First of a 3-Part Series by Moe White –
Ten years after the end of the Great Recession, Asheville’s economy is booming.
Tourism is at an all-time high, salaries for many professionals have gone through the roof, luxurious dining, drinking, and entertainment venues have opened, and spectacular homes and condos are available for a very tight, privileged, and almost exclusively white subset of society. And it’s not just older retirees from elsewhere settling here with big 401(k)s and bigger appetites; any visitor to the city’s breweries, craft pubs, hip restaurants, or outdoor adventure venues will see scores of young (under 40) entrepreneurs and executives spending without restraint.
The bust beneath the boom
But the flip side of that booming economy is a big, though silent, bust. Men and women who work in those restaurants make less than a living wage, cannot afford to live in the city they serve, struggle to pay rent or car-repair costs, can’t take their children to the dentist, shop at food banks and clothing closets, and face a lifetime in which—like many before them—they will never get the opportunity to build a better future for themselves, because just keeping up day to day puts them farther and farther behind. A major obstacle to their opportunity is the skyrocketing cost of housing.
The City of Asheville recently contracted a study with Bowen National Research to examine the housing market for the City of Asheville and Buncombe County. The study provides a high-level overview of the current market, including affordability issues that remain challenging for the region, and it points to many aspects of affordability that face City Council and staffers who are currently working toward a comprehensive improvement.
“While the data represents Buncombe County, we understand that within the city limits these issues exist and are often more challenging to those who currently live in the city and those who want to live in Asheville,” said Asheville Community Development Program Director Paul D’Angelo. “The City continues to look at solutions to address these issues and assist in the production, preservation and protection of affordable housing.”
The Bowen report highlights cost-burdened households and skyrocketing rent, among other issues of affordability, which range from high purchase prices for houses and condominiums to a severe lack of housing stock—the latter an issue exacerbated by the intensive hotel building of recent years.
Being cost burdened means that a family pays more than 30% of its income for housing costs; severely cost-burdened families pay more than 50%. The specific numbers are eye popping: 17,643 (46.1%) renter households are cost burdened, and an additional 7,439 (19.4%) are severely cost burdened. Over half the renters in the area find it burdensome or very burdensome to pay their rent every month.
Capitalism is based on the very simple premise that supply plus demand determines value. Thus with an ever-diminishing supply of rental homes and apartments, and ever-growing demand for such housing by the people who live and work here, the value—meaning the price—rises. There are three ways to address that problem, and only three: to increase supply, lower demand, or raise incomes to match prices.
Rent is unaffordable to many
For a number of years the City of Asheville has tried the first approach, to increase supply by using tax credits to partner with developers to provide more units of affordable housing. While increased supply will not lower demand, it will lower prices landlords are able to charge, because of another rule of capitalism: competition lowers prices. That is, if you don’t like Developer A’s apartment for $1,800 per month, you can go to Developer B and get one for $1,400, or Developer C for a smaller unit at $1,150.
That approach will work as long as there is a Developer B, and C, and D. But it, too, faces many drawbacks, among them the supply of undeveloped land or in-town properties available for rebuilding. For, once again, supply and demand kicks in: with few sites available, those that exist cost more and more.
The Bowen report found that, since 2014, rent in Asheville has increased by 5.4% annually. For the average renter, this means if their rent was $1,000 in 2014, it is now $1,300. Higher rent means individuals and families have less disposable income for other necessities: groceries, car repairs, medical care, clothing, etc.
High housing costs depress entire economy
A peripheral, bigger-picture impact of that problem is often overlooked: cost-burdened families spend less at area businesses and services where they shop for basic needs (a very different group of businesses than the restaurants, boutiques, art galleries, and other establishments patronized by tourists). As a result, those local small business owners have less income to spend, too, and they spend less on their needs, and the entire economy of the region is depressed—except for tourism-related industries. It is, in effect, what’s called a vicious cycle.
Also problematic are the slow pace and high cost of building in a market where high-end, luxury-priced homes and hotels and other construction are jacking up costs for land and labor—regardless of whether a developer is building single-family homes, townhouses, or a multi-unit rental apartment building. That factor offers perverse incentives to developers and contractors: the more expensive the home, the higher its price, and the greater the builder’s profit. Thus a single two-million-dollar home brings in vastly greater profit than ten $200,000 ones—and realtors need only find one buyer, not ten.
At present, the supply of housing stock priced under $200,000 has diminished to just 63 units, down from 460 homes at that price in 2014; meanwhile, hundreds of houses are on the market for prices ranging from $350,000 to $3.5 million—none of them affordable to the area’s working families.
To help alleviate the rent cost issue, Asheville City Council approved a Disposition Policy, which outlines how developers can work with the city when developing affordable, mixed-income communities on City-owned land. The City is now considering offering partnerships where rent is tied to income. An example is employing a land-use incentive grant similar to 360 Hilliard Ave., where 20% of the units are reserved for individuals and families with 80% average median income (AMI) for 20 years.
Buying is also unaffordable
Given the very limited housing stock at affordable prices, the City has also established a program of Down Payment Assistance, which provides $1.4 million to qualifying individuals and families to help them buy a home. The funding combines $1 million in bond money with $400,000 made available through public-private partnership with the Federal Home Loan Bank.
City staff are also working to develop partnerships with developers on infill land, which will allow borrowers to get into homes and build wealth. One example of this type of partnership is Cedar Hills, a 16-acre property in West Asheville designated for a housing community that, when completed, will offer a mix of rental and home ownership options.
In the meanwhile, month-in, month-out, thousands of hard-working area families struggle to pay for life’s necessities, and year-in, year-out, the window for making Asheville and Buncombe County affordable to its own residents gets shuttered a little more.
Part I: Affordable Housing: The ABCs (this article, published October 2019)
Part II: The tourism industry: wages, housing, quality of life (published November 2019)
Part III: The economic consequences: withholding wealth, opportunity, and the American Dream (coming December 2019)