A tale of two towns: The rise of luxury apartments amid affordable housing efforts

Throughout town, new developments peek out from behind familiar stores and shops.

Apartments such as Greystar Worldwide LLC's Union Chapel Hill, Leon Capital Group's Trilogy and Berkshire Communities LLC's Berkshire Chapel Hill plan to soon join the ranks of Carolina Square, Lark Chapel Hill and Environs Lofts at East 54. In addition, the Town of Chapel Hill recently entered negotiations with the Amity Station LLC Development team over a potential development at the current location of downtown restaurant Breadman’s, in the Northside neighborhood.

As the skeletal frames of future luxury apartments rise across Chapel Hill, some question whether this will leave the town's most vulnerable residents out in the cold.

Extremes on both ends

One thing all of these developments have in common: they’re branded as “luxury,” or Class A, apartments. Carolina Square starts at $1,216 monthly for a studio apartment. Berkshire Chapel Hill costs $1,366 for a single-bedroom apartment, while Union's apartments could haul in $998 per room.

An individual who works 40 hours a week for the state's minimum wage, $7.25 an hour, has a monthly income of $1,160 before taxes. To afford to live at the new Berkshire Apartments, they’d have to spend their entire paycheck every month  — and then some — on rent alone.

The Town suggests that affordable housing should cost no more than 30 percent of a household’s income. The median gross monthly rent in Chapel Hill was around $1,130 as of 2017, according to the most updated available U.S. Census data.

The sky-high prices contribute to a tale of two towns in Chapel Hill. The town's median annual household income was $67,426 as of 2017, which was 27.8 percent higher than that of North Carolina as a whole. 

But extremes on both ends of the spectrum differ greatly from that median number.

While 16 percent of Chapel Hill households earned more than $200,000 per year as of 2017, 20.3 percent of individuals in the town lived at or below the poverty line.

For many, this means that a luxury apartment spot is hopelessly out of reach, said Valerie Lucas, a UNC junior who works with the Community Empowerment Fund as a community engagement coordinator.

Lucas said she'd been meeting with a woman who, because her job pays just above minimum wage, "was sleeping in her car until recently" due to the cost of housing.

“Market-rate for a one-bedroom apartment is $800, $900, $1,000 a month," Lucas said. "That’s so far beyond what low-income folks, and folks on Social Security payments and making close to minimum wage, can afford.”

Residents of The Park at Chapel Hill were asked to vacate their homes last spring, making way for new luxury apartments, according to the News & Observer. Rent for a one-bedroom apartment at The Park was just over half of market rate before the planned redevelopment.

Sophomore biochemistry major Zoe Sessions said that high prices have made it difficult for students to find off-campus housing as well.

“Many people aren’t lucky enough to have scholarships or have someone willing to help them out with paying for their schooling,” said Sessions. “The fact that they continue to allow and promote these big places is really not considerate for those who are trying to find reasonable, normal places.”

'Trickle-down housing'

However, luxury developments may not be all bad, said real estate researcher and UNC finance professor Andra Ghent. Ghent said as more luxury developments enter Chapel Hill’s market, a "filtering" effect will occur.

If developers aren’t allowed to satisfy demand, she said, buyers will only buy up existing housing.

On the other hand, Ghent said, with the option of new luxury developments, residents looking to upgrade will take advantage, vacating their more affordable housing units for low-income residents to take over.

Speaking generally, Ghent said building luxury apartments helps offset increases in rent when housing demand increases in an area due to factors like migration.

“I want to be very clear," she said, "The causality runs from rising land value to luxury development, not luxury development to rising land value.”

However, Chapel Hill Town Council member Hongbin Gu said she hasn’t seen the benefits of trickle-down housing manifest in her area yet.

“If you look at the data, I certainly do not see that what they call the 'trickle-down housing' is working,” Gu said. “There are significant amounts of expensive luxury apartments supplied to Chapel Hill’s housing market, but at the same time, we’re not seeing that the overall housing market is becoming more affordable.”

In addition, Gu worries that luxury apartments may drive away young professionals, as well as the diversity of cultures, income and more that Chapel Hill hopes to cultivate.

“If we completely allow the market to drive the direction, then we see more and more of those luxury apartments coming up, and the most vulnerable communities are at the highest risk,” Gu said.

However, there’s not much the Town can do to keep developers who own land from developing luxury apartments.

“We have a private market, so when people have a piece of land, they have a certain amount of housing they can build,” said Gu. “By right, they don’t need the government to say whether or not they can.”

'We just have to do a lot of work'

The Town has an inclusive zoning ordinance mandating that 10 percent to 15 percent of new residential developments must be affordably priced. But that ordinance doesn't cover apartments because they are classified as rentals.

Gu said the Town also can't regulate "the upper limits" of rent for apartments.

It can, she said, negotiate with developers who need their land rezoned to create a package that includes affordable housing, which is often the case for high-rise apartment developers. The Town also plans to create more affordable housing through a $10 million affordable housing bond passed through a referendum in the 2018 elections.

“We soon anticipate doing our first (request for proposal) process, where developers, including nonprofit and for-profit developers, can apply for funding to create new affordable housing in the community,” said Sarah Viñas, assistant director of the Town's Housing and Community office. “We anticipate doing the first RFP process sometime later this spring.” 

To qualify for most subsidized affordable housing, a household must fall below 80 percent of median household income, Viñas said. For a family of four, that income limit would be $67,850.

Between 2008 and 2018, the town awarded $6.3 million toward affordable housing and approved the preservation or development of over 900 affordable housing units. 

But challenges still lie ahead. 

Viñas said one of the biggest hurdles the town faces in terms of affordability is the limited land supply of Chapel Hill, but she is confident that future housing will be well-situated. 

“We’re actually exploring opportunities for affordable housing development on some Town-owned sites, and they’re really in excellent locations that are close to amenities and in residential neighborhoods that are middle and high-income,” said Viñas.

Viñas referenced Greenfield Place, a new development about four miles northeast of downtown, as an example of a successful affordable housing project led by the town with close to 200 affordable units.

Gu said in order to attract more affordable housing developers, the town must do more.

“If we want to increase the diversity, to provide (middle-income) housing for young professionals or teachers or firefighters, we just have to do a lot of work," Gu said. "We have to go out and recruit and find special funding from the federal government, from the state and find the developers who have that kind of expertise.”

For Lucas, the most important thing is getting as much affordable housing built as fast as possible, regardless of how many luxury apartments are going up. 

“The wait list for affordable housing owned by the Town is years-long,” said Lucas. “Years.”

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