Atlanta Apartment Association President Jim Fowler breaks down what’s really driving rental affordability in Atlanta.
Yet, amid all the discourse and dismay about affordability, few have stopped to consider what is driving apartment rental prices upward, or what can be done to combat rising rents. Understanding these drivers goes a long way in helping to unearth solutions – something Atlanta’s multifamily developers and property owners are eager to do.
What those developers know all too well is that the rent required to support the construction of new apartment communities is determined by the cost to develop and operate these properties. Let’s focus on development, where there are several concerning trends.
As a recent study conducted by HR&A Advisors showed, construction costs have increased dramatically across the country since 2010 due to the increasing cost of materials and rising wages. In Atlanta, construction costs increased by 17% since 2010 and more than 80% since 2000.
Construction costs in Atlanta are now the highest among comparable Southern cities. In 2018, Atlanta had construction costs 12% higher on average than national benchmarks, compared to only 6% in Dallas and 3% in Raleigh.
As a result of rising construction costs and low market rents, most neighborhoods in south and west Atlanta cannot support new development. Although land there is relatively less expensive, prevailing market rents cannot support new (and more costly) development. Compounding that, neighborhoods with supportable market rents and demand are overwhelmingly zoned for single-family development. In North Atlanta, for example, more than 89% of all residential land is zoned for single-family housing only, and even in the denser city center around Midtown and Georgia Tech, 73% of all residential land is zoned exclusively for single-family housing.
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