Gentrification has long been a well-known problem for Atlanta’s residents. The longstanding issue recently made national news when candidates in the city’s latest mayoral race talked quite a bit about gentrification and the impact it has on real estate and residents. National publications picked the story up, and now all eyes are on Atlanta.
To understand the problem Atlanta faces today and gain insight into the gentrification problem in Atlanta, you need to go back a little over a decade.
The Beginning of the Problem
When the New York Times published “Gentrification Changing Face of New Atlanta” in 2006, many people turned a blind eye. The idea of gentrification was still relatively new as far as most people were concerned, and they didn’t realize how significant of an issue it was.
The New York Times outlined the good and bad sides of gentrification. On the bright side, gentrification had expanded Atlanta’s tax base and eliminated blight. On the flip side, it caused a significant demographic change. The city’s black population was in a decline and the white population was on the rise for the first time since the 1920s. That was just the beginning.
Over the last decade, the face of Atlanta has changed. It used to be a symbol of success for the African American community, but gentrification has changed that. Rising home prices are forcing African Americans to move out of their neighborhoods; in fact, Atlanta’s home prices have gone up by a whopping 53 percent since 2010, and rent has climbed by 33 percent during that same time period.
When real estate and rent prices go up, people tend to think it’s because properties have improved, but that’s not necessarily the case; prices often go up due to location instead of renovations. For instance, a low-income apartment building might be located in an area that’s been gentrified. This increases the perceived value of said apartment building, causing the rent prices to go up. Current tenants can no longer afford to live there, so they are displaced.
Current residents aren’t just getting priced out due to high rents and mortgages; property taxes are also on the rise. To put it simply, Atlanta’s gentrification is turning into a crisis, and politicians are looking for a solution.
Is the Solution on the Way?
When Mary Norwood and Keisha Lance Bottoms ran against one another for mayor of Atlanta, both made gentrification part of their platform. Norwood focused on senior homeowners during her campaign; she wanted to protect them while reducing, freezing, or delaying property taxes in some areas.
She also wanted to work with landlords to make it easier to provide low income/affordable housing, and with various organizations to offer vouchers to stabilize prices. At the same time, she spoke of adding more middle-income housing and creating an Employer-Assisted Workforce Housing Program. This is just a snapshot of her plan to overhaul real estate in Atlanta.
Keisha Lance Bottoms took a different approach: She spoke of appointing an Affordable Housing Czar who would report directly to her if she was elected mayor. The czar would be responsible for addressing this issue on a long-term basis.
She also pledged to work with corporations and nonprofits to help people stay in their homes. With the help of the corporations and nonprofits, she hoped to build a fund that would offset the costs of rising property taxes. On top of that, she stated she would work to prevent property taxes from surging as they have in Fulton County. Some residents have seen an increase of 200 percent or more, and that has made it difficult for them to stay in their homes.
Voters apparently preferred Bottoms plan, as they voted her in as mayor. She plans to begin implementing these ideas when she takes office in 2018. It will be interesting to see whether her plans manage to successfully fight back against gentrification in the city. If all goes as she hopes it will, it will become more affordable to live in the city, and people will stop getting pushed out of their homes. It might even return to the Atlanta of the past.
Being a Landlord in Atlanta
Atlanta’s gentrification issue doesn’t just pose challenges for renters and homeowners; it can also pose some challenges for landlords. If you’re going to buy property in Atlanta, follow some tips to protect your investment and yourself.
Understand the Property-Buying Process
Real estate investors love the idea of buying property in up-and-coming neighborhoods, such as Atlanta’s Kirkwood. They think they can pick a property and watch the investment grow by leaps and bounds in a few years.
It sounds simple, but buying a property in a gentrifying neighborhood comes with its own set of issues and considerations. You must be smart about it or you will end up with some serious problems on your hands.
First, you have to make sure the appraiser and banker are on the same page. Home values in gentrifying neighborhoods tend to go up faster than bankers allow for. That means your appraiser might appraise the home for more than the banker thinks the property is worth. If you can’t get the banker and appraiser on the same page, prepare for a big down payment, as you will need to pay the difference between the home’s appraised value and the amount of the loan; if you cannot do so, you won’t be able to get the property.
You will also need to consider repairs, as many homes in gentrifying areas need significant repairs. You might need to secure a construction loan so that you can repair the home before renting it out to tenants. Keep that extra expense in mind. Otherwise, you might get a conventional mortgage loan for an unconventional property; this could leave you stuck, trying to find ways to finance the repairs. As a result, it may be hard for you to get the property ready for renters.
Insurance can also be an issue when buying in a gentrifying area. Low income neighborhoods are often high in crime. That means gentrifying neighborhoods often have reputations for being high in crime. Insurance agencies look at patterns when determining insurance costs and coverage. The agency might look at the previous pattern and decide the risk isn’t worth it. Of course, that can change as new patterns are established, but go in understanding that you might have to shop around for insurance.
What does all of this mean? It basically means you need to expect to spend some more time on the process. You will need to talk to lenders, appraisers, and insurers to get the best deal for your money. You might even have to pass up a deal or two until something works out. It’s all part of the process, and it’s worth it if you can find a high-value property at an affordable price.
Open Yourself Up to Low Income Tenants
There will likely be a push for more low-income rentals after the new mayor takes over. As a landlord, you could ensure your property stays in demand by opening yourself up to Section 8 tenants. If your rental is approved to accept Section 8 tenants, you will get your monthly rent check directly from the government instead of from the tenant.
You will need to go through inspections to take on Section 8 tenants, and it’s important to understand that the first rental payment might come a month or two late. After that, though, you should receive your payments without fail. You might discover you like the predictability of the situation.
Make Repairs Easy
You are likely going to have to do some repairs when you rent in a gentrifying neighborhood. That’s true, even if you do a ton of repairs before you put the property up for rent. You want to make the process as easy on yourself and your tenant as possible. Use an online tenant portal to accept maintenance requests; then you can send the requests out to your maintenance team and have them get to work.
The easier you make this process, the happier your tenants will be. That means they’ll want to stay put when it’s time to sign a new lease.
Encourage Renter’s Insurance
As mentioned previously, you might have to pay more for insurance when you own property in a gentrifying neighborhood. The last thing you want is for a tenant to try to make a claim against your insurance. Encourage your tenants to carry renter’s insurance. That way, they can make a claim against their own policies if anything happens. This insurance is cheap and easy to get, and it protects tenants from a variety of issues. For instance, they can a make a claim if their belongings are stolen or if someone trips and falls on the property.
Make it as easy as possible for your tenants to get renter’s insurance. Give them the name of a local insurance agent for them to contact. You can also recommend they bundle it with their auto insurance. Be sure to give them some quotes so they’ll see just how cheap renter’s insurance is. Many will want it when they realize how affordable it is.
Get Those Tax Deductions
With rising property taxes and other issues, it’s important that you protect yourself by getting as many tax deductions as possible. Landlords have lots of options when it comes to tax deductions, and you want to get them all.
First, you can deduct interest. This is often the biggest deductible expense available for landlords, so deduct your fair share. You can deduct mortgage interest payments and even interest on credit cards if you use those cards to purchase goods and services for the rental property. Keep track of all your receipts so you can add up the total interest at the end of the year.
Depreciation is also a big one; you can’t deduct the full price of a property at one time, but the IRS does allow you to deduct the depreciation from one year to the next. If you don’t know the value of the depreciation, your accountant can help you.
Repairs can also be deducted. Unlike depreciation, you can deduct the full cost of repairs at one time, so don’t be afraid to fix that roof this year. Your tenant will appreciate it, and you can take the money off your profits from the year.
This might come as a surprise, but you can also deduct local travel. If you live in the Atlanta area and have to travel to an apartment building or house to deal with a complaint or fix an issue, you can deduct your travel expenses. Keep a travel log that you can look at the end of the year.
Deductions aren’t just limited to local travel, either. Long distance travel is also tax deductible. If you live out of town, you might have to travel overnight to conduct business for your rental property. You can deduct all of your travel expenses, including meals, hotel bills, and airfare.
Your home office is also tax deductible, as are any losses you incur from casualty theft and loss. You can even deduct wages when you hire someone to perform a service for you. That includes legal and professional services.
With so many deduction options out there, you really need to be careful. You don’t want to make a mistake, so it’s a good idea to hire someone to handle your taxes for you. That’s tax deductible, too.
Is Atlanta Right for You?
Atlanta is changing, and it’s an uncertain time for the city. Some neighborhoods will likely continue to gentrify, but other areas might start to cater to low- and mid-income families. That means real estate investors have a couple of options for buying and renting property in Atlanta. Whether you want to try your hand in an up-and-coming area or you are most interested in low-income housing, the city has something to offer. Do your homework and consider picking up some property in Atlanta.