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Nashville is booming, and so are rent prices.
The scenic town of 670,000 grew by 10% in the past decade, making it one of the South’s most rapidly growing cities. It also fueled 17% growth of the metro overall in the same time period. As a result, city officials have scrambled in recent years to find ways to boost the availability of affordable housing.
Downtown development has been brisk, with new skyscrapers dotting the skyline every year, and more and more people moving into the city’s business district. Nearly 500 restaurants have opened in the city since 2010, making the Nashville area home to nearly half of all the restaurants in the state.
In fact, the growth has been so explosive that a local task force assembled to address the problem recently concluded that the home of country music and growing tech hub must triple the amount of affordable housing units built annually for the next several years. If not, the city could suffer further affordable housing shortages, according to a June report from the Metro Nashville Affordable Housing Task Force.
The 22-person task force was organized in January 2021, and includes people from various city departments, developers and community organizations committed to ensuring Nashville is an affordable place to live.
In the past 10 years, tech companies relocating to the town known for country music have created thousands of good-paying jobs. In 2020, The Wall Street Journal named Nashville the second hottest job market in the U.S. behind only Austin, and the Today Show named it a top post-pandemic city.
Although the city is popular with corporations, job seekers and tourists alike, the city’s housing challenges are becoming increasingly magnified. Federal data from 2019 showed 44 percent of Nashville residents are housing cost burdened, meaning they spend more than 30 percent of their income on housing costs.
The average rent for a one-bedroom apartment in Nashville is $1,746 per month—more than 1.5 times the rent in Memphis ($988) and still higher than the average 1-bedroom rent in Austin, Texas, which is $1,396.
According to the U.S. Department of Housing and Urban Development, affordable housing is units available for people who make up to 80% of the area median income. For a family of four in Nashville, that would be $67,450 or less. By HUD’s definition, occupants should be paying no more than 30% of their income on housing costs.
The city recently added more than 13,000 jobs with tech company Oracle and online shopping giant Amazon building headquarters in Nashville. The average salary for the Oracle jobs is $110,000, but Oracle did not clarify whether that average includes higher executive salaries and how many employees would make six figures, the Tennessean reported.
Still, some affordable housing advocates worry the city doesn’t have enough affordable housing for people moving to Nashville for these new jobs.
“For the people who need more housing under $1,000 a month or $800 a month, where are they gonna go? Are we going to, as a city, corporately decide that they need to move to another county, or we’re gonna work to create housing?” said Eddie Latimer, CEO of Affordable Housing Solutions.
Nashville-based nonprofit Affordable Housing Resources has been developing affordable housing and helping residents buy their own home for 30 years. Through AHR, more than 17,000 people have bought their first homes. The nonprofit has developed and sold more than 1,400 single-family homes.
The city along with other advocates and nonprofit groups are using a variety of means to try to solve the affordable housing shortage.
Nashville Mayor John Cooper hopes to increase funding for affordable housing efforts in his 2022 budget, which has not yet been approved.
“Nashville must be a city that works for everyone,” Cooper said. “And – in a city that works for everyone – everyone who works here should be able to live here. That includes our teachers, first responders, and food service workers – the essential workers who got us through this past year.”
In the proposed budget, Cooper has allocated $36 million for affordable housing efforts. The budget includes $22.5 million for the Barnes Housing Trust Fund. The goal of this funding boost is to increase the number of affordable housing units produced each year through the fund’s grants.
The Barnes fund provides grants to affordable housing developers to increase the share of affordable housing in the city. The fund is supported by state, federal and philanthropic donations.
Cooper has also proposed using city-owned land for affordable housing and creating new taxes on hotels, short term rentals and expensive developments to fund affordable housing efforts.
The city has recently adopted and proposed creative solutions for the shortage. In May, for example, Nashville approved a measure allowing single-family homeowners to build rental units on their properties.
Under the measure, homeowners must have their property rezoned and are prohibited from using the units for short-term rentals such as AirBnb, which some advocates say has exacerbated the housing shortage and driven up home and property costs.
While other cities like Denver have used provisions similar to the backyard rentals approved by Nashville, some affordable housing advocates fear homeowners will turn the backyard rentals into AirBnb properties.
Angie Henderson, a Nashville city councilwoman, opposed short-term rental units in areas zoned for residential housing. She voted against the measure, and said she’s concerned the backyard rentals could have “unintended consequences” — aka more backyard Airbnb rentals, the Tennessean reported.
Henderson has advocated for sunset provisions on AirBnb-type properties and rentals in Nashville and encouraged her fellow councilors to consider the needs of residents before the allure of tourism development.
“Our Council securing places for people to live is more fundamental to our success as a city than our securing commercial hotel investments in residentially zoned neighborhoods,” she said last year during discussion on the issue.
Aside from short-term rentals gulping down the housing stock in Nashville neighborhoods, other issues are making it harder to create more affordable housing. Latimer said high cost of land in the metro area as well as high costs of construction materials could threaten developers’ ability to build affordable single-family or multi-family homes.
“We’re just in a strange time of life. It’ll eventually work out, but in the immediate 24 or 36 months, I am not sure that we can increase the production of affordable housing, without some kind of government incentives to bring in the for profit guys in partnership with the nonprofit guys,” Latimer said.
This is the first in an occasional series about how fast-growing Southern cities are addressing affordable housing challenges. Let us know if we should take a look at your city by emailing Anna Beahm at abeahm@reckonsouth.com.