Nashville has enjoyed some of the country’s fastest job growth for several years as healthcare and tech startups have made the city home. Unsurprisingly, this economic boom has coincided with a large increase in population, greater demand for real estate, and rising house prices. But Nashville’s policy environment has moderated price increases relative to what many in-demand cities have experienced. Nashville policy has made it possible for housing developers to build both up and out in response to this new demand. However, an expansion of historic preservation efforts that have so far failed to prevent demographic change could stall the new housing supply that has maintained the city’s relative affordability. Nashville’s experience offers three lessons for other cities:
1. Legalize Housing and It Will Be Built
Since 2010 the Nashville Metropolitan Statistical Area has grown by more than 400,000 residents, or 20 percent. Davidson County, home to Nashville at the center of the region, has grown by nearly 65,000 people, or 10 percent.
Like other Southern cities, its easy to build new suburban housing in the Nashville region, and most of this population growth has been accommodated by building out. What’s unusual is that Nashville is also accommodating significant infill.
In 2010 the city enacted a downtown rezoning. It eliminated parking requirements and increased by-right height limits. The new code is essentially a form-based code. Nearly all uses except for industrial are allowed in the center city. Dozens of new office, hotel, and residential towers have delivered since the new code was implemented, and many more are under construction. Since the new code has been in place, population in the two census tracts affected by upzoning has grown from about 7,500 to about 10,000.
Forthcoming research from my colleague Salim Furth shows that Nashville’s recent low-density growth has been comparable to what we’d expect to see in other cities if they experienced Nashville’s demand, but that the growth in its few high-density Census tracts has been exceptionally high.
Unlike coastal regions where increasing demand has resulted in higher prices without much new supply, the Nashville region has allowed construction. The chart below shows each year’s change in population and housing supply since 2008.
Source: Census Bureau
2. New Housing Supply Can Moderate Price Spikes
Even with rapid construction, Nashville house prices have risen in response to higher demand. But price changes have varied across price levels. In addition to providing data on median house prices over time, Zillow breaks down the median house price for the least expensive one-third of houses and the median for the most expensive one-third. The chart below shows that the price jump has been largest for Nashville’s more expensive homes (likely including a large portion of its new construction), and more moderate for less expensive ones.
The price effects of new demand and new construction have, of course, affected neighborhoods unevenly. While some historically affordable neighborhoods have seen large price jumps, others remain accessible to a wide range of household incomes. The chart below shows how prices have changed since 2010 for the six neighborhoods that had the lowest median rental rates in 2010.
In 2010 the median apartment in both Heron Walk and Rosebank went for below $900 per month. Today, the median for Rosebank has risen to just over $1,500 (more than a 50 percent increase), compared to a median rent of just over $1,100 for Heron Walk.
3. Historic Preservation Cannot Prevent Change
Nashville’s rapid growth has come with costs. Some homeowners with strong community ties resent redevelopment, even if they receive a financial windfall in the process. Gentrification has led to calls for development constraints, even though more regulation would likely lead to higher prices and accelerated demographic change in the face of rising demand.
Local activists are arguing for historic preservation to save the city’s music history. But the city’s own experience shows that preservation rules cannot prevent places from changing. Nashville’s honky-tonks on Lower Broadway are covered by not one, but two historic overlays. While regulation has prevented the two-block stretch from changing physically, its nightlife is now dominated by tourists and bachelorette parties, rather than locals. It’s a struggle to find singer-songwriters playing their own music there, and it’s easy to see why long-time residents are nostalgic for what the neighborhood used to be.
In an effort to prevent a similar loss in Music Row west of downtown, city planners placed a freeze on any development there for two years. The development ban has been lifted, but preservationists are now lobbying for dozens of neighborhood buildings to be placed on the National Register of Historic Places.
Land use regulation can prevent buildings from being demolished and can even mandate that their use stays consistent over time. But they can’t keep people in place. While there’s no way to legislate that great music will continue to come out of Music Row, the best way to make Nashville a good place for up and coming artists is to allow for new housing construction that will allow affordable neighborhoods to stay that way.
Some analysts foresee a slow-down in Nashville’s population growth and housing demand. Meanwhile, many more new developments are already under construction. If demand stops rising, this future housing stock will benefit renters, hopefully including some guitar players, with lower future prices.
So far, Nashville’s response to population growth has allowed the city to maintain a stock of relatively affordable housing while accommodating rapid population and job growth. If policymakers respond to the growth backlash by creating obstacles to new development, future demand increases will cause higher prices for both current residents and newcomers.