Rappahannock building permits surge in 2022, but budgeteers remain cautious

Rappahannock home builders scaled up their plans in 2022, gaining 40 building permits, up from 28 the year before. Commercial permits also jumped in the year just ended, to 30, from 12 in 2021.

Experts point to several recent trends that would explain the surge, but those interviewed agree that 2022 was likely an outlier. During Covid lockdowns, remote-workers migrated to the county, and many stayed on after their employers gave them the choice of returning to the office or working, at least part-time, from home. The remote workers joined the more established migrants who continue to embrace the county as a location to retire, or semi-retire. But perhaps the most significant driver of the planned construction activity was record low interest rates of 2 to 3%, which drove thousands of Americans to borrow and build.

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More significant than the number of building permits was the value of the homes that will result. County Administration Garrey Curry reports that the permits granted in 2022 will support homes with a total real estate value of $24.5 million, up from $13.04 million the previous year. In 2022, the average new dwelling was valued at $613,129, up 32% from $465,867 in 2021. 

The surge in building permits is good news for contractors, carpenters, electricians, house paintings and plumbers, but also for the county, which counts on real estate taxes as its largest single contributor to tax revenue. Moreover, the county is looking toward a $12-to-$15 million project of designing and building a new courthouse while restoring the existing structure. By any estimate, the protected rise in real estate taxes will help. 

But Alvin F. Henry, a home inspector, long-time observer of county real estate, and former public official, doesn’t expect the trend to last. “It’s not surprising,” he said, “because last year was a good year: interest rates were cheap.” He figures that the Federal Reserve Board’s assault on inflation will keep rates significantly higher for the next several years. “This year the number of permits will probably be about half of last year’s,” he said. 

Curry, a conservative budget planner, agrees that policy-makers shouldn’t count on the 2022 trends to persist. “I would not expect to see the same level of activity in 2023,” he said, “but that is only a guess.”

Curry noted that a five-year history justifies his caution: In 2018, Rappahannock’s building permits hit $8 million in value, only to dip to $5.4 million the next year. 2020 saw a jump to $9.2 million, followed by $13.04 in 2021. That history suggests that 2022 was in large part an outlier. 

Finally, real estate taxes are set at 60 cents for every $100 of real estate value. That means that the $24.5 million in added taxable value would generate $147,000 a year in taxes, less than one percent of the $15 million that may be needed for the courthouse project.