In Music City, Rents Keep Going Up And Up
RENEE MONTAGNE, HOST:
Rents are rising all over the U.S., putting the squeeze on many Americans who are finding that their salaries aren't keeping up. We'll take a look at the economics behind soaring rents in a moment. But first, let's go to Nashville, Tenn., to get a look at a white-hot market. Downtown is chockablock with construction on new apartments. Some 10,000 units are being created or are in buildings that will soon break ground. As Emily Siner, of member station WPLN reports, almost all of that is for new luxury buildings.
EMILY SINER, BYLINE: Austin Fabel is standing on his balcony with a scenic view of construction.
AUSTIN FABEL: Let's see - let's count them. We've got one, two, three, four, five, six, seven, eight cranes visible from the balcony.
SINER: Fabel is an insurance broker. He's 26, and when he was growing up in Nashville, this neighborhood near downtown, called the Gulch, was a rundown industrial area.
FABEL: I would never come down to the Gulch. I don't think my parents would really want me driving around the Gulch at the age of 16.
SINER: Now Fabel and his girlfriend pay $1,800 for a one-bedroom apartment here, which is almost double the average monthly rent in Nashville, and, he says, pushing the limits of what he can afford. But he thinks it's worth it for the tall ceilings, stainless steel appliances...
FABEL: Washer and dryer, like, industrial-grade, brand new.
SINER: There's a courtyard with a fountain, free coffee, communal grills, and the real selling point - a rooftop deck with a downtown view.
FABEL: When you Google Nashville skyline, you know, this is what you see, like, the Regions building, the Batman building, the Pinnacle building.
SINER: Apartments filled with luxury amenities are becoming the standard in this part of town. Young professionals like Fabel, they're the target customer.
ANDREW STEFFENS: Nashville, over the past five to 10 years, has become a very popular place for young, educated entrepreneurs, young, educated businesspeople.
SINER: Andrew Steffens runs Alliance Residential Company's office in Nashville, where it's developing two luxury apartment buildings. Here's the equation from a developers point of view - interest rates are low right now, so it's cheap to borrow money. At the same time, land in the urban core is getting more expensive.
STEFFENS: Which means then you have to build a taller building, which costs more and investors and developers are looking for a certain return on cost. Otherwise, the building doesn't get built and the deal never happens.
SINER: So they charge higher rent. At that price point, Steffens says, renters expect amenities. There certainly still is demand for cheaper apartments in the urban core. But Jim Fraser, a Vanderbilt University professor who studies affordable housing, says there's no incentive for developers to build them.
JIM FRASER: Developers are going to try to make the greatest profit, and right now the housing market in Nashville is very hot. And they can make very high levels of rent.
SINER: The problem, he says, is that rent prices in Nashville are increasing faster than wages. According to one recent report, only 11 percent of units downtown are deemed affordable.
FRASER: Some of the people that live here aren't able to afford, again, to live in the urban core because they're being priced out.
SINER: Classic gentrification, which is happening in a lot of cities, Fraser says. But usually it spreads one neighborhood at a time - not so in Nashville.
FRASER: Almost every neighborhood in the city at the same time is being gentrified, which is really an odd phenomenon. We haven't seen this in any other city across the country at this level at this rate.
SINER: Tyler Nelson has experienced this firsthand. Last year, he and his wife moved into a two-bedroom apartment. They paid just under a thousand dollars a month and it felt like a steal. Then, he says...
TYLER NELSON: My wife decided to go back to school, and we knew, since we were going down to one paycheck, it would be tough to afford rent.
SINER: And they couldn't afford rent even in surrounding neighborhoods, so instead they bought a foreclosed house nearby. Nelson says they got lucky.
NELSON: A lot of our friends have had to move further out.
SINER: There is some effort to address the cost of living. The city may require developers to build a certain percentage of affordable units. But right now almost every apartment downtown is occupied. As long as people keep moving in to luxury rentals, the boom won't likely slow anytime soon, and that means prices will continue to rise. For NPR News, I'm Emily Siner in Nashville. Transcript provided by NPR, Copyright NPR.