Nearly half of Memphis renters are 'cost burdened'

Nearly half of all Memphis renters are "cost burdened,'' meaning they spend more than 35% of their household income on housing.

And compared to the rest of Tennessee, Memphis rent is high and house prices are low.

Yet, Memphis renters are not making the jump to home ownership.

Those are among the findings by the Tennessee Housing Development Agency, whose new research shows Bluff City renters experience above-average money woes.

The agency studied housing in Tennessee's four largest cities — Memphis, Nashville, Chattanooga and Knoxville — comparing them to each other and to the state as a whole.

The median monthly rent in Memphis in 2015 was $828, which was 8.4% more than the $764 statewide average.

Rent high, income low

"The difference is especially significant because Memphis's median income in 2015 was $36,445, which is 19.4% below the state average of $45,219,'' the agency report states.

"Say they are paying 35% of a $1,500 monthly budget on housing,'' THDA research analyst Joe Speer said in an interview. "That's $500 gone. That leaves $1,000 a month for taxes, health care, food, transportation, utilities, child care.''

The problem is even worse for 30% of Memphis renters who pay more than half their income on housing.

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Memphis; Tennessee, USA - November 29, 2011 High angle view of downtown of Memphis, Tennessee. Mississippi River and Pyramid Area on the right, Clock Tower in the foreground. Seen during fall morning.

And even at that, Speer's informal example of a $500 rent payment might be far too low.

Typical rent for housing in healthier neighborhoods — where children don't have to "dodge bullets'' — is $900 to $950, said Priscilla Reed, a lending and home-buyer education manager for the nonprofit organization United Housing.

Many landlords require the monthly income of rental applicants to be at least three times more than the monthly rent.

$12 hourly not enough

"A person who makes $12 an hour cannot rent a home in a nice area,'' Reed said. A third of that person's monthly income would be $693.33.

The city's many warehouse or "distribution center'' jobs often don't pay enough to rent in a healthier neighborhood, she said.

For example, Amazon this week is seeking a local property tax break before it invests $72 million in a new southeast Memphis warehouse that would employ 600 people.

But Amazon's annual average wage of $28,912 would support a maximum monthly rent of $803.11 if landlords require the three-to-one, income-to-rent ratio.

Out-of-town landlords

Reed believes rent rose in Memphis after so many people lost their homes to foreclosure in the Great Recession and needed a place to rent. The shift generated more demand on rental housing.

Rent remains so high here because out-of-town investors pounced on the city's low-priced houses to make money as absentee landlords, she said.

"Neighborhoods that were predominantly homeowners are now predominantly rentals,'' she said. "They jacked prices up on rent. It just hit us really hard in Memphis.''

Surpassing $300 million

The Tennessee Housing Development Agency promotes homeownership by supporting local governments and lenders in making lower cost mortgages as well as providing down-payment assistance to prospective income-eligible home buyers.

For the first time since the Great Recession, the agency this year has reached the $300 million mark in making home loans statewide. "And we still have three more months to go,'' said THDA spokesman Rick Lewis.

$15,000 down payment help

Since March in Shelby County, 255 home buyers have participated in a program that provides $15,000 toward a down payment, Lewis said.

Across Tennessee, THDA has provided more than $19 million in down payment assistance through the $15,000 down-payment assistance program. The agency has a total of $60 million to spend on the program that should last through early 2019, Lewis said.

Last year, the agency awarded $98.9 million in Low Income Housing Tax Credits to private developers to build or renovate six affordable apartment developments in Shelby County. That amount represents 40% of all tax credit allocations in Tennessee. For 2017, the agency anticipates providing $21 million in tax credit allocations to two Shellby County apartment properties, Lewis said.

Anyone interested in information about down-payment assistance can visit GreatChoiceTN.com, or ask their Realtor or lender about the program.

Although 70% of the city's stock of single-family houses was appraised last year for under $100,000 — compared to only 21% of homes in Nashville and about 50% in Chattanooga and Knoxville — homeownership in Memphis dropped 4.5% in 2010-15 compared to a 3% slide statewide.

Tribune Content Agency
Affordable housing Housing markets Down payments Tennessee
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