Rental affordability is not, despite appearances, a national problem. It’s two separate problems — one with rent, and one with income — that look like one. Solving the former without addressing the latter would make America more unequal, not less…
I ran across this passage in a recent article by Slate staff writer Henry Grabar. For the uninitiated, Slate is an online magazine owned by the Washington Post, and happens to be my personal go-to website for news and opinion on politics and government, current affairs, and arts and culture.
(By the way, if you’re so inclined, Slate also runs a nifty weekly news quiz that generally serves to remind me how much I miss in our nation and the world while fulfilling my personal and professional obligation to keep up with the goings-on right here in our little corner of it.)
Grabar’s piece, published on June 20, concerned what he termed the ongoing “rent crisis” in America. It was wide-ranging and thought-provoking, providing historical context for the current situation. Grabar critiqued both conservative and liberal orthodoxy relative to issues like income, rent subsidies, federal urban policies and politics, and the inherent fallacy of treating rental affordability as a “national” problem as opposed to working at the local level to tailor workable and effective solutions. “The battle, as ever,” he concluded, “is between two largely opposed aims: helping people get out of struggling places and helping those places succeed.”
As these things tend to do — an occupational hazard, given the obligation I referenced above — the Slate article got me wondering about our situation in Birmingham. After all, we’re in a period in which a raft of new apartments, lofts, and condominiums seems to be announced or come on the market every other week or so.
Of course, this feverish activity is mostly confined to downtown and Southside. Together, those areas account for roughly 75 percent of apartments currently under construction in the seven-county metro area, according to a comprehensive housing market analysis issued in May by the U.S. Department of Housing and Urban Development.
On the face of it, the HUD report offered generally good news for Birmingham relative to rental housing. In the city of Birmingham, the report stated, demand for rentals “is increasing…because migration into the city has returned” over the past few years. “Much of that demand is being met by new apartment construction,” added the report, which also projected “increasing net in-migration” to the city over the next several years.
All of which is well and good enough — on the face of it. But there are several underlying issues that the HUD report did not take into account (nor, to be fair, should it necessarily have been expected to do so).
Start with the good news about population growth. As the HUD report alludes, Birmingham has gained population over the past few years for the first time in decades, going from 211,302 in 2012, to 212,157 in 2016 — though, as a recent AL.com story pointed out, the latter figure actually represents a decline of 80 residents from the prior year, so maybe we shouldn’t be popping our buttons over it just yet. (Mayor William Bell’s office has cited the increase of 855 people over four years as evidence of a “renaissance” in Birmingham, which is roughly equivalent to saying that having a pulse is evidence of one’s ability to be a professional athlete.)
No matter how you slice (or attempt to spin) it, Birmingham’s 0.4-percent growth rate since 2012 pales in comparison to those of leading regional growth centers like Austin (9.5 percent), Charlotte (8.7 percent) and Jacksonville (5.2 percent). I suppose we can take some consolation that another regional “competitor” — I use that term loosely, since Birmingham these days tends to be viewed as a second- or third-tier city, rather than among the regional leaders of anything (other than poverty, which we’ll get to momentarily) — the city of Memphis, which actually has lost 1.1 percent of its population since 2012.
This focus on population growth in the abstract — and Birmingham’s status as (let’s be charitable) a second-tier city — touches on another point in Grabar’s Slate article. “American migration is not a zero-sum game,” he wrote, “but in the fight against brain drain and population loss, one advantage second-tier cities and small towns have is their cheap housing stock.”
Let’s consider that. According to the online housing search engine Rent Jungle, as of May 2017, average apartment rent in Birmingham was $1,016. As you’d probably expect, that’s lower than Austin ($1,423), Charlotte ($1,341), and Jacksonville ($1,057), though higher than the $910 the average renter pays in Memphis. The problem, at least potentially, is the comparative rate at which rental rates are rising in Birmingham and those other communities.
Over the past five years, the average rental rate in Birmingham has increased by 28.3 percent. Over the same period, increases have been appreciably more modest in Austin (22.3 percent), Jacksonville (19.4 percent), and Memphis (21.7 percent).
Only in Charlotte have rents risen more precipitously (35.9 percent) than in Birmingham, though a couple of good reasons for that come to mind: First, the overall cost of living in Charlotte is 34 percent higher than that in Birmingham, which is roughly equivalent to the difference in rental costs. Second, according to HUD figures, Charlotte’s apartment vacancy rate of 5.2 percent is less than half of Birmingham’s 10.9 percent.
With regard to cost of living, explaining the steep rise in Birmingham rents becomes more problematic when you consider that the other cities, too, cost more — especially Austin, where the cost of living is a whopping 61 percent higher than in Birmingham. Meanwhile, living costs are 27 percent higher in Jacksonville, and just under 2 percent higher in Memphis. To Grabar’s point, there is certainly cheap housing to be had in Birmingham — in many more neighborhoods than not — but statistics show that, in terms of the overall picture, as a tool in the “fight against brain drain and population loss,” housing in this particular second-tier city is not cheap.
Getting back to the list of cities we’re referencing in this particular exercise, besides comparatively low costs of living and undeniably sluggish (again, being charitable) rates of population growth, Birmingham and Memphis have something else in common: High rates of poverty.
Here again, Birmingham is the “winner,” with 30.9 percent of our citizens living in poverty, according to the U.S. Census Bureau, compared to 27.6 percent in Memphis. Compare that to Austin, Charlotte, and Jacksonville, where the figures are, respectively, 18.0 percent, 16.8 percent, and 17.7 percent.
Now, believe it or not, there are readers of this publication who have expressed frustration over the frequency with which I bring up the number of poor people in Birmingham, and the galling proportion of the total population of our city they account for. While my standard answer to that objection — a cordial invitation to the objector to apply their lips to the rearward portion of my anatomy, or else spend some time consulting the Scriptures — holds here as well, I do feel obliged to tie it in directly to the issue of rent.
To that end, I’ll refer one last time to the recent Slate article on our nation’s rent crisis, in which Grabar wrote the following:
The crisis is not confined to the American poor. Americans of all incomes have flooded the rental market, leaving the rental vacancy rate at a three-decade low and the homeownership rate at a five-decade low. Rents continue to rise faster than inflation. More than 11 million households pay half their income in rent; nearly have of all tenant households pay more than 30 percent of income in rent, the standard mark of affordability.
With that last bit especially in mind, let’s engage in a little extrapolation to work our way toward an answer to the question, How affordable is rent in Birmingham?
At present, the median household income in Birmingham is $31,061. While this is not directly reflective of the income of the “average” renter in the city — which may be somewhat higher or lower (probably lower) — it does provide some basis for addressing the question at hand. Dividing Birmingham’s current annualized average rent by its median household income, we find that the average renter in Birmingham pays something like 39.3 percent of his or her — or, since we’re using household income as the standard, their — total income for housing. Considerably more, in other words, than the 30 percent that is “the standard mark of affordability.”
How does that compare to other cities? Using the same standard, both Charlotte and Memphis are at the edge of affordability, each coming in at exactly 30 percent. Austin is at 29.6 percent, Jacksonville at 27.1. All, in other words, are substantially more affordable for renters than Birmingham.
This — and the other observations and figures I’ve cited here — suggests a number of things about our local residential real estate market, the least sinister of which is that Birmingham is in for a significant market correction at some point. Actually, we’d better be, and sooner rather than later. Otherwise, our uphill battle for new jobs (which we’re currently not attracting in anything near sufficient numbers), sustainable growth (the jury’s out), and a stronger competitive position against other cities is only going to get harder.
I’m not trying to be alarmist here. I’m not downplaying indicators of positive growth and progress, and I’m not (necessarily) saying anything negative about the priorities of our real estate and development communities.
I’m just sounding a cautionary note about the path we seem to be on at present, and about the apparent lack of concern from both the public and private sectors about the impact of income inequity and unsustainably high rental rates on Birmingham’s long-term prospects. If we don’t do something to strategically address those and other pressing issues that affect the majority of Birmingham’s population, that hill we’re trying to climb is only going to get steeper.