Tuesday, January 12, 2016

Atlanta Rental Prices: A Tale of Two Cities

Neighborhoods in Old Fourth Ward have gone from abandoned to beautiful in a few short years. A beautiful park, apartments, and Ponce City Market exist in a space formerly occupied by warehouses, parking lots, and abandoned buildings. As this space and others have improved, the rents have rose, and several recent articles voice this concern.

My neighborhood in Kirkwood is great and far cheaper than where my sisters live in New York and DC, so I wanted to better understand calls for city hall to take action on affordable rents. I downloaded data on average apartment prices by neighborhood from Zillow to make this visual:



Mouse over the map to get price per square foot for each neighborhood, and the five year price change, adjusted for inflation (CPI). Blank neighborhoods are missing in the Zillow data.

Its true that there are a couple neighborhoods in Buckhead with median rent over $2 per square foot, and Midtown is up to $1.85 per square foot. But half the city can still be rented for less than $1 per square foot. My own neighborhood has a median rental price of $1.19 per square foot.

To better show change over time, the visual below shows current price graphed against the five year percentage change in prices.



The visual is striking. Although a price divide existed between the Southwest and Northeast halves of the city five years ago, almost every neighborhood in the Southwest half of the city has gotten less expensive, and every neighborhood in the Northeast half has gotten more expensive.

I have several take-aways from these graphs.

1. When people complain that the city is getting too expensive, they only mean the most desirable neighborhoods where they want to live. Half the city is very cheap.

2. Price is a good measure of desirable neighborhoods. The divide between nice neighborhoods and bad neighborhoods in Atlanta is growing.

3. Plans for affordable housing should be very careful. Most affordable housing plans actually make housing more expensive. Consider a policy that requires XX% of affordable housing per new development. Less total developments will be built because developments are now less profitable. Then, in the developments that are built, less units will be on the open market. Prices are then higher due to the policy because the housing supply is smaller. Good for the lucky few who win the affordable housing lottery, but bad for everyone else.

4. Atlanta should instead be very generous in encouraging and approving development. Increased housing supply will help keep down prices and allow more people to live where they desire.

5. Increased property tax from development can then help our poor neighborhoods improve. Luxury buildings, scary to some, generate property taxes that can be spent on improving schools, safety, and transit, or on more targeted development plans. Atlanta needs to increase investment in poor neighborhoods as property taxes rise. Luxury buildings also have residents who contribute to the economy and benefit local low-wage earners.

I'll publish another post on home price data from Zillow later this week. There are some differences from the apartment data, and more years. For a notification, use the google plus or e-mail widgets on the right, or follow me on twitter

25 comments:

  1. Good points here. I pay about $1.16 a sqft for a cool loft in a cool building very close to a MARTA station, walking distance to a grocery store and several bars, and a short drive to an astounding array of ethnic restaurants, including Creative Loafing's pick for best restaurant of 2015. The catch? It's in Chamblee.

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    1. Hello fellow Chamblite! I own a house and 85, 400, Lenox, Brookhaven, everything is so convenient from here.

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    2. Hello to you! I actually own too, but rental prices in my building and nearby are the same as what I pay in mortgage, etc. As I'm sure you know, they are building two large mixed-use developments on the south end of Chamblee. I'm curious what the rents will be in these. I think Chamblee is about to take off, with the Whole Foods and the Parkview development, plus the convenience you mention. I can be in Midtown in 15 minutes via the train, Buckhead even faster. We even have our own miniature Beltline, the Rail Trail, which will actually be quite useful after the Parkview on Peachtree development is up and running.

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  2. Fellow Kirkwood resident here! Awesome analysis. I'd imagine changes in prices to buy would be similar. There's a hardcore double-edged sword here, as I think to some extent SW Atlanta keeps north Atlanta "honest" (that is, cheap), but the lack of desirability is a big problem. It'll be interesting to see the long-term effect of the BeltLine on SW Atlanta prices.

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    1. Thanks! And agreed. We'll have to have an argument about gray houses sometime :)

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    2. "There's a hardcore double-edged sword here, as I think to some extent SW Atlanta keeps north Atlanta "honest" (that is, cheap)"

      Could you explain what you mean here? Not sure I follow.

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  3. Great visualization - another Kirkwood resident here. Curious about your takeaway re:affordable housing - a lot of the studies done focus on NYC, which isn't necessarily comparable to Atlanta. Also wondering about the impact of NPUs (and the potentially associated NIMBYism) on additional development in neighborhoods that are already "nice".

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    1. Thanks! Yea, I'd like to have a better understanding of the permitting process and potential barriers too. I've heard that Atlanta is thought of as very development friendly, but I don't know a good way of measuring that.

      As far as NYC studies and Atlanta- I think the economic arguments about affordable housing regulations limiting supply are pretty straight-forward regardless. A more specific analysis on market conditions and regulation type would be nice though.

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    2. An interesting take on market urbanism: http://www.interfluidity.com/v2/6287.html

      And a counter: http://marketurbanism.com/2015/12/26/a-response-to-interfluidity/

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  4. I'd like to disagree with your assertation that the difference in rent prices means that Atlanta has housing that is affordable for its residents. Your analysis shows an average price difference ratio of about 3.25 from the highest to lowest valued areas. This does offer great value for people in the middle and upper income levels. But if you look at household income across the city, the average varies from maybe $20k or less in some places to around $200k in other Census tracts. That means that there likely is not enough variation in housing costs - the wealthiest people are likely getting a bargain, while a lot of lower income households are paying way too much. Try producing a map that shows the ratio of average rent to average household income per tract, and show the percentage of cost burdened households.

    Additionally, recall that there are lots of socio-demographic biases at work in these differences, not just school quality or perception of crime. That has led to big differences in the location of local businesses, too, which leads to even lower income and lower housing demand in those parts of town. But, it's kind of a good thing that Atlanta hasn't gotten its act together on development, because at the moment, people who can barely afford to stay in the least expensive parts of town will have nowhere to go if demand increases and prices rise.

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