It’s not just temperatures and humidity that are high in Atlanta this summer. Optimism is soaring as well. Results of Smith & Howard’s annual survey of construction and real estate industries reflect confidence that Georgia markets will experience new or expanded growth over the next three years. A quick view of our crane-dotted skyline confirms this.
“Two things they’re not making more of are land and time,” said Kells Carroll, Acquisitions Director for Sugar Creek Capital, a national leader in affordable housing investments and property management. “Rising construction costs are a big issue; materials – lumber, bricks, they’re all going up in price, coupled with a rising interest rate environment it all directly impacts the feasibility of affordable housing,” he said.
Progress Within Reach
The rising cost of construction and scarcity of available land are key reasons developers will pass higher costs along. And while the growth is exciting for our state, it presents challenges for residents (and residents-to-be) whose incomes do not rise to the escalating costs of home or rental prices.
Keeping housing affordable for buyers and renters remains a challenge that’s receiving continued attention, especially in West Atlanta where the Beltline is driving development. Atlanta Beltline Incorporated (ABI) reports between 2005 and the end of 2017, there have been 2,565 affordable workforce units created within walking distance of the Beltline (this includes those in the Atlanta Beltline Planning Area created by ABI, Invest Atlanta, the Atlanta Housing Authority, and the State Department of Community Affairs). The City of Atlanta incorporated affordable housing through the legislatively-mandated goal of creating 5,600 affordable workforce housing units in the Tax Allocation District (TAD) over the life of the program. As of the end of 2017, three distinct sites were controlled by developers who are actively planning and assembling financing for over 300 affordable housing units. Over the next three years, ABI will invest more than $15 million to support an additional 425 to 600 units.
“There is a lot of opportunity and a need” in developing affordable housing in Atlanta, according to Carroll. “These are very vibrant neighborhoods people want to live in. They can provide stable, balanced communities for people – from blue collar workers to single moms and police officers. Having an opportunity to live along the Beltline, along with more expensive housing options, is critical.” Carroll says housing for both market segments is similar in construction, with the number and variety of amenities contributing to differing price tags.
Tools to Make a Home
According to ABI, achieving the goal of 5,600 affordable workforce housing units requires “enhanced or new tools and strategies.” Atlanta Beltline Incorporated seeks to “work closely with key public and private partners on programs, policies, and funding that will make affordable housing a realistic opportunity for all who wish to live in and around the Atlanta Beltline so that Atlanta Beltline neighborhoods can be affordable for all.”
To that end, ABI efforts center around these programs:
- Inclusionary Zoning requiring developers building 10 or more new residential rental units within the Atlanta Beltline Overlay District to set aside units for affordable housing.
- Centralizing information on tax exemptions for homeowners; affordable housing opportunities through ABI and Invest Atlanta partnerships.
- Homeowner education workshops designed to make sure existing homeowners in Atlanta Beltline neighborhoods are equipped to take advantage of available resources to stay in their homes or knowledgeably evaluate opportunities if they are considering selling.
- Pursuing key strategies and projects in accordance with the Integrated Action Plan, which details strategies through 2020 and beyond to further the original redevelopment plan’s goals. Its focus is on practical, action-oriented measures, including pursuing diversified funding sources for land acquisition and the sale or lease of affordable workforce housing.
Another emerging opportunity is providing affordable housing for seniors, ages 55 and up. The U.S. Census Bureau estimates that by 2030, more than 20 percent of the state’s residents will be 60 or older. That’s an increase of almost 34 percent from 2012. In 2016 Forbes dubbed Atlanta as America’s most rapidly aging city, with a 20 percent increase in the share of senior population from 2010-2014.
“There’s a lot of interest in Georgia from across the country,” Carroll said. “The Georgia Department of Community Affairs is well run; very focused on maintaining a balance in supply and demand for the elderly and for families.” Carroll said the state housing credit allows Georgia to increase the supply of affordable housing, and in doing so creates jobs and allows for a better quality of life for working families and seniors. Still, he emphasizes that the industry is driven by private investment, rather than government investment in affordable housing.
As Georgia’s real estate and construction industries continue to grow, many of these new developments will not be affordable for Atlanta’s middle to low-income families and individuals. There is a shortage of affordable housing for median income earners. According to the Housing Authority of the City of Atlanta (AH), half of Metro Atlanta’s households make less than $74,800. In addition, the AH marks a household of four which makes $37,400 as very low income. The shortage of affordable housing severely affects these residents.
Starting in November of 2017, The Georgia Department of Community Affairs (DCA) announced it will award $23.2 million federal housing tax credits to construct or rehabilitate 30 affordable rental housing properties located throughout the state. Though not a fix for the entire problem, it is a start.
“At the end of the day we are making money doing good and that’s not a bad way to spend your days,” he said, before adding his favorite quote, from renowned accountant David Reznick. “Remember at the end of the day, something you have done will put a better roof over someone’s head.”
If your real estate group has any questions about developments, investments or acquisitions, please contact a member of Smith & Howard’s real estate team by calling 404-874-6244 or by completing the contact form below.