A wealth of new luxury units in Atlanta creates fears of out-pricing low and mid-income renters
Construction has been moving in Atlanta, and the vast majority of it has been for luxury apartments that price out low to mid-income renters, according to a report by Georgia Tech Professor Dan Immergluck.
Immergluck’s report, which looked at current trends and census data, focused on the lack of affordable units, the number of which has consistently decreased by 4.4 percent per year thanks to gentrification and developers’ desire for more land for luxury apartments. The new units, which average around $2 a square foot, are priced well beyond what most renters could afford, and Immergluck fears it may cause renters to stretch themselves in order to reach the higher rents.
“As the industry follows a herd mentality by chasing the luxury rental market, owners of, and investors in, lower-cost units may disinvest out of more affordable units, converting them to upscale, much more expensive units or demolishing them to make way for luxury units or nonresidential uses,” Immergluck said.
Luxury Construction in Atlanta
According to a study by CoStar Group, 95 percent of all apartment units built in Atlanta from 2012 to 2014 were luxury units.
“Meanwhile,” Immergluck continued, “those with modest incomes may be faced with higher rents in the lower-cost segment of the rental market, or may even try to stretch themselves – perhaps too far – to afford a small but expensive unit in the luxury market.”
Immergluck encouraged Atlanta City Council members, who have expressed interest in solving the affordability problem in Atlanta, to seek solutions such as meaningful inclusionary zoning ordinances, along with budgeting the money to rehabilitate and construct affordable units which are linked to public services.
Stagnant Wages in Atlanta
The problem is not limited to the supply end. According to recent research, wages in Atlanta have been completely eclipsed by housing price growth.
For instance, in DeKalb County, prices have risen risen 20 times faster than wages, while in other counties, the price growth was closer to 10 times higher than wage growth. That is still one of the highest rates of disparity in the nation, behind only San Francisco. Even in the counties where the gap between wage growth and price growth is the smallest, Cherokee and Cobb counties, price growth is still double that of wage growth.
This phenomenon matches a worrying national trend, where prices outpaced wages in 68 percent of U.S. counties year over year; the average U.S. home price rose 24 percent, versus an average weekly wage growth of 7 percent.