Rental housing market skews to wealthy, reducing supply of affordable homes

By David Pendered

Cities across the country join metro Atlanta in facing shortages of affordable housing that stem, in part, from a surge in the proportion of rental homes that are built and priced for wealthy folks who want to rent, not own, a home, according to a recent report from a think tank at Harvard University.

amli, arts center, affordable housing

Monthly rental prices start at $1,675 for a studio apartment with 650 square feet at Amli Arts Center, located at 1240 West Peachtree St., in Midtown. Only the rent, excluding utilities and other fees, would consume 44 percent of a household earning $46,000 a year. File/Credit: amli.com

Nationwide, the proportion of renters with household incomes above $100,000 rose by more than half between 2006 and 2016. In 2006, the rate was 12 percent; in 2016, the rate was more than 18 percent, according to the December report by the Joint Center for Housing Studies of Harvard University.

The impact on the market comes as no surprise:

  • “While the share of new units renting for at least $1,100 jumped from 37 percent in 2001 to 65 percent in 2016, the share renting for under $850 shrank from just over two–fifths to under one–fifth.” (The dollars are adjusted for inflation.)

The report, America’s Rental Housing 2017, begins with this observation:

  • “After a decade of broad-based growth, renter households are increasingly likely to have higher incomes, be older, and have children. The market has responded to this shift in demand with an expanded supply of high-end apartments and single-family homes, but with little new housing affordable to low- and moderate-income renters. As a result, part of the new normal emerging in the rental market is that nearly half of renter households are cost burdened.”
housing, apartments, westside

Atlanta’s supply of affordable housing has shrunk as older units are not maintained and eventually close, as occurred at this complex west of Mercedes Benz Stadium. File/Credit: David Pendered

The findings of America’s Rental Housing 2017 closely track those presented by a real estate analyst at the June 6 meeting of the Atlanta Regional Housing Forum.

Geoff Koski, of the Bleakly Advisory Group, said the region’s dearth of affordable homes results from a lack of housing at all prices ranges. The overall shortage of housing is driving up the cost of available homes.

The region has a deficit of about 230,000 housing units, based on the premise that every 1.5 jobs creates demand for one home, Koski said. Touching on a point raised in the Harvard study, Koeski said the housing that has been built since the Great Recession has been built for an affluent market.

“Housing costs, especially near employment centers, are rising more rapidly than incomes,” he said. “Since the Great Recession, housing production is down and concentrated in the upper end.”

Another parallel issue named by Koeski and the Harvard study is the regulatory challenge of developing apartments and condos at all price points. Again, the trickle down effect reduces the amount of affordable homes built as many developers seek greater compensation for the time taken to gain government approval for a project.

“We have restrictive zoning and development policies that make it difficult [to develop] in the City of Atlanta and elsewhere,” Koski said. “We don’t have the right development policies. They are hurting us.”

America’s Rental Housing 2017 included the regulatory issue in a section that addressed construction costs. Citing estimates from RS Means, which tracks construction costs, the report noted the cost of building a basic, three-story apartment structure rose by 8 percent in the one-year period from 2016 to 2017. The report then noted:

  • “Tight land use regulations also add to costs by limiting the land zoned for higher-density housing and entailing lengthy approval processes.”
harvard, affordable housing costs

The proportion of rental homes priced above $1,500 a month nearly tripled between 2001 and 2016, according to a report by the Joint Center for Housing Studies of Harvard University. Credit: jchs.harvard.edu

 

Rental rates for most apartments being built in Midtown and Buckhead exceed $2.60 a foot, according to a 2017 report from CBRE, the real estate firm. These prices are beyond the reach of many who work in these two job-rich neighborhoods. File/Credit: mymidtownmojo.com

 

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

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