Affordable housing is critical to Charlotte’s future. I thank the City Council for bringing the topic to the front of the community agenda. The question is how we accomplish this goal.
Charlotte finds itself in a fortunate and rare position of being one of the fastest-growing apartment markets in the world. As anyone who has taken Economics 101 knows, increased supply lowers prices, while reduced supply raises prices. Our supply over the past three years has grown at an unprecedented rate, which has helped keep our rents from growing even faster. Most apartment developers are striving to make their units as affordable as possible because that is how they secure market share.
Affordability starts with our existing inventory of housing, and public policy that supports this inventory, so we don’t risk losing it. According to CoStar Group, Charlotte has 86,610 apartments that can be rented for less than $1,000 a month. The primary method to achieve affordability is efficiency at every level. Preserving our current stock of apartments and making those homes as efficient as possible could include incentives for energy savings or other ideas to reduce living costs for residents. It should not include proposals such as one in the current city budget that would raise the solid waste fee on apartments. Apartment dwellers create a fraction of the garbage that single-family homes generate. In addition, collecting a single dumpster for 200 apartments is significantly more efficient than picking up 200 individual garbage cans. A $50 solid waste tax wipes out $106 million in value, which is a $833 reduction for each of Charlotte’s 128,000 apartment homes using a 6% capitalization rate, a standard measurement of value. While the impact is less than ½ of 1% for luxury apartments valued at $200,000 per unit, it is a greater than 4% reduction in value for a $20,000 apartment home, pushing those communities closer to the wrecking ball.
A public policy that does make sense is asking everyone involved in the housing process what they are doing to support affordable housing. In our latest Link Apartments Brookstown in Winston-Salem, more than 35 percent of residents work at the neighboring hospital and more than 15 percent are teachers or others involved in education. We are seeking a similar demographic mix with our newest planned community, Link Apartments Montford off Park Road, but we have found that the costs of land, labor and other regulations in Charlotte will result in our costs being 40 percent higher than what we recently spent in Winston-Salem.
We need to change to a process that looks at the issue more holistically. Let’s work together to make Charlotte a world leader in coming up with novel solutions to advance the economic mobility of all of our citizens.
Clay Grubb is CEO of Grubb Properties, a Charlotte-based real estate investment company.