The push for Affordable Housing in Atlanta is something we hear all the time. Often these conversations center around the belief and conviction that City of Atlanta should be doing more to prevent families who have lived intown for many years, from being displaced as prices continue to increase at staggering rates in many intown communities. And, while this is certainly a worthy issue that deserves a great deal of attention, for this article, I want to set that aside and focus on another aspect of the affordable housing crisis in our city. One that has, I believe, a more direct impact on the overall housing market.
This week, I read a MarketWatch Atlanta report by MarketNsight, called “Everything Old is New Again in New Home Building”. It was an interesting article, not a whole lot of surprises — the market seems to be cooling off a bit (which is actually a good thing!) and moving toward more normal or balanced conditions. We need more home building to increase inventory. In general, the overall outlook for the market is very good for 2019.
But, what caught my attention in this article is a statement by MarketNsight President John Hunt…a statement that is something I inherently knew, but hadn’t really been able to articulate. Hunt said, “High demand for walkability and the need for more affordable options are leading many cities and developers to think outside our current housing box”. According to Hunt, slowed home sales are not simply because of lack of demand — demand is there — just a lack of supply at the price points home buyers can afford. Most Millennials seeking to buy in core counties cannot afford even the “entry-level” price point, and because of this, many Millennials opt to rent instead of buy, to live within desirable intown locales. He continues, “The apartment industry has shown that today’s housing consumers are willing to pay high prices for very little square footage to stay where they want to be. The entire neighborhood around them serves as their amenity.”
Very interesting, indeed. When we think about who first-time home buyers are, we generally think of young professionals, or young couples with no kids. And, while Realtors® have always been able to help set expectations with first time buyers about which neighborhoods they can afford, and direct them to great communities that have a lot to offer, that is becoming increasingly difficult. If Hunt’s statements hold true (and I believe it does), many first time buyers would need to move to communities farther from the city, farther from “walkability” and nearby amenities they desire, and they certainly don’t want long commutes. When the “entry-level” price for a small 2BR/1BA house that is near amenities is $350K+…well, that’s when many of these young buyers will opt to rent instead of buying. They can afford to buy a home, but just not where they want to be.
Atlanta Business Chronicle posted an article earlier this month, entitled “Where is it better to rent versus buy in Georgia? We’ve done the math”. In this article, it’s not surprising that ABC points to coastal/shoreline towns that typically present opportunities where it is less expensive to rent than buy. And, we know this is certainly true of key neighborhoods in large cities like New York, San Francisco, Los Angeles, etc. It would hold that the pace of development and surging prices in neighborhoods along the Atlanta Beltline creates a similar dynamic. I’ve heard developers of the housing along the Beltline compare buying one of these properties “beach-front opportunites”. Meaning, there is a limited amount of Beltline, and the adjacent homes are worth the price to those who can afford them. We might think of the Beltline as an “urban coastal community” — this development phenomenon in Atlanta is combining two of the most common drivers of housing desirability and pushing housing prices up at truly staggering rates. I mean, who would have thought, 6-7 years ago, that a townhome community in Old Fourth Ward would be selling like hotcakes for $1.2M in 2018? Who would have thought, even 3 years ago, that Atlanta’s west side would be developing into an urban mecca? Well, developers, builders, buy-hold investors and savvy home buyers all understood.
This brings me back to the original point of affordable housing. I’m going to talk about it in the context of the Atlanta Beltline, but recognize that there is a lot of development in Atlanta that causes home prices to soar. The Beltline is just a very good example that most everyone is familiar with. When Ryan Gravel and Cathy Woolard (and many others) initially “championed” the Beltline, one of the main components was to preserve affordable housing in Atlanta. And, while the compassionate part of us wants to ensure that people can afford to live intown because we want to be inclusive and have diversity in our neighorhoods, I think the more important driver is a city planning issue — how do we handle explosive growth in our city? Creating (or maintaining) affordable housing is essential to managing the influx of people coming to our city.
Let’s look again at those Millenials…those first time home buyers who would rather rent (and pay rather high rent) to live in the neighborhoods intown Atlanta where they can have a short work commute and walk or bike to amenities. Until there are affordable housing options to buy, we will continue to see a sort of temporary or “transient” resident in these communities – renters who haven’t committed to living in the neighborhood long term, and hope to buy in the future when they can afford it. On top of that, we see much of our “workforce” (think retail, restaurant, police, fire, teachers…) that often move out of the city and face long commutes, clogging up our highways and city streets. I suspect they don’t want to commute, but can’t find housing that is enough space for a family, can’t afford the high rents intown and, thus, move to communities outside the city.
The whole idea behind the Beltline was to create high-density housing so we could fit a lot of people in a relatively small amount of urban real estate. Then, make it easy for them to get around the city without a car so it would help address traffic congestion as the city grows (and, folks, it’s going to continue to grow rapidly — more development, more people, more high-density housing). Unfortunately, there are two key components that are keeping this vision from happening: 1) we are not creating enough affordable housing, so many of our workforce move outside the city and commute and 2) the development of our street infrastructure to support high-density and encourage car-free commuting is painfully behind the pace of development and growth in the city. I’m not telling you anything you don’t already know, but it bears repeating — both of these things have to happen for our city to grow and not be a complete cluster.
Let’s leave the development of roads for another conversation. The need to create affordable housing in Atlanta is, in my view, reaching the level of a crisis. OK, maybe that’s a little dramatic, but it can’t be overstated. Going back to John Hunt’s remarks, “High demand for walkability and the need for more affordable options are leading many cities and developers to think outside our current housing box” — there are some builders and developers in Atlanta who are certainly exploring alternatives to create higher-density, more affordable housing. And, there are some city officials who support these initiatives. And, there are some residents, neighborhoods and communities that “get it”. But, there are also many in each of these groups that can’t let go of the status quo and, thus, keep sufficient affordable housing at bay. Builders who want to keep building their cookie-cutter, 3,000-4,000 sq ft homes on residential lots because it’s easier than exploring new alternatives. City officials who bow down to developers who want to do massive projects, with no consideration or plan for improving the supporting road infrastructure. And, my favorite, residents of neighborhoods who think that the answer is requiring builders to build smaller, single-family homes on city residential lots.
Here’s an idea: A builder purchases a lot or tear-down in, say, Ormewood Park, for $250K (I use Ormewood because, well, that’s my neighborhood and it’s also a great example of staggering price increases because it’s Beltline-adjacent). Using rough numbers, a builder would need to sell the improved property for $800K to make the numbers work — not a greedy number, but a reasonable margin after building costs. In order to sell the house for $800K, they have to build a massive, 4,000 sq ft high-end home by Ormewood Park standards. But, if we think out-of-the-box, could they re-zone to allow for 4 units? We can see examples of these types of attached homes that are designed to fit with the character of the neighborhood — could the builder put 4 units that would be about 1,000 sq ft each and sell for $200K each? That would create 4 affordable housing units in a desirable intown neighborhood. Perhaps an over-simplified example, but just an illustration to get the creative juices flowing. Sadly, re-zoning individual parcels is a process that is painful, so builders most often choose not to pursue it. And, they would almost always have an ugly fight with the neighborhood residents along the way. So, why make the effort?
All this to say, we here at Red Robin Group and Keller Knapp Realty are really into the affordable housing conversation. Several of our agents are active in that space and it’s a conversation that we want to continue to promote. Because we believe it’s what is best for Atlanta. On January 15, our company hosted a Panel Discussion called “Why Affordability Matters” and welcomed some of the brightest minds in Atlanta to come together to discuss the future of affordable housing. The vision and ideas generated by the panel were inspiring and invigorating! There’s a lot of work to do, but I’m optimistic we’ll get there.
Here is the video of our Panel Discussion — let us know what you think!
Big thank you to our sponsor: Blue Ink Title!
Red Robin Group is a team of dedicated agents who live, work and play in our intown Atlanta neighborhoods (I mean, we like walkability and short commutes, too!) If you or someone you know is thinking of buying or selling a home this spring in Atlanta, give us a call — we’d love to meet you and be your partner in your moving journey! Email Melissa Wakamo, or call 404-729-1133.