December 23, 2019 10:00 AM
This week’s Courier Herald column:
The top line statistics tell us things are good. Last week, Georgia’s unemployment rate hit a
record low. Georgia has more people
working than ever before.
The state’s economic success continues to attract new
residents and new employers alike. About
100,000 new people are calling Georgia home every year, adding nearly one
million to the state’s population in the last decade.
A decade ago, Georgia was awash in excess housing supply in
the aftermath of the housing bubble bursting.
There were dire predictions that some developed lots would never be
built upon. Some wondered if the real
estate market would ever come back and if buyers would ever see housing as a
sound investment again.
New supply of single family housing has been slow to return
to the market. Some areas, particularly
in Atlanta and its northern suburbs and along coastal Georgia have returned to
the boom days of real estate. It should
be noted, however, that these areas contain much of the state’s higher priced
Other areas of the state have not yet seen a return to
single housing construction. Georgia
lost 25% of its banks in the aftermath of the housing collapse and big-bank
bailouts. These were often the source of
smaller homebuilders’ loans for construction.
A decade later, things have changed. Demand for housing is there, but the market
has many challenges in matching supply to that demand. State leaders are starting to focus on the
reality that a lack of housing supply – particularly in the entry level price
points – is a barrier to the state’s economic and employment expansion.
The Georgia House spent much of the summer and fall looking
at the issue of housing affordability and supply. A study committee chaired by Representative
Vance Smith of Pine Mountain heard expert testimony from economists, realtors, bankers,
and those in the construction industry on the challenges of delivering more
Workforce housing issues are generally discussed in terms of
metro areas, where gentrification and a shift toward living close to work have
dramatically bid up property values and rental rates in big cities. The working poor, usually renters, have great
difficulty finding housing within their budget and often lose the housing they
may have had due to rising rents or redevelopment of their property.
Housing affordability has a uniquely rural component as
well. Unlike Georgia’s growing metro
areas, much of the rural areas of the state are not seeing any significant
construction outside of student apartments in college towns.
Those making decisions to build new factories or other
employment centers often start with the question “where will our employees live?”. Too many Georgia communities that would
otherwise have the land and other resources employers are looking for don’t
have an answer to that question.
Realtor Frank Norton Jr of Gainesville testified to Smith’s
study committee that the state is currently lacking at least 300,000 housing
units needed to supply workforce housing needs.
Compounding the problem is that the state is producing housing at the
same levels as the 1970’s, while demand is increasing in numbers the state has
never experienced. The result is that
prices have almost doubled since 2011, which compounds the problem for those at
the entry level of the market.
Some solutions will focus on the side of regulation, where
design standards and extraneous additions to building codes are pushing up
development and construction costs with little actual benefit to the housing
structure. A battle is brewing between
state leaders that see the barrier of affordable housing as limiting economic
growth, and local leaders that are implementing design standards to inflate
property values while practicing exclusionary zoning.
Other solutions will include focusing on mortgage
underwriting standards. Because of historically
low mortgage rates, many buyers could actually pay less on a mortgage than they
pay in rent. Entry level buyers often
still exceed total debt ratios needed for mortgage qualification, even though
they would be improving their household cash flow moving from renting to
Legislators will spend the next couple of weeks at home for
the holidays. When they reconvene in
Atlanta in January, expect a renewed focus on policies that help or hurt the
ability for working Georgians to own their own homes.