The gold rush of residential development throughout Middle Tennessee conceals what some in the region say is a growing crisis in affordable housing.

New homes and condos come on to the market every day, and even more are under construction or still in the planning stage, but those homes are often on the higher end of the price scale.

Incomes are not rising as rapidly as rents and mortgages, and some residents find they are priced out of the neighborhoods and communities where they wish to live or where they could have bought a home only a couple of years ago.

“The city is changing and growing,” says Anthony Davis, District 7 Metro Council member. “New and expensive homes are coming into some neighborhoods, and if you don’t keep watch on it, you’ll lose income diverse housing in the city.’’

The affordable housing dilemma is on the front burner in Metro Nashville and in Franklin, as elected officials, housing advocates, faith-based organizations and other concerned community members move forward with innovative community projects and work to promote new legislation meant to stimulate – or even require – a greater range of housing prices.

About 100,000 or 40 percent of Davidson County households are “cost burdened,” according to the U.S. Department of Urban and Housing Development. This means they pay more than 30 percent of their income for housing.

Families earning slightly above the median of $56,377 for a family of four are among the citizens who seek and need affordable housing.

Franklin, with its population of 69,000 and median income of $82,300, is one of the most affluent small cities in the country. Yet, the quaint, picturesque city, isn’t able to keep up with the demand for affordable, middle-range housing that could benefit long-time residents, new residents moving to town for jobs or senior citizens on a fixed income who may either want to age in place or be close to their grandchildren.

A research study commissioned by the city in 2014 found that more than 43,000 people have jobs in Franklin but live outside of the city. Reverse that scenario and make a comparison with people who live in Franklin and commute elsewhere and the numbers are much different.

About 17,500 people who live in Franklin commute outside the city for work, and only 7,800 both live and work in Franklin.

The study, conducted by Denver-based BBC Research & Consulting, concluded that Franklin needed to create a more diverse housing stock – from starter homes to middle market dwellings, upscale homes and senior-friendly options.

Earlier this year, the Metro Planning Department released its own housing study, which was conducted by a team of researchers from Vanderbilt University. The results were similar.

The study recommended that Nashville:

• Pass an inclusionary zoning ordinance – a land-use practice that typically requires developers to set aside a proportion of units in market-rate residential developments to be made affordable for lower-income households in exchange for development rights or zoning variances

• Significantly increase the Barnes Fund for Affordable Housing, which the city uses to offer incentives to developers willing to pursue affordable housing projects

• Create a “shared-equity” housing program, which allows a person to purchase a share in their home even if they cannot afford a mortgage on the whole of the current value. The remaining equity share may be held by the house builder, by a private investor or by a landlord such as a housing association.

A national issue

Nashville and Franklin are not alone. Affordable housing is a major issue in towns and cities all over the U.S., from Seattle, Washington, New York City, Portland, Oregon and Los Angeles, California to smaller municipalities such as Pasadena, California, Chapel Hill, North Carolina and Fort Collins, Colorado.

“Affordable housing is a monumental problem in Williamson County,” says Brian Bousquet, executive director of the Hard Bargain Association, a Franklin-based non-profit dedicated to building and renovating affordable homes in the city’s historic Hard Bargain neighborhood.

Street-level renderings of the proposed Pennington Cottages, a development slated for East Nashville between Litton Avenue and Monetta Avenue.

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“The median house of at least $425,000 is out of reach for many. There needs to be a variety of price points instead of everything on the high end of the market and it’s going to take multiple strategies. You know you have a problem when it seems like no one can afford to live in your community anymore.”

Although there’s a broad consensus that affordable housing is a problem in Nashville and Franklin, there are varying opinions about cures.

Many developers, real estate professionals and others in the business community are skeptical at best about interventionary strategies such as mandatory ordinances or other governmental controls that might force developers into including affordable housing in their projects.

Such laws, they say, hamstring their efforts to meet Nashville’s massive housing demands.

The market itself – supply and demand – can solve the problem in less intrusive ways, they assert.

“It’s simply unfair to place the burden of providing affordable housing on the backs of developers,” says Nashville developer Bill Hostettler, chief manager of Nashville-based Craighead Development.

“Inclusionary zoning adds costs to the development of market rate housing and it could kill development, not help it.”

Meanwhile, many housing activists, officials and experts insist that nothing will change unless policies and local legislation is changed.

They say blending moderate and lower-income households into new residential developments gives all members of society access to better schools, commercial centers, parks and a higher quality of life often found in and around newer neighborhoods.

Inclusionary Zoning

Brant Bousquet, executive director of the Hard Bargain Association, holds a rendition of homes to be built on this land off Mount Hope Street in Franklin.

-- Michelle Morrow | The Ledger

Nashville and Franklin are at different stages in pursuing inclusionary zoning, a land-use practice that typically requires developers to set aside a portion of units in market-rate residential developments to be made affordable for lower-income households in exchange for development rights or zoning variances.

These policies are considered inclusionary because they are intended to allow lower and moderate income households to buy or rent property in middle and upper income communities.

With inclusionary zoning, often called IZ, affordable units in mixed income housing project are physically indistinguishable from market rate housing, thus avoiding the stigma often attached to affordable housing.

Metro Council overwhelmingly approved an affordable housing bill in July that lays the groundwork an inclusionary zoning policy in Nashville. The bill charges the Metro Planning Commission with designing a comprehensive affordable housing plan for Nashville in the next six months.

It asks the planning department to pursue inclusionary zoning with the goal of requiring new multi-unit residential developments to devote 14 percent of units as affordable.

Franklin already has a voluntary inclusionary zoning ordinance, but many in the community, including Mayor Ken Moore, say it’s been ineffective.

In June, the city’s Board of Mayor and Aldermen decided to rethink the ordinance to make it more effective, giving the Franklin Housing Commission 90 days to come up with final recommendations for a more cohesive plan. Among the changes expected in the revised ordinance: At least 15 percent of the total number of residential units built in Franklin must be affordable.

“There are differing opinions about inclusionary zoning, and you have people on both sides who feel very strongly pro or con,” Franklin Mayor Ken Moore says. “Ultimately, we’d like to find a middle point that creates a win for developers and a win for affordable housing and workforce housing.”

Floyd Shechter, a local commercial real estate developer who specializes in repurposing old buildings and an affordable housing advocate who’s was active in encouraging with Metro Council members to tackle a new affordable housing ordinance, says inclusionary zoning works best when it’s mandatory.

“We really need to stop the current trends that sees our affordable housing stock dwindling,” Shechter says. “I don’t believe you can do that by giving developers the option not to participate. Most won’t take that option.”

Leading the way

While legislators and public figures attempt to create new incentives and devise new laws that will spark affordable housing, some developers and community activists are doing something about it now.

Jamie Pfeffer, an architect and partner at Invent Communities, a local company that focuses designing and building urban cluster neighborhoods, is involved in Pennington Cottages, an East Nashville development.

Although the exact prices of the homes haven’t been determined, Pfeffer says eight of the project’s 17 homes will be priced in the affordable range.

“There’s absolutely a need for more affordable housing here,” Pfeffer says. “Every neighborhood deserves a range of housing types.”

Even though Pfeffer is a developer who’s interested in including affordable design in his projects, he’s not completely sold on mandatory inclusionary zoning, although he appreciates its goal and intent.

Pennington Cottages, which recently received strong endorsement from Metro Planning, was conceived of and planned without government incentives or inclusionary zoning.

Notably, 20 percent of the Pennington Cottages project will have affordable housing, higher than Metro’s proposed goal of 14 percent.

“Neighborhoods are very important to us,” Pfeffer adds. “It can be hard to legislate this kind of thing, but I definitely think affordable housing needs to be addressed.

“We like to figure out what an urban community might need and bring something to the marketplace that a particular neighborhood wants.”

District 7’s Davis worked closely with Pfeffer, Invent Communities and the surrounding neighborhood to design a project residents truly desired. Davis also co-sponsored Metro’s latest affordable housing bill.

“I think people see what’s going on and know we need to do something about it,’’ Davis adds.

“We know we have to keep a stock of affordable homes and find ways to keep residents in some of the gentrifying neighborhoods in their homes.”

Renewing Franklin’s Hard Bargain

The Hard Bargain neighborhood near downtown Franklin began in 1880 when Harvey McLemore, a freed slave, bought 15 acres from his former owner with money saved from years of sharecropping. McLemore later began selling lots to other freed slaves and their descendants, and the neighborhood grew to 130 homes.

As Franklin’s explosive growth continued in the 2000s and beyond, the Hard Bargain neighborhood and its residents became threatened by new developments and gentrification.

In 2004, a grassroots group, the Hard Bargain Association, formed to help preserve the historic district by providing affordable homes for purchase, repairing existing homes and structures, beautifying public spaces and educating the community.

With the help of private donations, government grants and corporate contributions, HBA buys homes and land in the neighborhood and either builds a new home on the property or renovates existing structures.

The organization is preparing to build five houses in the $140,000 to $175,000 range.

Qualified buyers of Hard Bargain-sponsored homes are also given the benefit of a “silent second mortgage,” and the homes are sold for less than market value. If a homeowner stays in a home for 20 years, the loan is forgiven.

If a home appraises for $150,000, it would sell for $115,000 and the silent mortgage would be for $35,000.

“The goal is to keep homes under the same ownership for years to come,” says Executive Director Brant Bousquet.

Bousquet says Hard Bargain is just one model of what can be done on a local level to maintain affordable housing choices and preserve neighborhoods in Franklin and Nashville.

“It takes more than one group, one ordinance or goals that are just written down on paper to take tackle this issue of affordable housing,” Bousquet says. “You have to put your money where your mouth is.”

Bousquet’s not only supportive of mandatory inclusionary zoning in Franklin, he believes the city’s housing reserve fund should be beefed up.

“People have to have the heart” for solving the affordable housing dilemma, Bousquet says.

“We know a lot of these methods work in other communities, and the more we actually apply them here, the better off we’ll be.”