In many ways, today’s Asheville is a victim of its own success.
The city is home to hippies and hikers, retirees and big city refugees, hipsters, foodies, brewers, farmers and artists of every sort. Downtown, a compact space bustles with life. Traffic inches along Patton Avenue and College Street, stalled by lights spaced a mere block apart. Firetrucks blast their horns as knots of pedestrians clog the street corners, waiting for their signal to cross.
Adding to the clamor, washboard-toting musicians perform traditional Appalachian tunes as tourists gather round, phones out, to share “weird Asheville” with friends back home.
For the past decade or more, the city’s been conspicuous on the national radar — and its population has spiked sharply. But living in such a desirable place can have unwanted consequences: in Asheville’s case, a severe housing shortage, skyrocketing rents and home prices, overcrowded streets with no place to park, and an abundance of lower-paying, tourism-based jobs.
Surrounded by mountains and crammed into a 45-square-mile valley, the city of Asheville is bursting at the seams, and increasingly, Buncombe County is feeling the effects of the spillover as well. Meanwhile, city and county officials are scrambling to combat the challenges posed by urbanization, overpopulation and a growing gap between wages and housing costs.
No vacancy
Every five years, the city commissions a Housing Needs Assessment and Market Study; in January, Patrick Bowen of Bowen National Research presented his findings.
Bowen, the founder of the Pickerington, Ohio-based company, has conducted real estate market analyses in hundreds of cities around the country. But as Xpress reported last winter (“Study Highlights Asheville Housing Challenges,” Jan. 20), he’s never seen the mix of extremely low apartment availability and high population growth that now confronts Asheville.
With the vacancy rate for multifamily rental housing at 0.9 percent, landlords can raise rents to meet the high demand. Nationally, the vacancy rate sits at around 5 percent, which is considered healthy.
“When demand increases and the supply doesn’t keep up, then prices rise,” says Mike Figura, who owns Mosaic Community Lifestyle Realty. “Asheville’s population has grown faster than houses have been built — apartments especially — partly because we’re constrained by our land.”
In the mountains, he continues, “It’s hard to build single-family houses in tracts, like they do in other cities and suburbs. If you’re a home seller, then that’s a good thing; but if you’re somebody looking to move to Asheville, buy a house or rent,” you’ll have to make some sacrifices, Figura explains. “Some people are willing to take a house with smaller square footage that’s in not as good condition, because they have a strong location preference. Other people need a house in better condition or a larger house, so they push out farther from the city, where prices are cheaper.”
Low wages
You can’t talk about affordable housing without considering income levels.
At an April 21 retreat, Planning Department staffer Donna Cottrell told the Buncombe County commissioners that the U.S. Department of Housing and Urban Development pegs the median household income for the four-county metropolitan area (Buncombe, Haywood, Henderson and Madison) at $32,200 for one person, $44,800 for two, and $50,400 for three. Other sources may give different numbers, depending on which specific areas they include, but the basic message doesn’t change much: low wages and high housing costs.
In Buncombe County, the median monthly rent for a two-bedroom apartment is $916; for a two-bedroom house, it’s $950, according to the Bowen report.
Yet many local people (such as firefighters, teachers, wait staff, child care and construction workers) aren’t making anywhere near the $40,450 per year that is needed to comfortably afford such rentals.
The widely cited benchmark is that affordable housing should cost no more than 30 percent of one’s monthly income. In Buncombe County now, however, 44.5 percent of renter households are considered “cost-burdened” (i.e., spending more than 30 percent on housing), and another 21.7 percent are “severely cost-burdened” (spending more than 50 percent), said Cottrell.
And meanwhile, notes the Bowen report, roughly 27 percent of Asheville’s current renters make less than $15,000 a year ($1,250 per month before taxes) in a city where the median cost of a studio apartment rental is $720 per month, and a one-bedroom is about $836. In other words, 27 percent of Asheville renters would have to spend about 57.6 percent of their pretax income to live on their own in a small studio — or 66.9 percent if they wanted a one-bedroom apartment.
After taking out 20 percent for taxes, this leaves those renters with somewhere between $164 and $280 a month to cover all other living expenses. And even with two earners in a household, the numbers often don’t add up.
So much for rentals. And if you’re trying to buy a home, things get even worse. At the commissioners’ retreat, Cottrell noted that the median home price in the county was $215,000 — and, to properly afford that, a household would need to make at least $67,188 per year. But that’s $22,388 more than the median income for county residents, and meanwhile, housing prices continue to climb.
One key reason for all this, of course, is the preponderance of lower-paying service sector jobs. Nationwide, many areas are grappling with the loss of manufacturing jobs; ironically, however, Asheville’s situation is also tied to its rise as a tourist destination.
The main industries here are related to either tourism or health care, notes Jeff Staudinger, the city’s assistant director of community and economic development. “We do have a significant manufacturing economy, but relative to the general economy, it’s a lower percentage. And our gross product is also relatively low per wage, so that really influences the wages that can be paid out the other side.”
Asheville is not alone in grappling with these problems: High housing costs are common in many big cities. But wages also tend to be significantly higher in those places — and even the service sector has more potential customers. Part of Asheville’s problem, says Staudinger, is “the size of our city relative to the demand. We’re not a Charlotte marketplace.” And the very demand that’s helping drive the housing crisis applies to the job market, too, giving many local employers the same kind of leverage that landlords enjoy.
No end in sight
Between 2000 and 2010, Asheville’s population grew by 21.1 percent, even as the rest of Buncombe County saw a 15.5 percent increase.
“We’re seeing the market in the county tighten up a lot, relative to where it was last year,” says Figura. “It went from a balanced market to a strong sellers’ market. … And as of the second quarter, the median home price in the city is higher than it’s ever been: $235,000. That’s even higher than it was at the last peak [in 2007], before the recession, at $225,000.”
Historically, houses in Buncombe have tended to command higher prices than those within the city limits, but Asheville began outperforming the county in 2011 — perhaps, Figura speculates, due to the “higher preference toward urban living among millennials.”
Still, there may be some good news here. As developers start showing more interest in Asheville, we should see some improvement in our housing numbers, Figura predicts. “For the longest time, developers didn’t want to look at markets like Asheville, because they were too small. They were focused on larger markets like Charlotte, Atlanta and D.C.”
“That’s changed as our population has grown,” he explains. “Our popularity is rising, and our low vacancy rate has caught the eye of a lot of developers.”
In the last five years, the population has increased by about 7.4 percent, and the Bowen report expects that trend to continue.
In the meantime, though, things could be worse. “We’re not at the top of the [housing] pricing curve,” notes Staudinger. “We do have a limited housing supply, but we are not Tokyo or New York City. And I think that, if you talk to some folks from Atlanta, they’ll tell you we’re not Atlanta either.”
Until development catches up with the population influx, however, the vacancy rate will remain stagnant, making it hard for many Ashevilleans to afford city prices, says Figura.
Playing catch-up?
The Bowen study indicated 40,504 total households in Asheville: 50.7 percent renters and 49.3 percent homeowners. Over the next five years, it predicts, Asheville will see another 1,338 homeowner households and 1,748 renter households moving to the city.
And with limited buildable land available within the city limits, the only place to go is up. “It’s going to be dense,” maintains Figura, who has a background in urban planning and development. “Land is running out, and in a lot of cases, they’re tearing down buildings to build another one.”
Several multifamily housing complexes are currently being built or in the works, he continues. “The question is: Will our population continue to grow? And is this going to fill the void and return our normal vacancy levels? Or is our population going to continue to grow just as fast as apartments are being built?”
Figura believes things will start getting better. “I think we’re playing catch-up right now, and at some point [the demand] will be filled.” Compared with other cities, he continues, “We don’t have a particularly high population growth rate: It’s more of a supply problem.”
In Charlotte, 21 percent population growth over a decade wouldn’t be cause for panic. In fact, that city’s 35 percent rate in those same years far outstrips Asheville’s; Raleigh, meanwhile, comes in at a whopping 46 percent. “They’re not as constrained by topography,” Figura explains, “so they can build a lot — and more quickly.”
And in fact, notes Bowen, Asheville’s growth rate is really more like 12 percent, because the city annexed a number of areas during that decade.
Staudinger, however, takes a somewhat less optimistic view. “You’ll get many economic theories about what drives down housing prices,” he points out. “The one that typically gets a lot of traction is about the supply-demand curve. If you see a real building boom of new housing, then, theoretically, that will drive down the pricing for existing housing that may not have the level of amenities or efficiency the newer homes have.
“But I think if we look three to five years into the future, we are nowhere near the point where even the suggested pipeline would be sufficient to really have a serious impact. There’s a lot of room in the market to continue to fill demand without driving prices down.”
Still, Asheville’s future, Figura believes, will probably include a lot of five-story apartment complexes, which are cheaper to build than taller structures. “I think that’s the only way we’re going to really solve it,” he maintains. “People are going to continue to build houses, but it’s not going to be able to keep up with demand. A lot of land just outside the city isn’t served by utilities. You just can’t build on land when you don’t have water and sewer.
“It’s a lot more cost-effective to make housing if you’re building multifamily,” he continues. “Land cost is really high, and you structure your building around that.”
Staudinger, however, cautions that “The apartment development that’s happening is not always inexpensive to develop. There’s topography challenges, flood plain challenges, the adequacy of infrastructure. All this provides some limits to our growth.”
In any case, however, multifamily housing is exactly what Asheville seems to need most.
Searching for solutions
“There are no vacancies among the 3,362 surveyed affordable (tax credit, government-subsidized) rental units in the city,” notes the Bowen report. “This occupancy rate and the long waitlists maintained at these projects indicate that there is pent-up demand for affordable housing in the city.”
The analysts surveyed 9,232 Asheville apartment units and found all but 82 of them occupied.
City officials are well aware of the problem. Asheville’s five-year Consolidated Strategic Housing and Community Development Plan, approved by City Council on April 28, states: “Prices of homes for sale are rising and are now at prerecession levels. Rental housing is full. Supply of homes — both for sale and for rent— is the greatest issue for low- and moderate-income households.” The consolidated plan is based on numbers from the Bowen report.
“At the end of June,” says Staudinger, “City Council passed a resolution establishing 2,800 affordable housing units to be constructed in the next seven years.” But that, he continues, will barely put a dent in the 8,751 additional residential units the city says it needs to bridge the gap.
Clearly, addressing Asheville’s housing crisis will take more than just building additional residential units.
“Affordable housing is not just a housing problem,” Figura explains. “It’s a housing supply problem; it’s a wage problem; it’s an employment problem.”
Staudinger agrees. As for the city’s role, “One of the questions we consistently ask is, ‘What can a local government do?’ And the second question is, ‘What will a local government do?’ I think, right now, we’re trying to answer those simultaneously.”
The current plan, he continues, is to “increase our investments in affordable housing; eliminate barriers created through our regulatory process; provide financial incentives; continue to look at and seek to increase the allowable densities — and increase our partnerships with housing developers.”
Figura, meanwhile, offers these suggestions: “If you’re a business owner, pay a living wage. If you go out to eat, tip your server well. Support the industries that aren’t making a lot of money whenever you can. It’ll help people afford the housing in Asheville.”
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