(The Center Square) – As rents and home prices have jumped in recent years in Tennessee, so has the demand for affordable housing, according to a new report by a nonprofit group.
“Housing is a necessity, and has grown increasingly expensive in Tennessee over the last decade,” said the report by the Sycamore Institute. “Much of this was driven by increased demand and diminished supply. Financing for housing developments can be challenging, and the process is particularly complex for affordable housing.”
In the early 2020s, residents from wealthier parts of the country increasingly moved out of urban areas and into more rural areas of Tennessee, the report said.
“Because Tennessee’s housing supply hasn’t kept up with these demands, housing costs have become increasingly expensive.”
Housing prices increased faster than incomes, Grace Baron, Sycamore Institute spokeswoman, told The Center Square.
There are developers that specialize in building affordable housing, helped in part by federal tax credits. Once a developer is approved for those credits, they can sell them to generate cash for the housing construction.
In fiscal year 2024, Tennessee awarded nearly $100 million in affordable housing tax credits to developers which will help finance 824 new rental units and the rehabilitation of 60, according to the new report by Sycamore.
In order to receive the tax credits, developers must promise to maintain the units as affordable housing for 30 years. After that, they can convert them to market-rate units or sell them.
Congress this year voted to increase the number of 9% credits by 12% starting next year.
“This is certainly good news,” Baron said. “But it takes time to be implemented and it takes quite a bit of time for those units to actually be built.”
Demand for the credits usually outstrips the available supply, Baron added.
Finding land for affordable housing can also be challenging, particularly in urban areas. Construction costs have also outpaced the overall inflation rate. Tariffs and supply chain issues have also added to costs.
Some governments have found ways to help by giving developers of affordable housing priority on bidding for public land, according to the report.
“Nashville also recently established a Faith Based Development Institute to facilitate the development of affordable housing on land owned by churches and other faith-based organizations,” the report states.
