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Memphis needs affordable housing. But it’s gotten harder to build

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Memphis needs affordable housing. But it’s gotten harder to build

Jun 12, 2024 | 6:01 am ET
By Jacob Steimer, MLK50: Justice Through Journalism”
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Memphis needs affordable housing. But it’s gotten harder to build
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The public notice sign associated to Pastor Clifford Causey’s housing development, weathered by the years passed since its posting, is planted at the edge of the overgrown field near the land. Photo by Andrea Morales for MLK50.

This article is republished from MLK50: Justice Through Journalism. The article was first published on June 5, 2024. Check out MLK50’s work here.

Pastor Clifford Causey says he was stirred by the Spirit to take a late-night drive through Parkway Village back in 2018.

On it, he saw a faded for-sale sign sitting in the brush of a vacant property across from his small church on Mt. Moriah Road Extd. He called the number on the sign to express his interest despite his lack of funds. A few months later, the owner called back to offer him the land for free.

At first, he wasn’t quite sure what he’d do with the 8-acre property, but within a year the housing needs of his congregants captured his attention. He became convinced he was supposed to construct affordable senior housing. And in 2021 he decided to partner with a California-based firm to do so.

He had no idea how complicated of a task he was undertaking. In his favor, he had free land and didn’t need to make a profit. But his timing was terrible.

Although developing affordable housing was not easy before 2020, it has become much more difficult in the years since. The costs of borrowing money, hiring laborers and obtaining construction materials have all increased dramatically. Companies with decades of expertise have had to become more creative and develop fewer apartments.

As of mid-May, Causey and his California partners still sit millions of dollars short of being able to bring their project to reality. They’ll need multiple large grants or a major shift in market conditions. Causey, though, remains quite confident.

“The numbers … sometimes are not there. (But) you still have to hold on to what you believe,” Causey said. “At the end of the day, somehow, some way … this is going to happen. I believe that in my core and with every fiber in my being.”

The good news, then the bad news

Guinevere Floyd, 67, has been driving commercial vehicles for 24 years.

She’s currently paid to drive a van around town, transporting people to and from medical appointments. Floyd, who attends Causey’s church, loves the job. But it only pays $14.50 an hour.

At that rate, Floyd can only afford to pay about $840 a month on rent and utilities before being considered “cost burdened” by the U.S. Department of Housing and Urban Development. When she’s looked at rentals in her price range, she hasn’t found anything decent.

Currently, Floyd pays $435 per month for an apartment on Kerr Avenue in South Memphis. The new owners have been slow to fix her refrigerator and water heater. And the police have been frequent visitors to the complex in recent years.

Floyd’s predicament is part of what inspired Causey to attempt to build housing.

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Pastor Clifford Causey stands for a portrait near the property. Photo by Andrea Morales for MLK50.

“If I could pick her up and move her today, I would,” Causey said.

The housing picture has been getting brighter in the past few years for most Shelby County residents in their working prime.

After local rental rates skyrocketed in 2020 and 2021, they’ve stayed steady since. Meanwhile, local wages have consistently marched upward since 2020, allowing more county residents to afford decent rentals

According to the Census Bureau, the county’s median income increased from about $52,000 to about $60,000 — a 14% jump — from 2020 to 2022, the most recent year the bureau has measured. Most of this increase has come from lower-wage jobs, allowing the county’s share of residents earning less than $35,000 per year to drop from 35% to 30%.

Yet, based on HUD data, the City of Memphis estimates it still lacks about 44,000 rentals for Memphians who qualify as “extremely low income” — an income of about $17,000 per year for a one-person household or about $24,000 for a four-person household.

Allison Donald, an independent living specialist with Disability Connection Midsouth, said she hears from seniors in Floyd’s position every day. Donald said the city’s current housing landscape is particularly tough for seniors and for Memphians living with a disability. Both groups have few opportunities to increase their income and need accommodations — such as ramps, wide doors or bathtub bars — that few rentals have.

“Accessible low-income housing is almost nonexistent,” Donald said.

For what does exist, waiting lists are at least a year long, she said.

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Harder to build

The primary challenge of developing affordable housing is that it’s not particularly profitable.

From a financial perspective, it’s usually more lucrative — and less risky — to develop housing for middle or upper-class families. The construction costs for a luxury apartment complex and an affordable one are similar, but the eventual rental rates are vastly different.

“(Affordable apartments) are just not money makers,” said Andrew Murray, president of the City of Memphis and Shelby County Community Redevelopment Agency.

This reality poses a problem even to nonprofits and churches that try to build housing without needing to profit from it. This is because they almost always need to work with for-profit firms and banks to get it done, and those institutions do care about profitability.

When the costs of building an apartment complex far exceed the value of the affordable rental rates that will be charged there, the project can’t come to fruition without significant government subsidies.

Federal, state and local governments have various programs to help, ranging from tax credits to grants. But these programs were designed when development was less expensive than it is today.

In the years since the pandemic, the costs of development have soared.

The Bureau of Labor Statistics estimates the hard costs of building apartments — not counting labor, insurance or the interest on a loan — have increased by more than 35% since the start of 2020, while interest rates have roughly doubled.

“Rising costs and less access to (loans) really met in the middle to make it harder for projects to be financially feasible,” said Thomas Robinson, the vice president of development for Alco Management. “It doesn’t make it impossible. It just makes the path to success a little bit more narrow.”

With rising costs, Tennessee Housing Development Agency executive director Ralph Perrey said his agency has realized its traditional methods for supporting affordable development are often no longer enough. To bridge some of this gap, his agency has increased the amount of tax credits it gives individual projects — meaning it can’t fund as many projects. It also has recently started offering “supplemental” tax-exempt bonds to developments it had already provided tax-exempt bonds to, and it’s allowed developers to shrink their plans while keeping their incentives.

“We have done a lot of very creative things to fill the gaps for our partners,” Perrey said. “We want to do everything we legitimately can to help (developers) get projects over the finish line.”

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Guinevere Floyd stands for a portrait outside her church. Photo by Andrea Morales for MLK50.

Alco’s ongoing redevelopment of the Greenbriar Apartments in Frayser has required this type of “extra push” from government backers and taken the company much longer than normal to reach the construction phase, Robinson said.

In this environment, Alco has had to be more selective about the projects it takes on, Robinson said.

Ultimately, inflation is limiting the number of quality, affordable apartments in Memphis.

What can be done?

Covenant Gardens Senior Apartments will include a fitness facility, reading rooms, an outdoor community garden and balconies facing a scenic golf course, if Causey can bring it to fruition.

Across two phases, the project would eventually include 203 senior apartments. To complete the whole thing, Causey said the team is about $8 million short, even after securing approval for an $8 million federal grant and a THDA tax-exempt bond.

Causey and his partners have requested additional federal and state funding, as well as cash from the city’s Affordable Housing Trust Fund and a tax incentive from the city’s Health, Educational and Housing Facilities Board, known as the Health and Ed Board.

The city created the trust fund in 2019 and has placed almost $15 million into it in the years since. It has used this money to subsidize developments including Edgeview at Legends Park, the redevelopment of Northside High School, Alpha Omega Veterans Services’ new apartments on Jackson Avenue and numerous smaller projects, leaving about $1.7 million sitting in it as of late May.

In Memphis Mayor Paul Young’s proposed 2025 budget, he asked City Council to approve an additional $5 million for the trust fund. Ashley Cash, the director of the city’s Division of Housing and Community Development, said the fund rose to the top of her budget priorities because of the city’s immense need for affordable housing and how free of red tape the program is, compared to the city’s federally funded programs.

“The city has a responsibility to make sure that we’re providing affordable housing opportunities for our most vulnerable populations,” Cash said. “A lot of the developers that have used the (trust fund) have remarked on their ability to be able to get their projects done because of (it).”

Cash’s goal is to eventually find a dedicated income source for the fund, so that developers can count on the money being there years ahead of time. She pointed to the Metropolitan Government of Nashville & Davidson County’s trust fund, which awarded more than $15 million to projects in spring 2021 and 2022, as a gold standard she’d like to eventually meet.

Andrew Murray, president of the City of Memphis and Shelby County Community Redevelopment Agency, said bankrolling the trust fund at a higher level — preferably at least $10 million per year — is one of the most important things the city could do to help create more affordable housing.

Along with the trust fund, he’d like to see the city help by developing a low-cost loan program, waiving some of MLGW’s development fees for such projects and zoning more property for multifamily housing.

Robinson said additional trust fund dollars will certainly help. But mostly, he has his eyes on the federal Affordable Housing Credit Improvement Act, which would increase the largest federal subsidy for low-income housing by 50%.

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Tanjular Perry stands for a portrait near her apartment. Photo by Andrea Morales for MLK50.

Tanjular’s story

More than anything, Tanjular Perry wants a new apartment. But there’s nowhere to go.

Two years ago, someone broke into the 61-year-old’s home and stole her television and furniture, leaving her living room completely empty. It was the fourth burglary in the 13 years she’s lived in the run-down complex at the corner of Tillman Street and Jackson Avenue.

Since then, Perry has spent most of her time living in a friend’s apartment since she doesn’t feel safe in her own.

While finding affordable apartments is difficult for most low-income Memphians, it’s been particularly tricky for Perry. She currently lives off of her SNAP benefits, with no actual income. Her current apartment is subsidized through the project-based voucher program. Unlike with the more common housing choice voucher, it’s difficult to switch locations when relying on a PBV, since the subsidy is tied to the property. Without income, she’ll probably have to find an open spot in another PBV property, which is even more difficult.

But more than 50 of the 103 units in Causey’s first phase would be PBV-subsidized, meaning it’s possible Perry could land a spot in one — though she’ll certainly have plenty of competition.

Perry said a nice, new apartment with older neighbors she doesn’t have to fear would be ideal. Though she has spent her entire life in northern Memphis, she’d gladly move anywhere in the county for such a place.

“Oh Lord, I’d be the happiest thing on earth,” she said.

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Jacob Steimer is a corps member with Report for America, a national service program that places journalists in local newsrooms. Email him at [email protected]