Could Memphis’ Zodiac development be sign of starter homes return?
This article was written and originally published by Daily Memphian.
The new-build starter home is mounting a comeback in clusters as Memphis grapples with a shortage of quality affordable housing.
“Since the 2008 housing crisis, starter homes have nearly vanished in our market,” Memphis Mayor Paul Young said Thursday, Aug. 21, as he cut the ribbon on a set of 10 new homes in an Oakhaven subdivision known as Whitehaven Hills. “Families who could once afford to buy a home are now being priced out.”
Nine of the homes in what is called the “Zodiac project” — because of its proximity to Zodiac Park — are four-bedrooms with two bathrooms. The 10th is a three-bedroom, two-bathroom property.
Each of the homes is valued at approximately $200,000 by United Housing, the nonprofit leading the development. United Housing is also part of a growing citywide response to the shortage.
Amy Schaftlein, executive director of United Housing, says there isn’t enough quality affordable housing in Memphis, the difference in where families have to live versus where they can choose to put down roots.
“I feel that if you are a first-time homebuyer, you need a very durable, energy-efficient, well-run home so that you can maintain it better over time,” she said. “Too often people would make affordable housing affordably, and then you would have issues longer term. I wanted to make sure that we’re constructing homes with great materials; brick is durable.”
Young notes a link between the more durable houses and the communities the city is incentivizing developers to build in.
“When I talk about growth, I mean activating vacant lots. I mean taking dormant structures and occupying them with families,” he said. “It’s not growth just for the sake of growth. It’s growth for the benefit of the residents of our city.”
Meanwhile, Schaftlein said families looking for quality affordable housing are finding it more readily south of the Tennessee state line as investors within the city have bought up affordable housing to convert single-family homes into rentals.
”We have to change that. Like many neighborhoods, they haven’t seen a new starter home in over 40 years,” Schaftlein said about the setting for the 10 homes. “It’s time. … Let’s stop giving our families to DeSoto and other counties. Let’s keep them here.”
The public agencies, nonprofit leaders, lenders and other developers involved in the development of affordable housing define a homeowner qualified for the financing and subsidies as someone whose household makes 60% or lower of the area’s annual median income of approximately $51,000.
The income standard comes with incentives like down payment assistance and other measures designed to bridge what’s called the appraisal gap, or the space between the cost of building the houses and their lower appraised value due to their location.
That gap is something clusters of homes — like the ones in Whitehaven Hills — could erase in time as builders seek to define affordable housing by homeowner income, not construction quality.
“In order to construct a home like this, we are going to have an appraisal gap. It’s going to cost more than what we have it appraised for,” Schaftlein said after the ribbon cutting. “I think over time as we continue to invest in infill development, you will see a more gradual increase in property value. That will help close the gap in many neighborhoods. It’s going to take longer in some neighborhoods and quicker in others.”
Young said the “broader strategy” is about rebuilding neighborhoods that have some measure of blight and even gaps of vacant lots where starter homes of past generations once stood. That comes with city funding for public infrastructure in areas that have been disinvested and neglected for decades.
“We want to have enough properties aggregated together where you are changing the perception of the neighborhood, both for residents and potential investors,” he said. “We want to change the perception such that neighborhoods that may have seen disinvestment for many years are now seeing opportunities for growth.”
‘When are they going to be available?’
The new homes at Whitehaven Hills are four miles south of the site of the blighted Somerset Apartments, which the city began clearing this past May.
The city is months away from seeking development proposals for the Somerset site. That could be new rental units, houses for sale or a combination of both. Some of those involved in the affordable housing movement say that combination is the more realistic, shorter-term answer.
The owners of the 30-acre Somerset complex (a series of limited liability corporations with addresses in Memphis, Delaware and California) gave it to the city after 15 years of abandonment during which the city pursued legal action against them for city-code violations. Young’s administration has stepped up those efforts as well.
The 10 homes sites bordering Zodiac Park were vacant lots in the Memphis Metropolitan Land Bank Authority.
United acquired them with a grant from the Tennessee Housing Development Authority to Convergence, a subsidiary of United that works specifically on predevelopment items like putting parcels together for sets of homes.
The process leading up to construction took about a year and half, Schaftlein said, with active construction lasting about three months.
“As soon as we started building, we were getting calls about, ‘When are they going to be available? Are they for sale? Are they for rent?’” Schaftlein said. “We’re using federal money, so there is an income limit. There are other limits on who can buy. It lowers the pool, but there are so many people in that income pool that benefit from this project.”
Trustmark Bank is a partner in the mortgage financing, which Schaftlein estimates is about $2 million for the set of 10 homes. Trustmark also worked with United in the Wolf River Bluffs development of 34 new homes in Frayer that debuted in 2022.