The Affordable Housing Crisis in Memphis:
While the new Hospitality Hub location is welcome news in addressing a critical issue facing too many Memphians, the necessity of this kind of intervention follows a truth that we can all see throughout the city: Quality, affordable housing is becoming so scarce that it has turned into a full-blown crisis. One recent estimate puts Memphis in a deficit of 39,000 quality, affordable housing units. In other words, 39,000 units are needed to meet the demands of the growing population, though only about 1,000 units are being built each year. The number of new housing developments for Memphis has yet to recover from the 2008 recession, with today’s rate of new builds still considerably below pre-2008 rates. Today, only nine percent of households in Memphis live in units built in 2000 or later.
The urgency for quality, affordable housing in Memphis is further underscored by the aging housing stock. While the age of a home may not always reflect the condition of the unit, older homes require more substantial maintenance and attention to meet quality and health standards today, such as lead abatement. Older, deteriorating units are more likely to have indoor toxins, poor insulation, or poor ventilation. Such conditions contribute to moisture and mold build-up, triggering asthma and other respiratory or cognitive disorders. Asthma and other chronic illnesses can further increase absenteeism rates among children, and poor-quality housing is associated with lower kindergarten readiness.
Even when quality homes are available, it is very often the case that out-of-state investors, who are able to pay for a home in cash and close quickly, dominate the market. For many prospective homebuyers—especially low-income families or first-time homebuyers—a mortgage is essential for homeownership. Out-of-state investors (also called institutional investors) further strain the availability of affordable housing from local, would-be first time homebuyers who cannot compete with cash offers.
Following the pandemic, the market has seen a drastic increase in the number of homes purchased in bulk by these institutional investors and out-state landlords, particularly for single-family unit purchases. By 2021, investors purchased 15% of single-family homes in 40 major metropolitan areas. These investors strategically target single-family units throughout the Southeastern U.S. due to the affordability of units, the more lenient housing codes, and market value trends, making building and purchasing homes in bulk easier than in states outside of the Sunbelt. Fewer policies around landlord compliance for maintaining rental units further draw in institutional investors to purchase these homes.
Out-of-state investor trends are no stranger to Memphis and Shelby County. The pre-existing shortage, exacerbated by increased demand during the Covid-19 pandemic, caused a dramatic decrease in housing availability. In the wake of the 2008 recession, the homeownership rate in Memphis declined from 80.3% to 46% by 2019. Black and brown families experienced the most pronounced decline in homeownership rates. In 2005, 73% of Black households in Memphis owned a home compared to 84% of white households. By 2015-2019, the percentage of Black households that owned a home had dropped to 39%, while the percentage of white households that owned a home had decreased to 65%. In more recent years, following the pandemic, institutional investors accounted for almost 25% of property purchases in Memphis in 2020, compared to the U.S. rate of 6.2%.
