In these last few decades, as Americans have flocked to major metros, two economic trends have surfaced. The first one, proven continually by coastal metros, like San Francisco and New York, is the law of supply and demand. That is, if a metro has fast population growth but limits housing supply—by maintaining what economists call an inelastic housing market—prices will increase far more than in an organic system. That’s common sense.
But another economic trend, far less explored, is the way that even elastic housing markets can struggle with high home prices, thanks to the inherent demands that come with fast growth. Some U.S. metros, after all, are increasing their populations by the high five or low six figures annually. While their housing growth is rapid, it is near-impossible for closings to occur fast enough that the market clears. So there will be ongoing housing shortages that inflate prices in certain areas and squeeze out certain demographics. This means, in plain terms, that the working class won’t always be able to find affordable housing in ideal locations.
Atlanta is one example of where this scenario plays out. It is America’s leading case of a “New South” boomtown, trailing only Dallas, Houston and New York City in net population growth since 2010. It does well on a number of economic metrics – in 2017, it ranked third in job growth percentage; it is tied for fourth in Fortune 500s; and its hourly cost-of-living adjusted wage is over three dollars above the national average.
Atlanta has done well at stabilizing home prices amid this economic boom. Between 2010 and 2016, it was, according to Census Bureau figures, sixth in housing permits issued. This has kept median home prices at $190,000, which is similar to Charlotte and Dallas, and less than half the medians in Boston and Seattle.
But, again, the housing situation here gets more complex upon closer look. For one, Atlanta’s housing growth is not what it used to be. As Ben King, a local developer, wrote in an Atlanta magazine article:
“What if I told you that for more than 20 years, from 1985 to 2007, we permitted more than 50,000 new homes per year to be built in the metro region? From 2000 to 2006 we even permitted 67,000 new homes per year.” Nowadays, he continued, the metro builds about half that.
And just because Atlanta is reasonably-priced at metro level doesn’t mean every area is cheap. Rather, says Christopher-John Smith, a local Keller Williams realtor, there are a handful of areas in or around the city core that the workforce competes to live in, creating general scarcity – and a scramble to find second options.
The parts just north of downtown are, like most rich neighborhoods, largely exclusive thanks to low-density zoning. They are out of reach, he said, to the typical police officer or Uber driver. The neighborhoods south of downtown are much cheaper, but they’re also known for higher crime and substandard housing. There are various neighborhoods to the east and west of downtown—such as East Atlanta Village, where I stayed throughout May —that offer good quality of life and moderate prices. But they are gentrifying quickly, and have already priced some workers out.
The suburbs have thus become the option of last resort for workers who must then commute into the city. A 2017 Curbed Atlanta report found that Atlanta’s suburbs make up most of the regional growth, and that the metro leads the nation in suburban apartment development.
One member of this outward-migrating workforce is Whitney Horne. A Georgia native, Horne is a single mother of one who makes under $50,000 a year as a freelance insurance agent. In the mid-2000s, she moved with her son into East Atlanta Village, on a mixed-use block geared towards her daily needs. But the neighborhood eventually “got too much attention” from other buyers, she said, and prices went up. So the family moved to Lakewood Heights, on Atlanta’s south side, into an older home that the landlord did not properly maintain. Finally in 2014, Horne moved to Kennesaw, a suburb that is a 45-minute drive from downtown. That was how far she had to go to find the necessary type of housing—a 1,200-square-foot ranch house with two-bedrooms—at the price she could afford, $1,300/month.
Horne’s story shows how Atlanta’s relative affordability still does not create wonderful scenarios. She believes a decent standard of living would mean getting to once again rent a ranch house in East Atlanta Village where, she said, “I would be able to go to the museums and the parks with my son.” But such housing in that neighborhood rents for around $2,000, so she’s stuck with a cheaper area where she now feels isolated and must drive everywhere. Her closest brush with her old life is when friends who are still centrally located leave town for the weekend, and let her house-sit.
Smith has found a similar scenario for his clients, who are generally lower-end workers, such as graduate students, public school teachers and carpenters. He says that, like Horne, they’re willing to pay between $900 and $1,300 per month. This lands them in similar areas – Doraville, Alpharetta and other far-out suburbs.
That doesn’t mean Atlanta’s housing situation is all bad, much less the sort of “crisis” that you’ll find in San Francisco, where entire income groups are driven out of the metro altogether. Atlanta, along with Sunbelt peers, like Houston, Dallas and Charlotte, should be viewed as affordable housing success stories that accommodated fast growth from multiple demographics. East Atlanta Village, for all its gentrification pressures, might still be seen as a microcosm of the city’s cultural momentum. It is a racially-mixed, professional-class neighborhood where people can walk to coffee shops and bars. Homes here can still be purchased for around $250,000.
But these prices are excessive for many of the people who want either to rent or buy in such centrally-located areas. They are a reminder that even in fast-growing cities with elastic markets, a large portion of the workforce will still have their housing challenges.
[This article was originally published by HousingOnline.com]