Just 10% of Nashville Homes Are Affordable to Local Musicians, Down From 50% Five Years Ago

Real Estate News & Analysis

Just 10% of Nashville Homes Are Affordable to Local Musicians, Down From 50% Five Years Ago

The city’s $500 million commitment to affordable housingalong with a request for $250 million from the private sectoris aiming to help combat the housing affordability crisis in Nashville for all of its residents.

Just 10.1 percent of homes for sale in Nashville are affordable for a typical local musician, compared with 60 percent for a computer engineer.

For the musicians that give Music City its name, housing affordability has drastically declined since March 2014, when half of for-sale homes were affordable on the average income for entertainers and performers. The portion of affordable homes has also fallen for Nashville residents who earn the median income, from 33.8 percent five years ago to just over 10 percent now.

This is according to a Redfin analysis of historical housing affordability in Nashville by occupation. See the interactive chart below for the share of homes sold in any given month that were affordable in Nashville for dozens of different occupations since the beginning of 2014.

Another reason why local Nashville residents are finding it more and more difficult to afford homes is the “Garth Brooks and Taylor Swift effect,” according to Matt Wiltshire, the director of the Nashville Mayor’s Office of Economic and Community Development.

“The things that have been attractive about Nashville at its core, like no state income tax and a convenient location at the intersection of three interstates, have been attractive for a long time,” Wiltshire said. “But when country music crossed over to the mainstream about 10 years ago, Nashville became an acceptable place to move for a wider swath of people.”

On Redfin.com, 28.6 percent of searches for homes in Nashville in the first quarter of 2019 were from users outside the metro, down slightly from 32.2 percent a year earlier.

“And at the same time, companies started to realize what Nashville has to offer,” Wiltshire continued. “Businesses realized there are tens of thousands of college graduates entering Nashville’s job scene each year, and all of a sudden, they’re opening offices here and we have significant population growth. And housing supply has not kept up.”

The typical home in Nashville sold for $289,000 in March. That’s up 2.9 percent year over year and up 65.7 percent from $190,000 five years ago.

The Local Government’s Commitment to Affordable Housing

Earlier this year, the city of Nashville announced a $500 million commitment to affordable housing, shining a renewed light on the issue. The initiative, known as Under One Roof 2029, is designed to create at least 10,000 affordable housing units, which will be a mix of rental and for-sale units, in the next 10 years.

Of the $500 million from the city, $350 million will go to the city’s Metropolitan Development and Housing Agency (MDHA), part of which will be used to pay for roughly 1,000 “deeply affordable” units. Under the new plan, a Nashville family that earns 30 percent or less of the median household income for the area—with the median income being $74,900 for a family of four—would qualify for deeply affordable housing, the most heavily subsidized option. Currently, 53 Nashville homes for sale—less than 1 percent—are affordable for families earning $22,470, 30 percent of the median income. Although the homes added to this bucket through Nashville’s commitment will be rentals, it will put an additional 1,000 units within reach for low earners.

A family that earns between 30 percent and 80 percent of Nashville’s median household income—$22,470 to $59,920—would qualify for “affordable” housing. For a household earning $41,000, roughly the midpoint between those incomes and typical for a musician in Nashville, just 8.4 percent (600 homes) of for-sale homes are affordable. The city’s initiative would add thousands of units, both rentals and for-sale homes, to the supply of affordable homes for this group. With companies like Amazon, Lyft and Apple ramping up hiring in Nashville, proactively upping the share of affordable homes could help keep local families in a lower income bracket from being pushed farther from the city center.

The initiative also earmarks funds for “workforce” housing, meant for households earning 80 to 120 percent of the median income for the area, and “market-rate” housing, meant for families earning more than that. For families earning the median income, $74,900, 54.3 percent (3,900 homes) of homes for sale in Nashville are affordable. With the money going into workforce housing, thousands of homes will be added to this bucket.

“It’s commendable that the city of Nashville is investing so heavily into building more housing units for people of all different income levels,” said Redfin chief economist Daryl Fairweather. “A lack of housing pushes up prices for everyone, and it’s usually the people with the lowest incomes who suffer the most. But if Nashville had only focused on low-income housing, you would still have the problem of high earners displacing middle earners. So it’s wise that Nashville is building housing for all different income levels.”

In addition to $500 million provided for the initiative by the city of Nashville, the local government is challenging the private sector to provide another $250 million, which could look similar to Microsoft’s recent commitment to affordable housing in the Seattle area.

“While wages for the average Nashville resident have gone up in the last decade, they definitely haven’t gone up as quickly as housing costs. Even for folks making 100 percent or 120 percent of the area’s median income, housing in Nashville is less affordable than it was a decade ago,” Wiltshire said. “The last part of the plan, the $250 million challenge to the private sector to make donations or invest in some other way in affordable housing, is meant to help those folks. It’s important as a piece financially, but it’s also symbolically important. The private sector can help.”

In an area where affordability has declined significantly for residents at nearly every income level, an ambitious plan that vows to create thousands of new affordable units is necessary, though it remains to be seen whether the initiative will keep up with Nashville’s growth.

“For many locals who love the city they grew up in but can’t afford to purchase a home there, Nashville’s financial commitment to affordable housing is a step in the right direction and a signal that they will hopefully be able to achieve their goal of homeownership,” said local agent Scott Mosley.

Notes on Methodology

Using employment data from the Bureau of Labor Statistics, we calculated the average of median salaries for individuals in certain occupations in the Nashville metro area. Historical income data is available through December 2018. For January through March 2019, we projected income for occupations using year-over-year growth from 2017 to 2018 and applying that same growth rate from 2018 to 2019.

 

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