Most Chattanoogans are enjoying historically high gains in the value of one of their biggest assets as home prices, on average, jumped by more than 22% in the past year to record high levels, according to the Greater Chattanooga Realtors Association.
But for the 36% of Hamilton County's population that doesn't own or isn't yet buying a house, the booming housing market is creating a growing problem of figuring out how to pay rents that continue to rise faster than wages or housing subsidies.
Housing that is affordable continues to be out of reach for many Chattanoogans despite extra housing relief provided during the coronavirus pandemic, according to housing experts. Rents and home prices have outpaced wage gains for the vast majority of workers, especially during the pandemic when labor and material shortages pushed up building costs and outside investors bought up many of Chattanooga's rental units at increasing prices.
"Our community leaders are doing a great job of bringing all of these businesses and people to Chattanooga, but we don't have enough places for them to live," said Doug Fisher, executive director of the Home Builders Association of Greater Chattanooga. "We've had a perfect storm of a pandemic, a labor shortage and low inventories of building materials combined with low interest rates and more people moving here. That has created a tremendous housing shortage right now in Hamilton County. This is an unprecedented situation for us."
The median price of homes sold by Chattanooga area Realtors rose last month to a record high of $275,000, reflecting a $50,000 increase in one year. In June, the average home sold in only 17 days, the shortest period on record.
"Homebuyers continue to struggle with declining affordability amid a lack of inventory," said Robert Backer, president of the Greater Chattanooga Realtors association. "This market shows little signs of cooling off anytime soon."
The tight housing market is also pushing up rental rates, especially as some landlords convert rental homes to vacation rental homes or flip houses for sale to capitalize on the appreciated market.
As a result, a new study by National Low Income Housing Coalition calculates workers in Chattanooga earning less than $14.42 an hour simply don't earn enough money to keep up with skyrocketing rental rates even in the lowest-cost housing areas of the city.
On average, a renter in search of a modest two-bedroom home, who is seeking to stay within the recommended 30% income window for housing, needs to earn an hourly wage of at least $21.54 in some parts of Hamilton County. Nationwide, the study said a wage rate of $24.90 per hour is needed to pay for a typical two-bedroom apartment.
"In no state, metropolitan area, or county in the U.S. can a worker earning the federal or prevailing state or local minimum wage afford a modest two-bedroom rental home at fair market rent by working a standard 40-hour work week," the coalition said in its analysis of metro markets across the country.
The problem of rising rents is especially difficult for low-income or homeless people trying to find housing even with the extra federal aid provided to help the rising number of homeless people during the pandemic.
The local homeless response system, coordinated by the Chattanooga Regional Homeless Coalition, received $6 million in COVID response funding earlier this year to support rapid re-housing and shelter for those experiencing homelessness in Hamilton County and the 10 surrounding rural counties of Southeast Tennessee.
"We had this golden opportunity to effectively end homelessness or at least a subpopulation of those experiencing homelessness because this money didn't have as many restrictions as what we are used to seeing," said Wendy Winters, executive director of the Chattanooga Regional Homeless Coalition. "Unfortunately, efforts to get people housed have not been as successful as they hoped because there just isn't enough affordable housing available in our area."
The online real estate website Zumper said Chattanooga residential rental rates rose nearly twice as fast as the national average in the past year as demand for affordable housing has outstripped the supply.
Winters said a bigger share of the grant money has been spent on housing homeless people in hotels or temporary shelters, as opposed to houses or apartments, because of the limited supply of affordable housing in the area.
In partnership with Hamilton County Health Department and BlueCross BlueShield, the local homeless response system's COVID response has been successful in vaccinating the homeless population, with more than 700 people vaccinated to date.
"We want to partner with landlords, property owners, contractors, and builders to find solutions to the affordable housing crisis," Winters said.
Justin Wolfe, a contractor with Nooga Strong Construction who owns several rental properties in Chattanooga and Knoxville, said zoning restrictions and supply prices are the main reasons why affordable housing is so limited.
"There's no financial reason to build a single-family unit that's smaller than 1,600 square feet," he said. "Contractor grade housing materials cost roughly $130 per square foot if you're building a 1,200 square foot home and that doesn't include the price of the land."
But Wolfe said he is eager to try to find a solution and thinks Chattanooga should be open to more density in housing units and new types of sizes and means of building, including 3D printed houses.
The Chattanooga Housing Authority also has increased the number of rental vouchers for low- income Chattanoogans to 3,900. But CHA program director Tammie Carpenter said some of the recipients have struggled to find housing within the current price limits.
"We're hoping that the new HUD guidelines coming out next month will increase the allowable rental rates," she said.
Chattanooga Neighborhood Enterprises, a nonprofit group created in 1986 to help provide more affordable housing options in Chattanooga, is developing additional units in the city and has held its rental rates constant to help address the affordability challenge.
"As a nonprofit supported by the city and local foundations, we're able to undertake some projects that private developers probably would not, but it's been a challenge for all of us," Martina Guilfoil said.
The 51-unit Mai Bell apartments erected in 2017 in Highland Park cost $4.3 million to build, but a similar 47-unit apartment complex now being built next door is projected to cost $5.3 million because of higher building material costs since the pandemic.
"We have a real need to develop more affordable housing in our community," she said.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.