Memphis must come together to address looming affordable housing crisis | Opinion
It is important that we do everything possible to protect our local neighborhoods that were once communities of responsible homeowners, from becoming rental communities where the residents have no personal stake in the up-keep and longevity of the community.
- Melvin Burgess is the Shelby County Assessor of Property and former Shelby County Commissioner.
On September 1, 2018, I was recited and accepted the statutory oath of office vowing to classify and properly assess all taxable property in Shelby County.
In order to carry out my duties, I am required to obtain and analyze property sales data on a regular basis. In maintaining records of all property sales and transfers in Shelby County, we are able to see market trends and shifts in the local economy in real time.
Recently, it has become apparent to me that the supply of quality affordable housing in Memphis and throughout Shelby County is being depleted at a rapid pace by large, well-funded, in institutional investment groups.
These investors are buying single-family homes and turning them into rental units. In many cases, the investment groups are real estate investment trusts that never lay eyes on the properties.
They purchase large numbers of single-family homes and offer prices well above the sellers’ list prices in light of the fact that they are only interested in long term rental income from the bulk purchases. It would seem that this is an indication of a booming economy however, it is quite the opposite.
I believe that this is an indication that Memphis and Shelby County could experience an economic crisis in the housing industry.
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The downward spiral of affordable housing
Every urban center must have sufficient housing supply to meet the demand of the population and the local income levels. Single-family homes are the primary investment for most individuals and families. The purchase of a home is often the first major investment that middle and lower-middle income earners expend. In a regular housing market, individuals with similar incomes compete in the marketplace for the available housing supply.
However, when the competition is no longer individuals and families with similar income levels, but well-funded mutual funds, real estate investment trusts, and investment bankers, the local residents do not stand a chance when competing for the existing housing supply.
In the past two years, over 7000 single family homes were purchased by such investors; then turned into rental units and changing the fabric of some neighborhoods forever.
The end result is sky rocketing prices for single family homes; oftentimes 50% higher than what the seller would demand in a normal housing market.
So young professionals, newly married couples, and families seeking to increase their lifestyles are unable to find homes they can afford.
Moreover, young college grads begin looking towards other cities where they might have a better chance at individual wealth and homeownership.
The depletion of the affordable housing supply likewise causes apartment rental rates to spike upwards as well. The demand for available apartments, not blighted, and in nice areas are limited. Many of them have waiting lists, thus the apartment management companies raise the rents to meet the demand in short supply.
The suburban areas of Desoto County, Mississippi and Fayette County, Tennessee are seeing growth in new residents because middle class income earners are going to find quality affordable housing elsewhere.
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Memphis must come together and solve this issue
I am of the opinion that we must bring together local economists, real estate professionals, and governmental policy makers in order to address this looming crisis.
It is important that we do everything possible to protect our local neighborhoods that were once communities of responsible homeowners, from becoming rental communities where the residents have no personal stake in the up-keep and longevity of the community.
I am sounding the alarm now in hopes that my colleagues in local and state governments, along with other community stakeholders, will join me in seeking solutions to this prevailing problem.
Melvin Burgess is the Shelby County Assessor of Property and former Shelby County Commissioner.