SHELTER SKELTER
Why a boom in apartment building may not help with rising cost of housing in Chattanooga
Back in 2019, Caleb McCool, a lifelong resident of the Chattanooga area, rented a one-bedroom apartment in Red Bank for $650 a month, a rate he found affordable at his income.
Two years later, an out-of-state developer upped McCool’s monthly rent to $1,000.
“It was bought out by somebody out West,” said McCool, 25, in a phone interview. “They didn’t even remodel it.”
McCool’s experience is far from unique. In 2022, Hamilton County saw the largest annual rent increase in the past decade, the Chattanooga Times Free Press reported.
Within Chattanooga, the annual median rent increased from $855 in 2010 to $1,300 in 2022, a 52% increase.
Chattanooga’s rent problem is part of a national trend. According to a recent report from Harvard University, 22.4 million households spend more than 30% of their income on rent and 12.1 million spend more than 50%, The New York Times reported.
Economists and advocates partly attribute this to a simple math equation: There’s more demand for housing than what is being built, despite the increase of residential units permitted in Hamilton County in recent years.
According to data from the Chattanooga-Hamilton County Regional Planning Agency, 8,976 single-family homes and 4,868 multifamily units were permitted for construction in Hamilton County from 2019 to 2023.
“There’s been a lot of influx of people from the rest of the country,” said Howard Wall, chief economist for the Center for Regional Economic Research at the University of Tennessee at Chattanooga, in a phone interview. “The population growth has been outpacing the speed that they’ve been building.”
To meet this demand, residents of the area may notice apartment complexes being constructed in areas like Hixson Pike and Gunbarrel Road.
EVERY UNIT COUNTS
Increasing the supply of housing is part of the city’s plan to overcome the shortage of affordable housing in the area, a shortfall expected to reach 7,000 units by 2030, according to the city’s housing plan released in August.
“Every unit counts, and every unit helps release pressure downstream,” Nicole Heyman, the city’s chief housing officer, said in an interview. “If I am on the cusp of being able to afford a nice apartment, but there aren’t any available, then I’m probably renting below what I can pay instead of above what I can pay. I’m kind of taking up a unit that could be freed up for someone who actually needs it.”
At the same time, though, advocates and economists say a supply increase won’t solve Chattanooga’s affordable housing problem.
“It costs what it costs to build,” Martina Guilfoil, president and CEO of affordable housing developer Chattanooga Neighborhood Enterprise, said in a phone interview. “The difference between what it costs and what you need to rent your unit to cover debt coverage and what folks think is an affordable rent, you just have to have money to cover that gap.”
Heyman said aside from limited supply, long construction times of units and the incentive for developers to maintain higher rents contribute to high rents.
“It’s not enough to just think that the market is going to take care of itself,” Heyman said. “If the market can sustain market rate rents or higher, then developers are naturally going to build for that rent.”
HOUSING BURDEN
Guilfoil said there’s a school of thought out there that, with more housing, prices will come down.
“I don’t believe that,” Guilfoil said. “Yes, we need to build more housing, but let’s not delude ourselves that it’s going to cause rents to come down. It’ll stabilize rents and maybe they won’t go up as quickly.”
Wall said the types of units being built matter as well. Luxury apartments, for instance, common in places like the North Shore, won’t do much to drive down rents, he said.
“That’s the problem,” Wall said. “At the lower end, there’s not really that much being built.”
Much of the housing supply issues date back to the 2008 recession, Wall said. Across the country, residential construction plummeted in the postrecession world.
Michael Gilliland, community organizer for Chattanoogans in Action for Love, Equality and Benevolence, said in a phone interview that high rent costs, which have always affected low-income households, are starting to affect a majority of renters.
“Renters and homeowners, really a majority, are considered burdened by housing costs in Chattanooga,” Gilliland said.
According to federal standards from the U.S. Department of Housing and Urban Development, any household that spends 30% or more on housing is considered cost-burdened.
In Hamilton County, 45% of renter households are considered cost-burdened, according to the latest data in 2022 from the U.S. Census Bureau’s American Community Survey.
According to a 2021 report from Chattanoogans in Action for Love, Equity and Benevolence, the burden can be attributed to rising housing costs along with stagnating incomes among many households.
Gilliland said this is a trend that predates the current supply problem.
“The idea that a simple housing stock increase is going to meet the housing needs of everyone in the city, I don’t believe that for a second,” Gilliland said. “I don’t believe that the private market with its own production has ever created safe, efficient, affordable housing for workingclass people.”
SOLUTIONS
One thing local governments can do to ease housing costs is to zone for more density in residential housing, Wall said.
“There’s an awful lot that’s just zoned for R1 and R2,” Wall said, referring to single-family zoning. “The opportunities for building more multifamily housing, like duplexes or small apartment buildings, are limited because the places where people are living — where they might want to just have more housing or newer housing — the zoning doesn’t allow it, and it takes quite a lot of time and effort if you can even get the zoning changed.”
Gilliland said it will take more public investment to make housing more affordable, especially from the federal level.
“The housing crisis is a national crisis. It’s not just a local crisis,” Gilliland said. “The primary reason why it’s gotten to such a degree is because of the failures of federal policy.”
Guilfoil said the solution to high housing costs is complicated and will require incremental efforts in both the private and public sectors.
“Your head starts spinning,” Guilfoil said. “You can’t build your way out of it. You could if you had billions of dollars and you could subsidize a lot of housing to where people could find affordable rents.”
Heyman said the discussion around affordable housing needs to be humanized.
“We’re just talking about everyday workingclass folks that are making a buck and raising families and contributing in every way to a meaningful society,” Heyman said. “When you talk about affordability, people think about old school tenant complexes where poor people are isolated and stacked on top of each other, and their perception is they don’t work and they don’t contribute, and that is so untrue.”
CITY EFFORTS
When Chattanooga Mayor Tim Kelly took office in 2021, one of his primary goals was to address the affordable housing issue in the city.
In August, the city unveiled a housing plan to address the lack of affordability.
Guilfoil said the city is taking steps in the right direction.
“The mayor is making strides. I think he’s realized how difficult it is,” Guilfoil said. “The housing plan needs a lot more definitions. How are we going to get to some of the things that plan recommended? It was really a framework. It wasn’t a plan.”
Gilliland said he’s been impressed by the city and the mayor’s efforts, but there needs to be more money going toward the issue.
“The No. 1 problem is that public support and backing for equitable housing options,” Gilliland said. “There isn’t the money for it right now, and so at the end of the day, there needs to be a recurring revenue stream at a local level.”
‘RUNNING PEOPLE OUT’
After McCool’s rent went up in Red Bank, he said he was forced to move to an apartment in East Ridge that he described as being substandard and in poor condition.
He said he felt the city and the area is being built not for longtime locals, but for people moving here from places like California and New York.
“You’re running people out rather than bringing people in,” McCool said.
Gilliland said, referring to new residential construction, that it’s important to consider the type of city that’s being built.
“The amount that’s being built in Chattanooga comes nowhere near the affordability needed for a majority of Chattanooga’s workers,” Gilliland said. “It’s not a question of ‘Build, build, build,’ but a question of ‘What is being built and for whom?’”