Why building more market-rate homes is not creating affordability in Nashville
Article by Chris Remke, AIA (ret) • 2 minute read
The housing ladder is broken
In growing cities like Nashville, filtering hasn’t delivered affordability—it’s removing rungs from the housing ladder as modest homes are cannibalized and replaced by high-priced, high-density units.
Filtering takes too long: the affordability that never arrives
The theory behind filtering
For years, policymakers have pointed to filtering as the economic rationale behind building more market-rate housing. The theory suggests that adding high-end homes allows wealthier buyers to move up the ladder, leaving more affordable options for those with lower incomes. However, housing markets are not as fluid as this theory assumes.
Why housing isn’t like other markets
Unlike consumer goods, housing is built on inelastic land. Land doesn't multiply, and zoning entitlements, infrastructure, and locational desirability introduce rigid constraints that prevent the "supply curve" from functioning as it does with pens and pencils. This is why filtering may work within a submarket but fails across disconnected ones. More homes in affluent neighborhoods don't create availability in less affluent areas. That's not just a planning theory problem—it's a geographic and financial reality.
What the research shows
Even the Urban Institute’s multiyear study showed that when new housing production was concentrated at the top, only the most affluent gained meaningful affordability—a 0.89% improvement over nine years. For middle- and low-income households, the benefit was statistically unmeasurable across 1,136 cities. That’s not reform—that’s a red flag.
A foundational study by Stuart S. Rosenthal (2014) found that U.S. housing filters downward at about 0.7% per year. As a result, it can take 30 to 50 years for new housing to become affordable to lower-income households through filtering alone.
Nashville works best when everyone has a voice and a place to call home.
Source:
Rosenthal, Stuart S. (2014). “Are Private Markets and Filtering a Viable Source of Low‑Income Housing? Estimates from a ‘Repeat Income’ Model.” American Economic Review, 104(2), 687–706. Available: https://www.aeaweb.org/articles?id=10.1257/aer.104.2.687
The Nashville example
In Nashville, the situation is particularly acute. The city's housing policies have led to a scenario where the housing ladder doesn't work as intended. Homes that would ordinarily remain affordable for people to move up are being purchased and replaced with two or more homes and with newer, more expensive homes, effectively removing rungs from the housing ladder.
The Area Median Income (AMI) for the Nashville region is $64,350 for a two-person household. Affordable housing is typically defined as housing that costs no more than 30% of a household's income. For households earning 80% of the AMI, this translates to a maximum affordable monthly housing cost of approximately $1,609. For buyers trying to enter the market with a mortgage under this threshold, the numbers are increasingly out of reach. With current interest rates, taxes, and insurance, this budget supports a home purchase in the $210,000–$230,000 range. Yet homes at that price are vanishing from many Nashville neighborhoods, replaced by high-end or high-density construction that serves buyers much higher on the income ladder.
Moreover, the need for housing units in Nashville largely falls between 0-80% of AMI, with an estimated 35,715 units of rental housing needed for people with income levels of 0-30% AMI through 2030 according to the 2021 Affordable Housing Task Force Report. This indicates a significant shortfall in affordable housing for low-income residents.
What filtering is actually producing
The reliance on filtering (and similarly churn) and market-rate housing production has not only failed to deliver affordability but has also contributed to gentrification and displacement. Neighborhoods are being transformed, and long-standing communities are being pushed out. The cultural fabric of the city is being unraveled, and the people who have lived here the longest and contribute the most—teachers, city workers, single parents, and seniors—are finding it harder to stay.
A call for grounded, performance-based solutions
It's time to move beyond simplistic economic theories and start measuring what's actually happening on the ground. Continuing to prioritize housing production that primarily serves the wealthiest segments of the population only widens the gap between opportunity and need. The National Low Income Housing Coalition and local data make it clear: most new housing in Nashville since 2010 has served those earning above 80% of the Area Median Income (AMI), leaving behind the very residents most in need.
Nashville's housing policies must shift focus. Instead of incentivizing developers to pursue higher-profit, lower-risk projects, local government should target its resources and policy tools toward the unmet needs of low- and moderate-income residents. The marketplace will continue to serve those at the top; public intervention is needed to serve those the market will not. Our solutions must be grounded in actual need, not in economic theories that have failed to deliver. They must be designed to support residents earning below the 80% AMI threshold; the population Nashville’s own data and study has already identified as most in need.