When the Great Recession struck in December 2007, metro Atlanta’s housing market didn’t just crumble. It collapsed. The construction cranes that swung across the skyline in the decade after the Olympics all but vanished. Developers on the suburban outskirts abandoned half-completed projects. By decade’s end, the region had one of the nation’s highest foreclosure rates, with dramatic house auctions held on county courthouse steps.
Although the recession officially ended in June 2009, metro Atlanta’s housing market lagged in its recovery. If the downturn had a silver lining, though, it was that it kept the city affordable. You could easily live within walking distance of the heart of Atlanta without paying big-city bucks.
Since 2012, however, average home sale prices have risen by more than 50 percent, though they still haven’t quite reached pre-recession levels. In the third quarter of 2015, the number of residential sales climbed nearly 10 percent from the year before. Realtor.com even pegged metro Atlanta as one of the country’s top five regions “poised for substantial growth in prices and sales” in 2016. At the same time, the region is undergoing a seismic demographic shift—one that could impact affordability in the years to come.
Historically, housing in metro Atlanta has been relatively cheap, in part due to perpetual sprawl. But our seemingly relentless march outward appears, in fact, to have ebbed. The total population of metro Atlanta’s 10 core counties has grown just 5 percent since 2010—down from nearly 20 percent growth in the decade prior. In contrast, the city of Atlanta has become a population magnet, attracting nearly 12,000 new residents over the past five years—triple the rate of growth in the 2000s.
The result: While the overall metro area has remained affordable—in the third quarter of 2015, the $178,900 median sales price for a single-family home was lower than all but three of the nation’s 20 largest metros—the cost of housing in much of intown Atlanta has skyrocketed. Data from Zillow shows that between December 2011 and December 2015, the median home value rose from $168,000 to $258,000 in Cabbagetown, from $281,000 to $428,000 in Inman Park, and from $460,000 to $695,000 in Morningside/Lenox Park (see how other neighborhoods fared here).
The intown rental market reflects the same trend. Since the recession ended in 2009, says real estate consultant Ladson Haddow, there have been three times as many new or proposed rental units in intown Atlanta than in the period between 2000 and 2008. Mostly, these apartments are not cheap. Georgia Tech planning professor Dan Immergluck found nearly all of the new units being built between 2012 and 2014 were luxury rentals in places like Buckhead, Midtown, and neighborhoods adjacent to the Atlanta BeltLine’s Eastside Trail, which cost, on average, nearly 40 percent more than older apartments.
From 2012 to 2015, the average cost of a one-bedroom rental intown increased from $1,144 to $1,390. And that’s average. Along North Avenue, the monthly rent for a 360-square-foot studio at 131 Ponce starts at $1,087, a 649-square-foot one-bedroom at 755 North runs $1,635, and a 1,330-square-foot two-bedroom at Ponce City Market costs $2,785. At the same time that these lavish rentals have hit the market, more affordable units are disappearing. Immergluck also found that between 2010 and 2013, Atlanta lost nearly 5,000 units costing $750 a month or less.
The combination of rising housing costs and static wages—Atlanta’s per capita income increased just 1 percent between 2010 and 2014—has squeezed intowners without the means for a down payment on a home or a monthly rent that’s well over $1,000. So as prices have crept upward in northeast Atlanta, gentrification has crept south of I-20 and west of downtown. Can’t pay for a Buckhead apartment? Try Westside. Is Westside out of your price range? Give West End a shot. Has West End become unaffordable? Consider West Lake. For existing residents, however, “it’s a double-edged sword,” says southwest Atlanta Realtor Naquita Green. In Capitol View, where Green lives, her elderly neighbor recently sold his longtime home to a speculator after he fell behind on his property taxes, which had spiked due to the rising value of his residence.
“If you can afford to stay, you’ll stay,” says Georgia State sociology professor Deirdre Oakley. “But not everybody can.”
Still, affordable housing advocate Andy Schneggenburger says local officials have tools at their disposal. They could pass a mandatory inclusionary zoning ordinance, which would require all new developments to include a minimum percentage—typically between 10 and 30 percent—of units that are affordable, as calculated by the area’s median income. They could use a public authority known as a land bank to take ownership of blighted tax-foreclosed properties and resell them to private affordable housing developers. Or they could steer cash to private community development nonprofits, such as land trusts, which sell homes at a low cost but retain the title to the land, leasing it to the homeowner on the condition that the building remain owner-occupied and resold at an affordable price.
Last year Invest Atlanta, the city’s economic development arm, created an affordable housing strategy that seeks to use some of the aforementioned tools to reduce the percentage of people spending more than a third of their income on housing, create a more diverse mix of housing, and lower the number of abandoned and vacant homes. But so far the plan largely has not been put into action or received dedicated funding.
Failure to act soon, warns Schneggenburger, could further economically segregate the city. “We’re almost past the point of no return,” he says.
There is some good news. Paces Properties president and CEO David Cochran, the developer behind luxury projects such as the Office (a 20-story downtown office building recently converted into 327 apartments), believes rents could eventually hit a ceiling. “Intown construction prices are higher, land prices are higher, and buildings are bigger,” he says, and eventually this will drive up rents beyond what residents are willing to pay. “There’s a tipping point,” he says, predicting that “there will be pushback on pricing” when renters begin vacating expensive intown communities in favor of cheaper units elsewhere.
Conor Sen, a Brookhaven investment manager, agrees the white-hot rental market will cool down a few degrees in 2016 as more new apartments come online and pricing becomes more competitive. At the same time, he predicts, as the economy continues to improve, intown millennials—the same group largely responsible for the rental boom—will finally start to buy homes in greater numbers, just like the generations preceding them. In December, Realtor.com named Atlanta the number one market for millennial home buying in 2016.
Overall, though, Atlanta developer Jeff Fuqua says higher housing costs are here to stay as our population and density continue to grow. On a recent business trip to northern Virginia just outside D.C., he noticed the rents were double those in Atlanta’s suburbs, even though the areas closely resemble one another. Looking ahead a decade, he says, a similar fate awaits the Atlanta area. “A higher cost of living, more density, paid parking,” he says. “I don’t know how you avoid it. I’m not sure there’s any other way we can go.”
This article originally appeared in our March 2016 issue.
