In research speak this is called household formation. The age at which an individual gets married and has children. There are other types of household formations as well, like students graduating from college and into their first apartment, or a couple going through a divorce. Relative to families, household formation is often a life stage met with the purchase of a home. Nationally, household formations are outpacing new supply by a rate of 3.5 million formed households, according to findings in a joint study produced by ULI and PWC called Emerging Trends in Real Estate 2018.
The report identified Atlanta as the number 2 city in the country for those starting families. This at a time when there is less product for starter families compared to the past two generations. Economics teaches us, growing demand combined with limited supply drives up prices, often beyond what young families can afford. Atlanta’s trajectory is no exception.
In 2016, for instance, population growth was nearly three times that of number of permits issued. Yet Atlanta was ranked #8 in the country as a top market for new supply, behind NYC, D.C., L.A, and Seattle. Something about these numbers seem a bit off.
In a panel discussion hosted by ULI Atlanta about these findings, local leaders in real estate and housing agreed.
“Big A and little a affordability is being lost” said Jim Grauley, president and CEO of Columbia Ventures, an affordable housing developer. “It’s a very real and huge issue for the city. We are seeing more and more cost burdened households.”
Cost burdened, a metric defined by HUD as households who pay more than 30% of their income on housing have a tough time affording other necessities like transportation cost, food, clothing and healthcare.
But if home prices were to fall, would that chip away affordability problems that keep people out of the market and from home ownership? It’s likely not that simple.
“Atlanta has a lot of assets related to real estate. What parcels are vacant or underused that are city owned?” asked Stephanie Stuckey, Atlanta’s Chief Resilience Officer and one of the chief architects of Atlanta’s new resilience strategy that addresses long-term stresses to the city like income inequality, housing affordability, and other major quality of life issues everyday families face like economic mobility.
How can these parcels and other publicly-owned assets be redeveloped and add more multi-family units? This is an important part of the land and capital equation. “Metro areas need to raise capital locally; the trickle of federal dollars doesn’t get it done. Capital sources have to be a regional priority” added Jim Grauley.
There is also proximity to underutilized transit stations.
Regional investment in transit is encouraging. For the first time in an ARC survey, 51% of respondents said they would be willing to pay higher taxes to fund more public transit options.
There are other positive examples of investments in critical infrastructure too. “DeKalb county just passed SPLOST by 70%, GDOT is investing $10 billion dollars in traffic infrastructure, and MARTA is expanding” said Bob Voyles, CEO of Seven Oaks.
Better infrastructure and access to transit are two major community amenities that give more diverse housing choices, and where housing comes, retail follows.
“In terms of affordability, creative class retail like breweries are looking for submarkets that are the next market over from the east-side BeltLine explosion.” Neighborhoods like East Lake, Avondale, and the Westside. “There is great opportunity where dirt is more affordable” said Gene Rice, co-founder of Vantage Realty Partners.
Another industry that is creating housing demand is film. Three film studios sit in the city of Atlanta south of I-20, and these production and sound complexes could help spur existing and new housing stock, like Pinewood Forrest, a mixed-use development delivering 1,300 residences at various price points adjacent to Atlanta’s Pinewood Studios. It’s not just the actors and directors that need a place to live, but the production crews and service jobs are all essential to making the film industry tick.
The panel seemed bullish about Atlanta’s affordability prospects, namely because it’s an issue that is front and center on everyone’s minds. They all agreed that the Atlanta market overall is in a strong position, and part of that optimism being related to these types of policy discussions. It gives the real estate professionals, homebuilders, and developers insights into important demographic and market trends.
A clear theme running throughout the course of this discussion – all of these changes are happening at the local level. Stephanie Stuckey reiterated how creative partnerships with cities can be powerful incubators for change. “More and more there is dysfunction at the federal and state level and cities have strong leadership, backing of the private sector, and philanthropy. This is where we’ll see significant change around issues like affordable housing.”
Let’s hope that she is right.
by: Daphne Bond-Godfrey, Director, ULI Atlanta
This event is part of a quarterly series hosted by ULI Atlanta which gives special attention to ULI’s core mission to provide leadership on the responsible use of land and create sustaining and thriving communities here in the metro Atlanta region. To stay abreast of upcoming events, please visit: atlanta.uli.org/events