Homeownership is becoming far more elusive in Chattanooga, and it's a dream Theresa Roberson almost let die.
Roberson, who works full time as a scheduling supervisor at a local doctor's office and part time as a caregiver for another health care operation, was eager to own a home again - a place her four grandchildren could visit - after her divorce and subsequent foreclosure.
Still, she waited patiently for seven years to pass, when most negative debt would fall off her credit report, while renting a small apartment in East Ridge, taking classes at Chattanooga Neighborhood Enterprises to improve her eligibility for a home loan and scratching together savings for a downpayment.
When the time came to house hunt, she was armed with a pre-approved home loan and downpayment assistance through CNE, and her own savings, yet after six months of fastidious searching and three failed bids she felt no match for the market forces at work.
A household with an income of $45,650 a year - around what many teachers, firefighters and skilled laborers make - can afford a $155,000 house. In the last six months, however, only 188 houses costing less than that went on the market in Chattanooga, and 68% were sold to investors, according to recent data collected by CNE, which has been positioning itself to begin leading Chattanooga's response to the global affordable housing crisis.
Chattanooga Neighborhood Enterprise
"We have to start talking about how we get control of our housing resources," CNE President and CEO Martina Guilfoil said. "We see what the outcome is without having any controls: This huge company from Canada (for example) overpays for everything and your neighborhoods are all owned by absentee landlords at rental prices."
In 2017, a 1,400 square foot home in East Ridge sold for between $110,00 and $120,000. Then investors began buying them up, Hamilton County Assessor of Property Marty Haynes said.
Now, those same homes are selling for more than $180,000, and East Ridge leads the county, and recently led the state, in the percentage of rental homes.
In 2017, a 1,400 square foot home in East Ridge sold for between $110,00 and $120,000. Then investors began buying them up, said Hamilton County Assessor of Property Marty Haynes.
Now, those same homes are selling for more than $180,000, and East Ridge leads the county, and recently led the state, in the percentage of rental homes. "Our affordable homes, that is where the price has jumped the most," Haynes said.
Those same forces were also being blamed for the $220 rent increase Roberson had just received notice of.
"After I got outbid on the last house I wasn't even trying anymore," she said. "I felt so discouraged."
Then, a real estate agent called with news.
One of the homes she had previously bid on was back on the market. Quickly, she offered $180,000, and they accepted. She settled for the 1,221 square foot, three-bedroom home off Wilcox Boulevard because she couldn't afford anything she actually loved. Even the worst homes seemed to command bidding wars.
"I have just been praying the Lord would give me a place where we could have dinner together, room to enjoy each other's company," she said, excited, while driving to deliver her earnest money. "I am so desperate to get out of the apartment loop."
Roberson is among a small but growing number of Chattanoogans finding hope in the desperate hunt for affordable housing, thanks to CNE, an often misunderstood nonprofit lender and developer that dates back to the 1980s downtown renaissance and became a catalyst for downtown's real estate price surge years ago.
Since 2010, CNE has helped 1,693 people buy their own home by providing access to education, loans and downpayment assistance, and, in the past four years, over $39.7 million in home equity was created for low and moderate income households locally.
CNE also manages 165 affordable rental units in the city, a number the nonprofit is building back up after shedding hundreds of rental properties in the early 2000s.
An additional 53 units should be available for rent by the end of the year, which will be leased by those next in line on the organization's 448-person waitlist, said Robert Prichard, vice president of property and asset management at CNE.
CNE won't rent to anyone making more than 80 percent of the area median income, which means one person can't make more than $42,150 and a two-person household can't make more than $48,150. A recent $25 rent increase was the first in five years.
"Landlords are doubling the rent, and they say they are living in their cars," said Prichard, who speaks daily with people on the waitlist. "They can't afford the market rents going on in this area Even at $15 an hour they are stretched."
The idea for CNE was inspired by James Rouse, a nationally renowned urban planner and developer who visited Chattanooga in 1984, as Vision 2000 - the community-wide planning process that sparked the downtown renaissance - was underway.
Rouse, who had made his fortune from the shopping malls and suburbs that grew out of the white flight that followed integration, had become passionate about the housing needs of the poor and was looking for a city willing to partner with his foundation, the Enterprise Foundation, to create a model for providing safe and affordable housing, as well as neighborhoods that celebrated economic and racial diversity.
Leaders of Lyndhurst, the family foundation of Coca-Cola bottling heir Jack Lupton, who were also underwriting the Vision 2000 efforts, signed on to help fund Rouse's vision, impressed. So did former U.S. Senator and Chattanooga Mayor Bob Corker, then a successful, young developer who'd recently returned from a moving mission trip to Haiti.
Founded in 1986, CNE was intended to build affordable housing, offer loans for home repairs and provide financial assistance for potential homeowners, with the bold aim of making housing for the very poor fit and livable within a decade. Money from foundations and donors supported the organization's administrative costs, while the city gave it access to federal grants.
Ironically, the nonprofit ended up working more and more to develop market-rate housing that would draw the middle class to Chattanooga. At the time, there was very little housing downtown, since so much had been torn down during urban renewal efforts decades earlier, and private developers weren't interested in the city.
CNE's first work was in the downtown neighborhood of Fort Negley, where the nonprofit bought old rooming houses and renovated them to create affordable housing units, while another program helped struggling homeowners get access to loans for needed home repairs.
Still, those efforts didn't spur the market rate development CNE's backers, like Lyndhurst, hoped would follow efforts in the disinvested neighborhood. So, the organization pivoted.
Cowart Place, a neighborhood created by CNE on downtown's south side, was a chance to start from scratch.
Half of the mostly vacant land was developed by CNE for affordable housing, while the rest was sold to private developers, who benefited from zoning change efforts and infrastructure spending city officials committed to nurture the new neighborhood.
CNE then acquired much of the vacant property in Jefferson Heights, where land was generally owned by Black homeowners or absentee landlords, about half and half. Affordability would be woven into planning, but revitalization was the focus. Again, CNE sold lots to private developers and in the ensuing years the Southside neighborhood became one of the hottest real estate markets in the county.
M.L. King Boulevard, a main downtown thoroughfare along which the city's Black business district once thrived, then became the target of revitalization efforts, though those sputtered.
By the time Guilfoil was hired to lead CNE in 2013, almost all of the organization's rental units, which reached 991 by 2002, had been sold off. Staff had also been significantly reduced after city leaders, concerned about bloating and mismanagement, pulled funds from the organization.
Guilfoil came to Chattanooga from Los Angeles where she worked at a similar organization helping revive neighborhoods in the city of Inglewood. There, homes had already gotten so expensive that even those making $150,000 a year couldn't break into the housing market without hundreds of thousands in subsidies through an organization like CNE.
"I didn't get into this to help higher income earners get a home," Guilfoil said. "There, subsidies are $350,000 to help one person get into a house. That is more than a whole house here."
Chattanooga's median home price recently topped $300,000 for the first time.
The percentage increase in property value in Chattanooga over a four-year period was approximately 10% to 12% every four years beginning in 1989. The increase in property values in 2021 was 27%, property assessment data shows.
Under Guilfoil, CNE has worked to rebuild its rental portfolio - which had been severely cut back years earlier after former Chattanooga Mayor Ron Littlefield raised questions about how the nonprofit was being run - while also advocating homeownership for the dwindling number of Chattanoogans with the credit score, earnings and savings to put the goal within reach. Student debt, medical debt and credit card debt climbed to all-time highs before the pandemic, while wages stagnated and costs rose, forcing a larger share of the middle class to abandon home ownership.
Now, almost 70% of American households have been priced out of buying a home, according to the National Association of Home Builders 2022 Priced-Out Estimates, which looks at how many households can afford a 10% deposit, a 30-year mortgage at 3.5% and a home payment to income ratio of 28%. For every $1,000 increase in the median home price, another 117,932 households are priced out of the market, and each quarter of a percentage point rise in the mortgage rates excludes another 1.1 million households, according to the report.
The Federal Reserve Board is expected to announce a three-quarters of a percent rate hike later this month, which would be the second such increase in two months.
"Everything is so high right now. It is way overpriced," said Alexis Tisdale, a mother of four who works at Mars Wrigley and recently started shopping with a pre-approved home loan through CNE. "This is a lifetime investment. Something I have to pay off the rest of my life, and I don't want to end up thinking that I don't really want to live here. I want enough space for my kids, but it's so hard to find. People are moving from out of town to here and they are taking everything."
In 2017, CNE built its largest rental project, the Mai Bell, a 51-unit apartment complex in Highland Park, along with several prototypes of "missing middle housing," house-scale duplex and triplex units in Ridgedale. The closing of Tennessee Temple University allowed CNE to attain land for the redevelopment efforts.
CNE also built a row of single family homes at Bailey and Union avenues that sold for $155,000.
"We are a dual mission," Guilfoil said.
Recently, local home builder Ethan Collier donated land for CNE to develop 36 one- and two-bedroom rental units targeted for low- and moderate-income households in his Mill Town development. CNE also bought four lots along Lyerly Street next to Mill Town for additional 16 rental units.
The nonprofit accepts federal Section 8 housing vouchers, but right now the vouchers can't cover the cost of CNE's one- and two-bedroom offerings, despite the fact that CNE's rents are lower than market rate. The market rate for a one-bedroom apartment in Chattanooga is $1,350 a month, while CNE rents one-bedroom units on average for $720.
This spring the U.S. Department of Housing and Urban Development approved an increase in voucher payments because of rising housing costs, said Tammie Carpenter, who oversees the Section 8 program at the Chattanooga Housing Authority. Only 40 percent of the local low-income residents who receive vouchers are able to find a rental within six months.
"It is definitely a struggle," Carpenter said. "I have never seen the rents like this."
Since the pandemic, homelessness has surged, increasing 153% in the Chattanooga region in the last year alone to total more than 3,000 people, according to the most recent count, and the city just opened a supervised homeless encampment on 12th Street.
Chattanooga's multifamily housing inventory increased by roughly 7,500 units, representing about 30% of the market's existing apartment stock, over the past 12 years. Another 1,200 units are underway, according to a recent report commissioned by CNE.
Still, the additional housing has done nothing to lower rents, which are expected to continue climbing, the study said. Year-over-year rent growth was 13.4%, far higher than the metro's five-year average of 5.2%, but in line with national trends.
Forty-three percent of Chattanooga renters are now "housing burdened," spending more than 30% of their gross income on housing.
Apartment building sales, like homes, have surged as investors continue to show interest in Chattanooga, lured by reported job growth. The area still outperforms the national average in employment gains since the onset of the pandemic. Volkswagen, one of the largest employers, is investing $800 million to expand the current plant to handle production of its first electric vehicles in North America.
State law forbids rent control in Tennessee, so the only way to ensure the lasting affordability of rental properties is to keep them under the oversight of a nonprofit committed to creating and maintaining local affordable housing, Guilfoil said, and the only way for those nonprofits to offer lower rents is with increased public and private financial support.
"Rental rates are escalating astronomically," said CNE board chair Michael Stewart, who works as a real estate attorney. "There has been an emphasis on creating affordable rental units."
So far, CNE's rental projects have all been within the city, but Guilfoil said the organization plans to begin pursuing projects in the county as well. CNE leaders interviewed county mayoral candidates to assess their stances on housing this year, and Guilfoil said she expects to to see future county leaders far more engaged in the issue. Chattanooga Mayor Tim Kelly, who has been in discussions about housing with CNE since before being elected, recently announced a $100 million housing initiative, in which Kelly said CNE will play a key role.
Earlier this month, Kelly announced that $12.7 million of the $30 million the city received from the American Rescue Plan Act will go toward creating more than 230 new affordable rental units, transitioning those without a home to permanent housing and helping families keep their homes as property values rise.
"We stand the very real risk of becoming a city where lifelong Chattanoogans cannot afford to live, and that is flatly unacceptable," Kelly said recently.
There are plenty of hurdles ahead, however.
Even if there were plenty of places to develop house-scale duplexes and triplexes, which could pepper affordable housing throughout the county, current zoning most likely outlaws it and often neighborhood associations and homeowners associations resist.
In 2018, a representative of then Chattanooga Mayor Andy Berke, whose administration pushed for downtown density, met with CNE officials to discuss the need for advocates to educate and engage the public on the issue, and after further discussion the CNE board agreed to take on the role and the Benwood Foundation agreed to fund some of the effort.
That same year CNE hired Alexa LeBoeuf, who had helped manage the APEX community engagement project for the nonprofit UnifiEd, to work as a policy advocate. In the new job, LeBoeuf helped CNE hold workshops about affordable housing and create a housing platform, which was published and used to publicly interview and endorse mayoral candidates.
"We just realized that there was going to be a moment in time where we could get affordable housing out there as a key issue," Guilfoil said. "Until the housing prices spiked a few years ago it wasn't registering. It overnight went from a non-issue to, 'Oh my gosh, things are so expensive that I can't attract employees.' The pandemic exacerbated what was already becoming a problem."
Nearly half of Americans now say the lack of availability of affordable housing in their local community is a major problem, up 10 percentage points from early 2018, according to a Pew Research Center survey conducted in late 2021.
During the pandemic, LeBoeuf began advocating for renters facing eviction and left CNE in 2021 to continue that work at Cosette Consulting. CNE then hired Justin Tirsun into the expanded role of vice president of neighborhood investment and community engagement.
Tirsun, a former senior planner with the Chattanooga-Hamilton County Regional Planning Agency, said CNE is recommending local officials respond to local housing needs in several ways.
The city and county own a significant amount of land through back-tax foreclosures, and a lot of the land is vacant. Tirsun said CNE has requested for the majority of the land to be moved into a land bank that could distribute that land to agencies, like CNE and Habitat for Humanity, capable of building housing at affordable rates.
CNE staff has also pitched a million-dollar fund to city officials to buy homes with cash, bring them up to standards and sell them to first-time homebuyers in the nonprofit's pipeline, which just received city funding.
Zoning and building codes also need to be liberalized, to allow for more "missing middle" type housing that can fit into traditional neighborhoods, he said.
"The city will be doing a massive overhaul of the zoning code," Tirsun said. "Missing middle development will require allowing more dense and multi-family zones into neighborhoods which have recently opposed such development."
As they continue to study the local and national housing dilemma in order to propose solutions, the CNE staff and board will also be looking at the ripple effects of development.
After its works in Highland Park, home prices soared - a good thing, on one hand.
"If you don't invest in neighborhoods and improve neighborhoods you are assigning people to generational poverty because they aren't gaining any wealth if they own their home," Guilfoil said.
But it also drove up rents for many of the people CNE wants to help.
Jenny Hill, the District 2 City Council representative and a CNE board member, said while on the board at Metropolitan Ministries - which has long offered rent assistance to those near homelessness - she saw Highland Park residents with rents that jumped from $500 to $1,200 a month for no reason other than that the neighborhood was improving.
"When you do a good thing, how do you ensure that other good things come from it for people who aren't directly involved? What are the options we have to protect renters in a footprint of revitalization work?" Hill said. "Undeniably there are ripple effects of revitalizing neighborhoods."