Navigating Tennessee's Housing Affordability Challenge: A Complex Dance of Supply and Demand

Jan 29, 2024 at 09:23 am by WGNS News

RUTHERFORD COUNTY, TN - Recent research by the Tennessee Advisory Commission on Intergovernmental Relations (TACIR), titled “Reducing the Burden: Increasing Housing Supply to Lower Housing Costs," confirms that in some cases Tennesseans may be unable to afford to keep their home or unable to buy a home to begin with. In Murfreesboro, the median home listing price is sitting at $455,000, making that new home purchase even more difficult. State Representative Robert Stevens in Rutherford County stated...

Tennessee stands at the forefront of a housing crisis, facing unique challenges shaped by diverse factors across the state. The escalating housing and rental prices in recent years have placed the dream of homeownership beyond the reach of many Tennesseans. The issue manifests differently in various regions, creating a complex landscape of affordability concerns. State Representative Mike Sparks said...


As of 2022, 17.9% of Tennessee homeowners were classified as cost-burdened, paying more than 30% of their incomes towards housing. For renters, the situation is even more dire, with 43.4% classified as cost-burdened. The implications of a lack of affordable housing extend far beyond individual households, impacting the state's workforce, economy, infrastructure, property values, property taxes, and community concerns such as public health and homelessness.

Recognizing the severity of the issue, House Joint Resolution 139, proposed by Representative Sparks in 2023, prompted the Commission to study housing affordability. Initially focused on impact fees, the scope of the study expanded to consider various factors affecting affordability beyond impact fees.

While impact fees are now used in places like Murfreesboro to potentially manage growth-related costs, their effect on housing affordability is limited. The need for infrastructure and services accompanying new developments necessitates funding, typically sourced from impact fees or property taxes.

Debates on financing growth revolve around equity concerns. Some argue that those generating the need for new infrastructure should bear the cost, while others contend that impact fees and related taxes are unfair to those buying new homes. Tennessee law mandates that collected impact fees be spent exclusively on infrastructure needs arising from the respective developments.

Tackling the complexity of the housing issue in Tennessee requires a comprehensive approach and local governments have limited policy tools to address the problem, including impact fees, property taxes, and sales taxes. While impact fees contribute to housing costs, they are only one element in the intricate web of factors determining the total cost of housing.

Representative Sparks highlighted how the cost of education, mainly in the form of new schools, is one of the many facets driving the need upwards for things like impact fees and increased property taxes cost... A Rutherford County Board of Education meeting held earlier this month, confirmed the cost to build the new Batey Elementary School in the Blackman Community, will cost approximately $60-million.

At the same time, the National Association of Home Builders estimated that just under a quarter of a home's cost could be attributed to government regulations. However, this encompassed various regulations, not solely impact fees, and Tennessee-specific data are lacking.

Residential impact fees and development taxes in Tennessee vary by location and are not the largest factors affecting housing affordability. In the current market, these fees, even at a rate of $1 per square foot, represent a minimal percentage of the cost of a median-priced new home. But what can't be overlooked is that when land is scarce and a local school system has to spend spend over $80,000 per acre, the costs go hand-in-hand with the increasing costs of homes.

Existing Homes Locally: In Rutherford County, just 6.3% of homes were constructed on or before 1959, according to data from the TACIR study. Further findings reveal that a significant portion, 26.5%, of all homes in Rutherford County were built between 1960 and 1989. These insights into the construction years of homes suggest that the majority of residences currently occupied by residents were built from 1990 onwards. In fact, a substantial 67.2% of all homes in Rutherford County were constructed on or after 1990.

An intricate dance of supply and demand in the housing market has become increasingly complex, driven by various factors ranging from the pandemic's disruptions to historical shifts in land use policies. The state as a , like many others, grapples with a shortage of homes compared to the rising demand, creating a significant challenge for residents seeking affordable housing. Estimates from housing research groups, including Up For Growth, suggest a substantial need for additional housing units in Tennessee, with numbers doubling from 22,000 in 2019 to 56,000 in 2020.

The rising population, witnessing an increase of over 125,000 people from 2020 to 2022, exacerbates the situation, driving competition and prices upward. A staff analysis by the Commission reveals a direct correlation between per capita income and median home sale prices, emphasizing the impact of financial means on housing affordability. Increasing housing supply at a faster rate than population growth is identified as a potential solution, associated with lower home sale prices. However, the analysis recognizes that this alone may not be sufficient to bring home prices down to universally affordable levels.

In the ongoing policy discussions about housing affordability, the focus often centers on whether to subsidize affordable housing for lower-income individuals or broaden measures to increase housing supply for a wider income range. Research indicates that a dual approach, supporting both subsidized and market-rate housing concurrently, may be the most effective strategy. The state could play a role in assisting local governments by providing tools to increase land availability for housing. The recommendation to authorize all local governments to establish land banks aims to address blight, secure existing affordable housing, and create a more dynamic housing market in Tennessee.

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