John Partipilo captured a stunning photo of homes located in East Nashville.
According to a recent report by Tennessee’s intergovernmental agency, there is a housing affordability problem in various counties, including Jefferson, Davidson, and Shelby. The report highlights that the demand for new homes has exceeded the supply, leading to a challenging situation for prospective homeowners.
According to data from the U.S. Federal Reserve, Tennessee’s median home price has seen a significant increase of 44% since 2019, which is higher than the national average of 34%.
According to a report recently approved by the Tennessee Advisory Commission on Intergovernmental Relations (TACIR), the issue of unaffordable housing is not just limited to rapidly expanding cities and counties, but it is prevalent throughout the state. The report highlights that due to a surge of prospective homebuyers and a shortage of available properties, housing prices have skyrocketed, making it impossible for many to afford a home.
According to TACIR, the number of new homes being built is greatly influenced by zoning, especially single-family zoning.
Single-family zoning restricts homeowners from building more than one housing unit on a property, making it difficult for developers to construct apartments or divide properties into multiple units. This type of regulation limits the number of individuals who can reside in particular neighborhoods and communities, leading to a fierce competition for fewer homes and resulting in increased prices.
Cities and counties across the United States are now required to remove many of the regulations around building new homes due to zoning becoming a bipartisan issue. States like California, which is controlled by Democrats, and Montana, controlled by Republicans, have adopted laws that promote the removal of these regulations.
According to Ron Shultis, who works as a policy researcher at the conservative think tank Beacon Center of Tennessee, the state’s single-family zoning is leading to a housing affordability crisis. He points out that cities like Minneapolis, which have abolished this policy, are experiencing slower rent increases.
Shultis stated that the outcome is evident when implementing best practices and giving the market the freedom to fulfill the demand, as that is what it does best.
Impact fees on housing costs
Sparks expressed his uncertainty about the effectiveness of the solution in keeping property taxes at bay. However, he emphasized the need for an open discussion to address the issue at hand.
Developers would bear the cost of impact fees, which are a one-time charge, at least in the beginning. However, it is expected that a portion of this expense would ultimately be transferred to buyers of new homes.
As communities continue to grow at a rapid pace, county and city governments have been exploring alternative avenues to fund the costs associated with accommodating a larger population, such as building new roads, schools, and ensuring public safety. One such avenue that has been gaining popularity is the implementation or increase of impact fees, rather than raising property taxes.
According to the draft report, impact fees don’t have a significant impact on housing costs. However, the commission members took advantage of this opportunity to investigate the various problems that the housing market faces across the state.
Higher prices, larger tax bills
Not all counties have been able to reduce their overall property tax rates despite the higher price of new homes. The unfortunate reality is that homeowners are shouldering more of the tax burden as home values grow faster than the value of real estate and property owned by businesses. This means that the amount of real dollars homeowners pay in property taxes has increased despite the increase in home prices.
With the shortage of available housing supply driving up demand, homeowners have seen their property values skyrocket over the past few years, sometimes even doubling in value regardless of the condition of their homes.
After seeing the numbers on paper, homeowners often find themselves in a tough spot. While they could sell their homes for a higher price, the reality is that finding a more affordable place to live may prove to be a challenge. This can leave them feeling unsure about their next steps and wondering what the best course of action might be.
Many retired and older homeowners living on fixed incomes have been significantly affected by this situation. Although they can apply for property tax freezes, the existing income limits often disqualify them.
The draft report suggests additional measures to address the housing crisis, such as providing incentives for local governments to implement zoning reforms, allocating more funds to the state’s housing trust fund, and implementing policies to minimize the impact of property tax reforms on individuals.
