How the Atlanta Beltline broke its promise on affordable housing

At that price, the condo is out of reach for three quarters of metro Atlanta, according to an analysis performed by real estate data company Zillow. Jenkins thinks it’s only a matter of time before he’s priced out, too.

“Eventually I won’t be able to even live here, probably,” said Jenkins, an Emory physician.

This is exactly what housing experts warned Beltline administrators about years ago, when experts found that their affordable housing spending could come to nothing by its planned 2030 completion unless they changed course. Along with the ribbon of parks, trails and transit, Atlanta Beltline Inc. was supposed to create at least 5,600 affordable houses and apartments — a goal so important that City Council put it into law.

But halfway to the Beltline’s scheduled completion, it has only funded 785 affordable homes, more than 200 of which remain under construction. At that rate, the Beltline, one of the nation’s most ambitious urban redevelopment projects, won’t meet its 2030 goal and rising housing costs may drive away more middle class residents.

While forces beyond Beltline Inc.’s control share the blame, the agency’s actions created much of this problem, an investigation by the Georgia News Lab and The Atlanta Journal-Constitution found.

Beltline Inc. kept units that it funded affordable for only a short time; decreased spending on affordable housing as the city entered its current housing crisis; and even passed up on millions of dollars of potential funds. The untapped funds were enough to more than double the project’s affordable housing budget, the investigation found.

Its mission of keeping black families and middle and low-income residents from being pushed from their neighborhoods became an afterthought to building parks and trails, the investigation found.

And when Beltline Inc. fell far behind on its affordable housing goal, Beltline Inc. President and CEO Paul Morris and board chair John Somerhalder pushed for accounting changes that would make it easier to reach, according to memos and interviews with housing experts. The agency only increased affordable housing spending last fall after the city’s economic development agency, Invest Atlanta, which oversees Beltline Inc., held back approval of its annual budget for months, records show.

Somerhalder defended the agency's progress, saying that it increased funding when it could, but the Great Recession and legal disputes left it with little to give to affordable housing during the project's early years.

“All I hear is positive. Everybody has a little different view about priorities,” Somerhalder said.

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But residents of Beltline neighborhoods say they are feeling the strain of skyrocketing rents and taxes, and those who have worked for more than a decade to ensure that Beltline Inc. lived up to its affordable housing promise have lost faith in its leadership.

“I get no sense of a commitment. Now we get lip-service,” said Mtamanika Youngblood, who served for 10 years as a board member of the Atlanta Beltline Partnership, the project’s nonprofit fundraising arm.

Fixing these problems will require public pressure, said Beltline creator Ryan Gravel, who resigned from the Partnership board last year over housing and other equity issues.

“The public has to get loud and say something,” Gravel said.

Calls for help

The calls come to Helene Mills, 90, on the telephone that sits beside the rocking chair in the living room of her yellow bungalow.

“Ms. Mills, I don’t know what to do,” neighbors tell the lifelong Old Fourth Ward resident and advocate for seniors. One told her that she plans to cut back on food to pay her climbing taxes, the retired tax auditor said.

Mills is in the same predicament. Luxury construction in the neighborhood where Martin Luther King Jr. spent his childhood has pushed her home’s value to at least $317,000 according to estimates, nearly twice as much as what she paid in 2003. When she opened this year’s tax bill, she found it had nearly doubled in a single year to $2,374. (Fulton assessments have since been frozen.)

“I said I might have to sell my house to pay my taxes,” Mills recalled telling clerks at the Fulton County tax office. She was joking. If Mills sold her home, where would she live?

Experts had proof that this problem was coming as early as 2007. That year, research by Georgia State University housing expert Dan Immergluck, then at Georgia Tech, found that land prices were rising rapidly in the project’s southern neighborhoods, many of which are predominantly black, middle class or lower-income. This raised the specter of Atlanta’s history of slum clearance, when city-backed redevelopment in the last century pushed these groups out of their homes in the name of progress.

By 2008, the project’s 17-member Beltline Affordable Housing Advisory Board had labeled this problem an “accelerating threat.” But years of grassroots efforts had won what backers believed could be an extraordinary weapon against displacement: an affordable housing trust fund expected to raise $120 million over 25 years. Each time the city issued bonds for construction, 15 percent of the proceeds would go into the fund. Rising real estate values in the area along the trail known as the Beltline tax allocation district would increase the city’s property tax revenue, which it would use to pay back the bonds.

At the time, supporters labeled the trust fund the biggest commitment by a city in the Southeast to affordable housing.

The Advisory Board issued a detailed list of programs, new laws and strategies to ensure that affordable housing would be built along the entire Beltline and across the city, but the Great Recession dealt those plans a body blow. That year’s bond issue raised only about $64 million for the Beltline, $55 million less than planned. The entire project was in jeopardy — not just its affordable housing trust fund, which received only $8.8 million.

Local philanthropists were eager to help, but a survey by the nonprofit Partnership found that these donors felt they should fund amenities, not essentials such as affordable housing and transit, said board member Valarie Wilson, who then ran the nonprofit. Those were best left to government.

The Partnership’s tiny staff managed to raise $38 million for parks and trails but none to build affordable housing. With foundation dollars out of reach, the Partnership spent two years creating the Atlanta Land Trust Collaborative, a nonprofit to create permanently affordable homes. But the collaborative was forced to set up shop on its own because Beltline Inc. decided not to fund or house it.

The trust fund, with its diminished revenues, would just have to do.

Credit: Hyosub Shin

Credit: Hyosub Shin

Stark warnings go unheeded

By 2013, a report by outside experts warned in stark terms that Beltline Inc. needed to take its affordable housing mandate seriously.

“If not, there is a good chance that in 25 years the communities surrounding the Beltline will be as unaffordable as they would have been if the resources were never directed to affordable housing at all,” it said.

Beltline Inc. had spent only $5.3 million on affordable housing, an amount dwarfed by the nearly $127 million it invested on parks and trails, the report found. Only 131 affordable homes were created, and all indications were that it would get harder to build more. A Partnership survey found that for-profit developers would not develop affordable housing unless they were required to do so.

Few of those who received housing were the law enforcement officers, teachers or long-time area residents that the trust fund was supposed to help, it said. Most of the homes were located along the southern half of the Beltline, instead of near jobs and top ranked schools, and their affordability would often disappear in 15 years.

Requirements for the Beltline’s down payment assistance program are so weak that affordability can disappear even sooner, an AJC/Georgia News Lab review of these deals shows. Rules that buyers give over as much as half of their profits to the trust fund when they sell will expire in 2018 for at least 19 homes bought in 2009. One has already sold for $110,000 more than it was purchased.

At the Lofts at Reynoldstown, where Jenkins bought his $340,000 condo, provisions for 25 of its 28 affordable units expired months ago, and there is no requirement that they be re-sold to middle-class residents. Beltline Inc. gave the original owner of his unit down payment assistance in the form of a $64,000 loan that he would not have to pay back if he remained for 15 years. The seller had to pay back the loan because he sold early, but kept the remaining profit.

This never would have happened if Beltline Inc. put the needs of Atlanta residents first, said Nathaniel Smith, who resigned from the Partnership’s board with Gravel. Local housing experts proposed deed restrictions, land trusts and other programs that could have stopped it.

“That is what the big problem of the Beltline is — that the people have been overshadowed by profit,” Smith said.

Millions in potential revenue overlooked

Beltline Inc.’s Somerhalder argued that at the time, there was little they could do to boost funding for affordable housing. The trust funds and other money had been divvied up, and a years-long legal dispute stopped the city from issuing more bonds to replenish them. As rising rents and home sale prices pushed Atlanta towards crisis levels, Beltline Inc. budgeted only $630,000 total towards affordable housing for the next three years, its financial reports show.

“Our flexibility was very limited,” Somerhalder said.

But this approach overlooked millions coming through the Beltline Inc.’s front door. Records show that by 2012, it had begun to collect more than double the revenue from the tax allocation district that analysts projected in 2008. Had the city continued to issue bonds as planned, Beltline Inc. would have been legally required to spend 15 percent of it on affordable housing. But because city statute stated that “bond proceeds,” not tax dollars, would go to affordable housing, Beltline Inc. was free to spend the TAD windfall elsewhere.

This cost affordable housing millions in potential funding, according to calculations by public finance expert Dick Layton, who was lead underwriter for the 2008 bond issue.

“It would have been more than twice as much,” Layton said.

Morris also tried to loosen the rules on how affordable housing was counted. Morris tried to convince affordable housing advocates that homes the Beltline helped fund outside the TAD boundaries should count towards its 5,600 unit requirement, they said. The original ordinance from City Council said units should be created inside the TAD boundaries.

In 2015, Beltline Inc. stated in its annual report that it had created 1,025 affordable units, even though 330 were out of bounds.

“It [was] about making the counting easy,” said John O’Callaghan, President and CEO of Atlanta Neighborhood Development Partnership. Beltline Inc. only stopped counting these homes in 2016 when an Invest Atlanta attorney informed them they could not legally do so, a Beltline spokeswoman said.

What strategies Beltline Inc. did use fell far short of what the 2013 report advised. Beltline Inc. continued to rely on its weak down payment assistance program, failed to fund more land trust homes, and for a time, opted out of an Invest Atlanta tax incentive program to coax luxury builders to rent to middle or working class residents, records show.

Frustrations came to a head in 2016 as word got out that the Beltline had failed to use 15 percent of its public funding on affordable homes. In May, Randy Hazelton, chair of Invest Atlanta’s finance committee, noted in a meeting that Beltline Inc. proposed to dedicate less than one percent of its fiscal year 2017 budget to affordable housing and set no milestones for reaching its goal of 5,600 homes, minutes state. It would hold up the budget until Beltline Inc. pledged to spend more.

Yet during budget negotiations, Morris and Somerhalder renewed their efforts to change the housing goal, according to memos between them and Hazelton. Doing so “opens up many additional opportunities,” they argued, such as funding single-family homes.

Beltline Inc. lost this bid, and in September increased that year's affordable housing budget from $676,000 to $2.2 million. But the damage was already done. To meet its goal, it would have to create nearly 360 new units each year until 2030, which may be out of reach. Beltline Inc. currently estimates it will help develop about 150 units per year over the next three years.

Now conservative estimates put the project’s affordable housing needs at 10,000 units, well beyond the 2030 goal of 5,600.

“I don’t have any confidence at all in leadership of Beltline Inc. or Paul Morris to fully engage in the way that Beltline Inc. needs to engage to turn the corner on housing challenges we face in this city,” said Smith, the former Partnership board member who resigned.

Credit: Hyosub Shin

Credit: Hyosub Shin

Rents rise and residents are pushed out

Now well-paid professionals are being pushed out of east side Beltline neighborhoods, even in areas where the path is far from completion. Single father Ben Speight, a labor union staffer who makes nearly $90,000, had planned to move at the end of June with his 3-year-old daughter from the two-bedroom house they rent near East Atlanta Village because of rising prices.

Speight, whose rent rose by about $200 over three years to $1,650, will move to a small carriage house in Kirkwood at $900.

“I cannot afford $1,500 a month rent, OK?” Speight, 35, said. “I can’t. I can’t. I don’t know how people do it, other than loading up their houses with roommates.”

The problem is spreading. Former West End resident Stacey Graham, 36, an administrative assistant, moved with her husband and three children to less expensive Grove Park when the monthly rent on her house rose above $1,000. Her new neighborhood is also along the Beltline, and she worries that elderly residents will leave because of higher taxes.

“Ultimately it’s going to happen,” Graham said. “It’s just becoming expensive.”

For Old Fourth Ward resident Mills, keeping her home will require making sacrifices, which she is good at doing. On a recent weekday morning, she showed off a 50-year-old green dress that she still wears, and boasted she hasn’t bought a stitch of clothing since 1989.

“I must pay for the needs and leave the wants,” Mills said.

Staying is a need. The new people on her street rarely speak to her and don’t visit, but Mills remembers how neighbors banded together to keep the streets free of trash and revived derelict blocks by building new houses. Some of the friends she made became like family to her.

“I would not want to live anywhere except Fourth Ward,” Mills said.

Editor's Note: Since this story first published, the CEO of Beltline Inc., the agency that administers the Beltline, stepped down from his post. New CEO Brian McGowan said he would tackle affordable housing immediately.

Students from the Georgia News Lab reported and helped write portions of this story. The News Lab is a collaboration among Georgia's leading journalism programs, The Atlanta Journal-Constitution and Channel 2 Action News. To report the story, students obtained hundreds of pages of records from Atlanta Beltline Inc. and Invest Atlanta, and interviewed officials from those agencies, along with community groups associated with the Beltline. Students working on the story were Breana Albizu, GSU; Gladys Bautista, GSU; Lindsey Conway, UGA; Jacob Durst, Emory; Cole Gibson, GSU; Ashley Graham, Emory; Anastaciah Ondieki, Kennesaw State; Abe Park, UGA (graduate program); Destiny Robinson, GSU; Maureen Sheeran, UGA; Ugo Unigwe, Morehouse; Nick Wooten, Mercer. The story was written by AJC reporter Willoughby Mariano with help from Conway, Ondieki, Durst and Wooten.

The high cost of renting along the Beltline

Since 2005, rents along the finished portion of the Beltline’s Eastside trail have skyrocketed. This is what it costs to live within a half mile of it.

Average rent: $1,629

Percent Increase: 59%

Amount increase: $602 per unit

Source: CBRE, a commercial real estate company, based on data from CoStar. All amounts are averages. 

How the Beltline makes housing affordable

Atlanta Beltline Inc. uses these programs to reach its city-mandated goal of creating 5,600 affordable homes:

Beltline Affordable Housing Trust Fund:By law, 15 percent of proceeds from bonds issued to pay for Beltline construction go into this fund to provide grants to developers, down payment assistance and other programs to house low-income, middle- and working-class families. Backers expected it to raise $120 million over 25 years, but 10 years into the project, it has raised less than 17 percent of that amount.

Community Land Trust:These entities own the land beneath a house, not the house itself, which makes the house cheaper to purchase. This form of ownership also softens the blow of big property tax increases. Beltline Inc. created only three of these homes.

Down Payment Assistance: This program makes homes easier to purchase by giving Beltline-area homebuyers down payments in the form of second or third mortgages. The loans are forgiven if they stay in these homes long-term.

Lease Purchase Bonds: This incentive reduces taxes for a developer for a set period of time if they rent a portion of their units to middle- or working-class residents.

Behind the numbers

Atlanta Beltline Inc.’s affordable housing numbers aren’t always what they seem. That’s because the agency hasn’t been transparent about how it counted units, according to a 2013 assessment. Beltline Inc. counted dwellings it had not funded. At the end of 2013, the total of affordable housing stood at 500 units. By 2015, it climbed to 1,025. But in 2016, the total was revised downward to 785 because Beltline had claimed credit for units outside the boundaries where Atlanta City Council mandated they be built.

Source: Atlanta Beltline Inc.