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Report: Tennessee zoning laws negatively impact availability of affordable housing

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(The Center Square) – Tennessee would benefit from zoning reform to support affordable housing, according to a report from Tennessee’s Advisory Commission on Intergovernmental Relations.

The report suggested the state offer local governments incentives to reform zoning to support housing development such as allowing mixed-use development, reducing lot size requirements, or allowing types of missing middle housing.

TACIR suggested the state sharing some of its realty transfer tax or mortgage tax revenue with local governments whose land use regulations meet a minimum number of criteria.

Those taxes could also be used to fund either the existing housing trust fund or a new trust fund to make low- or zero-interest construction loans for affordable housing.

The report came after House Joint Resolution 139 was approved in April 2023 requiring the report. The report was increased in scope from simply a study of new construction impact fees.

The median sales price of all homes in Tennessee was $325,000 in 2022, an increase of 44% over 2019.

“In 86 of Tennessee’s 95 counties, the median-priced home costs more than three times the median salary of a local teacher, and in 15 counties it is more than six times as much,” the report said. “As a result, Tennesseans may be unable to afford homes located close to their workplaces.”

One in five Tennessee homeowners and two in five renters pay more than 30% of their income toward housing. The report also concluded that impact fees are not the largest factor in the rising cost of homes.

In all, $107.6 million was collected in local impact fees and development taxes in the 2021-2022 fiscal year.

“While impact fees do add to housing costs, they are not so influential as some other factors in the state today—including, above all, the supply of housing,” the report said.

The report comes a year after Beacon Center release a report finding that local and state policies have contributed to an environment where housing prices have outpaced median income.

The Beacon Center report found that multi-family housing like apartments are banned on 94% of Middle Tennessee land and duplexes are banned on 59% of land. Only 11% of Nashville allows apartments while Maury County allows affordable housing on 96% of land while Forest Hills, Brentwood, and Sumner County effectively ban them.

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