By Meghan Michel

The shortage of low- and moderately-priced housing has become problematic in a growing number of “18-hour cities”—such as Nashville, Tennessee—that are drawing young professionals seeking an urban lifestyle in smaller and presumably more affordable markets. As these cities have become more vibrant and appealing to new residents, including millennials, many are struggling to balance the benefits of gentrification with the reality of existing residents being pushed out by rising housing costs.

Strategies that cities can use to address the social equity and affordability aspects of urban growth were the focus of a ULI Nashville Housing Forum in January, which drew housing experts, practitioners, and policy makers from across the country. Nearly 200 attendees, representing the public, private, and nonprofit sectors, gathered to discuss pressing housing issues facing their communities.

“Engaging all sectors is the only way we can really scale up and deal with these incredible challenges that are market driven and [that] have all kinds of underlying causes,” Stockton Williams, executive director of the ULI Terwilliger Center for Housing, said in opening remarks that kicked off the forum.

A panel focused on Nashville’s housing market agreed that the city needs to get creative in order to solve the looming workforce housing crisis. Economists have long said that an urban ecosystem cannot survive on just one demographic, and Nashville’s housing market is slowly pricing out key members of the workforce.

Workforce housing is targeted to people earning between 60 and 80 percent of an area’s median income. In Nashville, this translates to those earning annual salaries of $30,000 to $65,000, a group that struggles to find affordable housing. An estimated 53,000 working households earn up to 120 percent of area median income in the Nashville metropolitan area, and many of these households are severely cost-burdened, paying more than 50 percent of their income on rent.

Panelists pointed out that for many years, workforce housing appears to have been an afterthought of community development. Now, cities are recognizing a strong correlation between congested roadways and the lack of affordable and workforce housing near job centers and transit nodes. While housing located farther from urban centers tends to be more affordable, this decentralized approach to housing adds stress to roads, bridges, and other infrastructure.

If mixed-income communities are created, employees can afford to live near their jobs, reducing the transportation burden on the community, panelists said. This, in turn, reduces energy consumption as well as infrastructure maintenance expenses, and aids in commerce through decreased congestion on roadways, allowing businesses to thrive within the community.

The influx of new residents drawn to Nashville due to its relatively low cost of living (for now, it remains less expensive than Raleigh-Durham, Charlotte, and Denver) has significantly increased housing demand, making it difficult to secure even market-rate rentals, much less affordable units, panelists noted.

Panelists discussed a centrally located property, owned by the Nashville metropolitan government, which could be a candidate either for redevelopment as affordable housing, or for a reuse to support affordable housing development in another location.

“Sometimes, the decision is to sell the land for the highest and best use and then rechannel those funds for affordable housing in another area,” said panelist Mark Deutschmann, chief executive officer of Village Real Estate Services.

Panelist Adriane Harris, senior adviser for affordable housing issues to Mayor Megan Berry of Nashville, told the audience she had met with several developers who are eager to increase the city’s supply of affordable housing.

Typically, a “toolkit approach” has proven effective to incentivize developing affordable housing. James Alexander, housing policy and development director for Atlanta Beltline Inc., described the approach taken in Atlanta to encourage affordable housing development along the Beltline, which is a former railroad corridor converted into an active transportation trail (including transit) that circles downtown and connects 45 neighborhoods to each other.

Affordable housing in the Beltline district was developed with resources resulting from a variety of tools: land trusts, parcels of land acquired by a nonprofit to benefit the community; tax increment financing; the repurposing of properties; and the creation of parks and trails. Panelists cited several factors that will increase prospects for the development of affordable housing, including the following:

• Using market forces for mixed-income housing;
• To the extent possible, preserving the existing housing stock to prevent displacement;
• Redeveloping underused sites with joint ventures; and
• Pursuing a comprehensive approach through inclusionary zoning and special tax increment financing districts.

There is no single solution or quick fix to the workforce housing issue, requiring developers to become creative with design, financing, and deal creation, participants concluded.

Meghan Michel is a ULI Nashville member and graduate student in Auburn University’s Master’s in Real Estate Development program.