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Ask Eli: Will new Capitals/Wizards stadium increase home values?

This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Eli Residential channelEnjoy!

Question: Do you think that the newly announced stadium for the Capitals and Wizards will cause home values to increase in Potomac Yard and the surrounding neighborhoods?

Answer: Last week Monumental Sports owner Ted Leonsis and Virginia Gov. Glen Younkin announced a new stadium complex for the Washington Wizards and Capitals in Alexandria’s Potomac Yard neighborhood, initiating a shocking departure from their current home in downtown Washington, D.C. Immediately, questions began to swirl about the costs and benefits of building a new stadium, including whether it would boost nearby home values.

 

Studies Say… It Depends

There are dozens of studies on the effect of stadiums on local and regional economies; most find that it costs taxpayers too much and the stadiums fail to deliver on the promises made by the team owners, who end up being the biggest beneficiaries.

There are also a number of studies looking at how sports stadiums effect nearby home values (you can reference some articles and studies I found here, here, here, here, here, and here) and the findings of those studies vary widely. Positive or negative price effects seem to depend on the economic/development state of the local community when the stadium is announced.

Stadiums built in communities in need of development/revitalization (e.g. what Nationals stadium did for Navy Yard) tend to result in a major boost to home values, yet stadiums in areas that are already economically successfully can have a negative effect on prices as shown by a study conducted on the effects of the Seattle Supersonics (NBA) leaving the Key Arena in Seattle, which led to home values increasing as a result of less traffic and crowds.

Potomac Yard, the location of the newly announced Caps/Wizards stadium, falls into the latter bucket — already economically/commercially successful without a stadium.

Homes Values In/Near Potomac Yard Already on Strong Trajectory

Potomac Yard already has a strong home value appreciation trajectory without a new stadium complex due to major developments including:

Adding a massive sports and entertainment arena will certainly expedite new development and most likely cause more development dollars to flow in, but I’m not convinced that a new arena increases the ceiling for appreciation more than the existing factors listed above.

It is also worth noting that without a new stadium complex on this land, it’s not like the land will sit vacant and unused, it’s an incredibly valuable piece of land that can and will be developed for commercial and/or residential use. That beckons the question of whether a new stadium and entertainment complex increases the projected home value appreciation more than another use of the land.

Stadium Likely a Net Negative for Many Homeowners

The expedited and additional development resulting from a new arena will create upward pressure on home values in Potomac Yard and the neighboring communities, but it comes at a significant cost of high traffic and crowding throughout the year in an area already plagued by traffic issues.

Given that plenty of commercial (retail, dining, shopping) development already exists in Potomac Yard and the surrounding neighborhoods (Old Town, Del Ray, Crystal/Pentagon City, Shirlington, and D.C. is pretty close too) for residents to enjoy, I think that many residents/future residents will find that the cost of the congestion far exceeds the benefit of marginal improvements to local entertainment and retail.

If enough homeowners consider the new arena to be a net negative for themselves, the logical conclusion is that demand in and around Potomac Yard will fall, which means a new arena will have a negative effect on the value of homes in the congestion area.

Better for Rentals, Condos

The effects may not be felt evenly across all housing types though. If I had to make a prediction, I would guess that a new stadium and entertainment complex will provide a material boost in apartment rental prices and potentially condo values, but become a drag on townhouse and single-family home values in Potomac Yard and the adjacent neighborhoods.

I’m assuming here that renters and owners in apartment buildings/condos rely more on public transportation/Metro and walkability than townhouse/single-family owners so will be less affected by traffic congestion and that those renters/owners are more likely to value easy access to the sports and entertainment events hosted in the new sports complex.

That would bode well for owners in condo properties like the Dylan (new condos in Potomac Yard) and the Eclipse (in Arlington, just north of Potomac Yard).

Home Value Increases May Be Speculative Only

I’ve written in the past about the “speculative boom” of home (specifically condo) prices after the Amazon HQ2 announcement and the abnormal ~10% appreciation in the condo market following the HQ2 announcement was purely speculative about the future benefits of Amazon HQ2.

I’ve gotten multiple messages from clients/contacts excited about the home value appreciation that will follow the new stadium complex, but that excitement is of course speculative for now. I would not be surprised if there is a bump in home values in/near Potomac Yard speculating on the benefits of the stadium, but buyers and investors should be careful placing much, if any, speculative premium on adjacent housing (especially townhouse/single-family) because of the concerns shared in this column about the effect on actual demand.

My Humble Opinion

After my initial reaction of “we’re getting a stadium and concert venue in our backyard!” wore off, I think this is a terrible deal not just for the people who live nearby the proposed stadium but for Virginians and the entire DMV.

The added congestion for those who live nearby and rely on those sections of Rt 1, GW Parkway, and 395 (not to mention all the smaller side streets) and for those coming and going from Reagan National Airport will be a significant negative on a frequent basis. Plus, it’s not like getting to Capital One Arena is all that difficult for Arlington/Alexandria residents anyway so there’s little gained for most of us.

The Washington Post just published an article saying that the stadium complex could cost Virginia taxpayers $1.35B which would be the largest arena subsidy ever. I’m not sure if that number accounts for all the increases in infrastructure, police, etc costs that come with supporting the on-going operations of the complex and events. The promise is that the taxpayer subsidies will get paid back over a few decades through revenue generated off the arena (parking, naming rights, etc) and additional taxes but studies have found that taxpayers usually end up getting the short end of the stick on these stadium deals.

The entire DMV suffers because access to the stadium becomes more difficult for a majority of fans (think about people coming from the Maryland suburbs), the teams leave their home city, and downtown D.C. gets crippled by the loss of sporting events. A strong, vibrant D.C. core is important for the entire DMV and this is a crushing blow to an already fragile downtown.

This column is full of my opinions and assumptions on how people feel about the pros/cons of the stadium complex; I know how I’d feel if I found out an arena like this was being built a mile or so from my house. What do you think? Am I wrong? Do you think enough homeowners will see this as a net positive and demand will increase for housing in Potomac Yard and the adjacent neighborhoods?

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.

Video summaries of some articles can be found on YouTube on the Eli Residential channel.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10CA

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