Tennessee’s cities have a housing problem. Specifically, not enough rooftops and certainly not enough that are affordable.
Elected officials at the state and local levels are trying different tactics to ease the crunch. But what’s the silver bullet? Zoning-density changes? Developer incentives?
Studies and recommendations differ, but the goal is the same: More “middle-level” housing – and now.
Middle-level housing is defined by some as multiunit housing such as duplexes, or multiple units on a lot that formerly may have been single-family. In general, it means denser zoning, which is where the trouble often begins.
The response to more dense zoning is, predictably, varied. Local officials reliant on property taxes to fund operations see more structures as more revenue.
Baby Boomers who have been in a brick ranch house for 30 years look out in horror across the street at four tall, skinny homes stand where their neighbor’s a single ranch once stood.
Others, often millennials and Gen Zers looking for a starter home, see those same abodes, with their smaller footprint often-lower prices than a traditional single-family building, as an access point into the increasingly challenging world of homeownership.
Many see this is a “Nashville” problem, but in fact it’s a statewide issue that’s only growing worse. Perhaps for that reason, the Tennessee General Assembly moved on making zoning changes at the local level easier this year.
This benefits Nashville and the state’s other large cities but trickles down into smaller communities that see the problems their bigger siblings are having and are not eager to share in them.
Specifically, the new law allows local governments to offer no-cost, voluntary incentives to builders of affordable housing development: an increased density allowance, and thus more units can be built on a single piece of land; lower parking requirements, which can save on building and development costs; and priority permitting, which can also reduce costs on the front end.
Municipalities now must pass local legislation to adopt any or all elements of the new framework, and the process by which the initiative will be awarded. Projects then can be submitted for a review process by the Regional Planning Commission. So, what’s next at the local levels?
Sorting the complexities
With a decade of explosive growth behind it, Nashville stands front and center when it comes to zoning challenges in Tennessee. Its Metro Council has been trying for years to find ways to put more houses, at more achievable price points, into Davidson County – especially in the urban core.
Plans such as Nashville Next, Metro’s 25-year general plan which was adopted almost a decade ago, are usually referred to in discussions, study groups and committees, which continue to proliferate.
And then some are pushing for more rapid action. Earlier this year, at-large Council member Quin Evans Segall and District 20’s Rollin Horton introduced a set of bills known as the Nashville’s Essential Structures for Togetherness, or NEST, housing bills, designed to spur movement on the issue.
“The suite of bills would have made government more efficient – without changing outcomes – as well allow for gentle density in historically appropriate ways,” Evans Segall says. “As set out in Nashville Next, Nashville needs to produce more housing that is affordable to those making a middle income. The reforms set out in the legislation would have achieved specific goals in Nashville Next in ways other cities – and our own studies – have shown lead to more middle-income housing generation.”
Those measures and conversations need to open wider and include the upcoming transit referendum, the example set by the newly launched East Bank Development project and other moving parts, adds District 6’s Clay Capp.
“This is an important topic, not just here but around the state and country,” Capp says. “And it’s complicated. The Metro Council and state legislature have passed legislation to make building housing easier, but there’s more to do.”
Price points still a problem
Zoning, density and affordability are top of mind for Emily Benedict, Council member for District 7, as well. For many, the density issue is about the hole in the doughnut, those “middle-density” houses and their price points.
“These are not ‘affordable housing’ as in ‘subsidized housing,’” Benedict explains. “There’s the density component, which means more houses, but also smaller ones. That will help drive prices down.
“For instance, if you see two tall-skinnies at 2,500 square feet each, and they are selling for $700,000, think what would happen if there were four instead of two, and those four were only 1,500 square feet,” she continues. “That price might be closer to $400,000 to $500,000, which is still market-rate housing but more affordable. The goal is to create more housing that’s smaller, and at a lower market price, so more people can afford to live where they work.
“The state has recognized it’s not just Nashville but everyone needing tools to help build more affordable, market-rate units,” Benedict continues. “No matter where in the state, people like teachers, firefighters, police, first responders, all the people who work in a city should be able to afford to live there.”
Evans-Segall points eastward for some inspiration.
“We need to produce more housing in size and scale that is naturally affordable. Efforts such as those recently passed in Knoxville are consistent with Nashville Next and would address both scarcity and affordability,” she says.
The Knoxville plan involved new zoning codes, passed in February, around what is known as “middle housing,” defined by the city as “house-scale buildings with multiple units in walkable neighborhoods … neighborhood complimenting structures provide diversity of housing stock with simple, well-designed options between the scales of single-family homes and mid-rise apartments.”
It’s a worthwhile goal, but Benedict and others say that getting long-term residents to see density as a plus will be a challenge.
“People who bought that house 20 years ago for $200,000 now have something worth $600,000 and they don’t want to see $400,000 homes there,” Benedict says. “That’s not fair to groups like millennials and Gen Z, who want to get into a house and need a lower price point,” she continues. “More houses are how we fix that problem, and hopefully people will come around to being OK with that.”
East Tennessee sees it coming
Knoxville real estate agents and others in the real estate business have been watching Nashville for years. Now they are experiencing some of the problems that come with more people than available properties, or at least affordable ones for first-time buyers and others who are looking to own versus rent.
“I’ve been here my whole life, and it’s grown faster in the last two years than I’ve ever seen,” says Jennifer Montgomery, an agent with Wallace Real Estate. “Knoxville is growing and it’ll keep on growing until we’re as expensive as everywhere else, and that’s going to happen.”
Like Nashville and Chattanooga, the area draws new residents for everything from the natural environment to jobs and the tax structure. And from 100 years ago, urban density was needed as most people didn’t have cars so relied on public transportation of some kind to get to work and run errands. With cars came suburbs and zoning loosened. Now it may need to snap back, Montgomery says.
“Density is not a new idea, but it’s one we all will have to get used to,” she says. “In real estate, we used to say, ‘drive until you qualify,’ and that meant people were living pretty far out of the city center. If you had $200,000, you drove until you found a house at that price. But now people want to live back in town, they don’t want that long commute, and we don’t have the housing stock.”
In addition to DADUs, Montgomery says she has been seeing family compounds or mini-farms, pop up. The idea is simple: Buy a piece of land that might have one house on it, add more and move in relatives. The result is an intergenerational compound.
“It’s an old way of thinking, but we’re seeing everything old is new again with city living,” she says. “Sometimes an older house gets torn down and replaced with two or more if the zoning can be changed. Other times that house may get renovated and a new one built to the side or in the back. But those newer ones are almost always smaller and priced to sell.
“This is one reason why there’s still lots of variety in Knoxville, and a lot of different ways to look at this depending on what you want.”
Realtors, builders unite
While Nashville might loom large on the housing-difficulties landscape because of its explosive growth, the state’s other larger cities are also seeing the issue ramp up within their borders.
No matter where they are operating, the people who buy and sell houses, build them and renovate them say tackling the shortage of rooftops is key. Whether that’s through new zoning, easing of regulations or totally new angles such as the use of detached accessory dwelling units, or DADUs, and even a “family compound” type of development is up for debate.
“Property owners love the idea of selling a lot with one house to build four because they can command more money,” says Lon Hurst, affiliate broker with Parks Real Estate. “The neighbors, especially in an older neighborhood, not so much. But on the other hand, those people are seeing their property values go up as well, so they do win out eventually.”
The appetite in general, Hurst says, is for smaller houses, two or more to a lot. That’s a change from a decade ago in Nashville and other markets in Tennessee, but it’s also reflective of people who move from more dense cities, and don’t really want a big house and yard.
“As you see more of a housing mix, it does become more normal,” adds Murn Roberts, an affiliate broker with Compass Real Estate. “For a while, people were looking to maximize by adding a DADU or other secondary unit or they were splitting their lot and selling that off if the zoning permitted it.
“They still are, but there also are a lot of people who want a smaller home, who are not put off by another home right next to them. Right now, it’s still all over the place, but I do think we’re moving toward a more compact landscape where a single home on a big lot becomes something else after it’s sold.”
Upgrades can mean stay or move
Contractors, whether for renovation of entirely new builds, also are facing challenges that range from zoning and other regulations to ongoing supply-chain and affordability issues.
They say the market will likely continue to be a mix of people who want to keep and upgrade what they have, as well as move into something entirely new if they can find what they want.
“Middle Tennessee has a crisis when it comes to housing, because the city governments haven’t wanted to approve more housing but also know they need to do so,” says David McGowan, president and owner of Regent Homes, whose latest developments include the Burkitt Ridge and Carothers Farms communities in Middle Tennessee.
McGowan says builders continue heading toward the ‘beltway’ counties around the state’s larger cities to put down planned communities, in large part to feed a buying group that’s looking to upgrade.
“You see people going to and from places like Columbia because that’s where they bought a house with a yard that they could afford,” he says. “Nashville is building plenty of apartments in the urban core, but once you’ve got a couple of kids and a dog you want more. You want a community, and it’s hard to buy that in the city with prices where they are now. We’re at a very critical crossroads right now.”
Owners who want to stay put aren’t afraid to spend some cash to upgrade what they’ve got, says David Manning, owner of House Dreams, a Nashville home renovation firm. That gives them resale value down the road, another bonus.
“The post-COVID, post-interest-rate hike trend is for people to make that house more livable,” Manning says. “Expand your space, do what you want to do where you are versus buying something new. The huge push to own a home for two years and flip it while making a 30% profit has come to an end.”
Denser zoning isn’t going to affect someone who’s got the space to put in an outdoor kitchen or redo a deck to create a screened-in porch, he says.
“It’s the market. Some of them don’t like the tall-and-skinnies coming in, but they also don’t want anyone telling them what they can and can’t do with their property now or when they sell it,” Manning says. “Whether it’s new zoning or other changes, it’s still going to come down to who wants to buy a house, and what their plans are for that property now and in the future.”
“Right now, it is impossible in almost all of Nashville to build true duplexes or smaller scale multifamily housing without a zoning change, which takes lots of time,” concludes Evans Segall. “At the same time, neighbors have very little say over the scale or design of new buildings, even single-family homes. To build more dense housing, we have to balance the need for buildings that fit within the scale of the neighborhood – whether single or multifamily – with the need to increase unit sizes where appropriate.”