs. “Governments in NOVA need to update regulatory frameworks for mid 21st century challenges, not mid-20th,” he stated. This criticism of government inefficacy was echoed by other panelists who lamented the restrictive local policies that they believe are steering Northern Virginia towards “perpetual economic mediocrity,” as David Boyle from Buke & Herbert Bank put it. “We’ve spent in NOVA 25 years not building enough housing. Now cracks are showing, there’s a pattern of decrease, it’s getting worse – and the Federal government can’t backstop this decrease.” He also commiserated that local policies continue to interfere in growth and innovation in housing and lending in the area, and that interest rates won’t go down soon at all.
This local pessimism stands in sharp contrast to the broader national economic narrative. On one hand, pragmatic, non-partisan business economists and the small business community align more closely with the regional outlook, acknowledging a national economic downturn fraught with similar challenges of inflation and regulatory hurdles. On the other hand, governing political interests and certain sectors of the media present a much rosier picture of the national economy, often glossing over deep-seated issues in favor of a more optimistic forecast. As Dr. Clower put it, “elected officials need to be braver” – and admit to themselves and their constituencies that things are not as good as we might think they are, or the politically-charged media makes it out to be.
The panelists, including real estate experts Rachel Carter and Jack Perkins, discussed the acute housing shortages and regulatory burdens that significantly inflate costs and restrict market accessibility. Carter noted an alarming trend with mortgage rates, which rose in 2022 faster than at any time in history, pushing the affordability of housing out of reach for many – “a $1K rise in regulatory costs equals 4K residents closed off from the housing market”. Housing inventories typically healthy at a 4-6 months supply, are now less than 1 month in Northern Virginia, outside of a few small pockets. Meanwhile, Perkins emphasized the need to cut through the red tape that makes up 20% of new home costs. Noted also was the recent housing density regulation passed in Alexandria, which “really didn’t take into account the actual needs of residents and businesses, was very unpopular, and won’t fix anything”.
The panel also touched on broader societal implications, with Roberta Tinch from INOVA Mt. Vernon Hospital highlighting the critical need for affordable housing for healthcare workers, exacerbated by policies that don’t account for the real needs of residents. Michael Kitchen from IMEG pointed out the transformative impact of the pandemic on retail (i.e. the “dinosaur meteorite event”) and the necessity now of supporting entrepreneurs and emerging businesses more robustly.
In closing, Dr. Clower made a compelling call for urgent reform and innovation, suggesting technologies like 3D-printed houses as motivation for solutions. His recommendations were a plea for more transparent proffers and quicker government decision-making, along with less reliance on NIMBY preferences via public feedback. The disparity between the optimistic national economic narratives and the grounded, often grim regional and non-partisan perspectives underscores a critical disconnect that, if unaddressed, could leave Northern Virginia lagging in both economic vitality and quality of life.