Atlanta Luxury Apartment Boom Puts The Squeeze On Renters
Caroline Huftalen has lived in Atlanta for six years, in the Cabbagetown-Reynoldstown area, specifically. She’s a writer and the marketing director for Seven Stages, a nonprofit theater company in Little Five Points. And recently, she had to move.
Huftalen had been renting a 700-square-foot unit in a condo building for $975 in the neighborhood, but this summer, building officials reinstated a two-year renting rule, forcing her out. Huftalen says she quickly learned $1,000 for a one bedroom apartment or studio didn’t go as far as it did a few years ago.
The city of Atlanta has been experiencing a boom in the luxury apartment sector – think stainless steel appliances, quartz countertops, hardwood finishes, on-site gym and saltwater pools. According to one study by CoStar Group, nearly every apartment unit that came on the market between 2012 and 2014 fell into the luxury category.
But low- and middle-income renters – renters like Huftalen – say they feel increasingly squeezed by the market, unable to afford the new luxury apartments and edged out by stiff competition and equally high prices for older units.
“I just felt like, if I’m going to pay $1,000 for an apartment, I want to make sure my windows aren’t falling off,” she says.
Huftalen wanted to stay in the Cabbagetown area, but ended up looking in the Old Fourth Ward, Midtown and the Highlands – anywhere she could still bike or walk to work. After a few months of searching, she found a place: a one bedroom condo in Reynoldstown she’s renting from a friend. But she’s paying more – $1,200 a month. To make up the additional cost, Huftalen took on more freelance writing work and also became a dog walker.
Huftalen says she looked at some of the new apartments that have been built in recent years, but they were out of her budget and also not her style. Still, she also found rent for older units weren’t that much cheaper.
“The buildings that are more rundown, you look at them and you’re like, ‘I’m paying a $1,000 for this?’ It’s because they’re basing the prices on the more luxury-type condos and apartments that have the amenities,” Huftalen says.
Over on Atlanta’s trendy west side, Tim Schrager, the CEO of Atlanta-based development firm Perennial Properties, is overseeing the final construction work on The Brady, one of the latest luxury complexes to hit the market. The 230 apartments are mostly rented, and the leasing staff moved in last week. All that’s left to build is the rooftop common area and pool.
“This area is really meant to function as our pool area, our club area, we’ll have some gaming going up here, pool table, shuffle board, those types of things. Real interactive type things for the residents to use while they’re up here,” Schrager says.
Out on the pool deck, Schrager points to where some cabanas will go, with a stunning view of Atlanta’s skyline.
After 30 years in the Atlanta apartment rental business, Schrager says the last few years have been unlike anything he’s seen.
“In the past five, six years, the quality of finishes has ratcheted up dramatically,” Schrager says. “What you’re seeing in apartments now is the equivalent of what you would have found in high-end condos 10 years ago.”
As of this summer, there were more than 11,000 apartments under construction and another 11,000 proposed, according to consulting firm Haddow and Company. The vast majority of those fall in the luxury category says Georgia Tech professor Dan Immergluck.
“There’s essentially no new low-income housing development,” says Immergluck, who studies housing and real estate markets. “There’s also very little for moderate income folks, and so there’s this mismatch, and what it’s going to force people to do is stretch.”
“We Can’t Sustain It”
A recent study by New York University’s Furman Center for Real Estate and Urban Policy says just more than half of Atlanta renters two years ago were cost burdened, meaning more than 30 percent of their income went to rent.
Meanwhile, 95 percent of all apartment units built here from 2012 to 2014 were luxury units, according to CoStar Group, a real estate information company.
Perennial Properties’ Tim Schrager says developers default to luxury units right now because land costs, architects and labor are at an all-time high.
“It’s costing X number of dollars just to put a shovel in the ground and start a project, so for the little bit of incremental cost to build that A-quality property, it’s worth it,” he says, adding that people in Atlanta will probably have to get used putting a bigger portion of their earnings toward rent, like those in New York, Boston and other major cities.
That doesn’t mean Schrager isn’t concerned at the sheer number of luxury properties being built.
“We can’t sustain it. I really believe that to be the case,” Schrager says. “We cannot continue to raise rental rates every year at the rate we’ve been raising them and expect people to afford them. So something has got to give.”
Atlanta Housing Policy
Mayor Kasim Reed says he wants to tackle the issue of affordable housing, and the city’s development authority, Invest Atlanta, has laid out a housing strategy. It includes producing or rehabilitating 10,000 apartment units for a range of incomes and cutting the number of housing burdened citizens by 10 percent by 2020.
Reed also wants developers that get tax incentives from the city to include affordable units, but he says that’s being undermined by Fulton County’s tax breaks.
“What is being done is that folks are going around that effort to Fulton County where they have no standards, and so that’s one area where we’re going to take that on,” he says.
Officials with Fulton County’s Development Authority say their hands are tied until the Atlanta City Council passes an affordability law.
Whatever the case, Georgia Tech Professor Immergluck says the end result for Atlanta has been a major construction boom that accommodates just a few.
“I hope we don’t look back on this as the biggest missed opportunity for affordable housing,” he says.
Immergluck says requiring developers to set aside some units for workforce residents could have gone a long way to keep rents down.
“But now, we’re probably seeing the end of this boom, and even if we put something into place soon, which I understand the city is trying to do, I fear it’s going to be a little too late,” he says.
Immergluck says City Council needs to move quickly on an affordable housing policy or they could miss the building boom entirely.