The owners of older apartment buildings in Knoxville could soon be eligible for new incentives that could also keep rents lower for their tenants under a new direction for affordable housing efforts approved by City Council on Tuesday.

Forty-seven percent of the city's housing stock is more than 50 years old.

The goal is to prevent the loss of existing affordable housing units due to landlords raising rents in an overheated housing market.

“The housing crisis is real,” said Kevin DuBose, the city’s director of housing and neighborhood development. “And what we're seeing is that those older housing units are now being converted to market rate.”

More than half the city’s households are renters, and apartment occupancy rates have been hovering around 95 percent. That supply shortage has driven rents up by about 20 percent in the past year, according to East Tennessee Realtors, and they are expected to rise another 5 percent in the coming year. 

“We have a lot of older housing, and traditionally, your newer housing was market-rate and your older housing has been more affordable,” DuBose said. “What has happened here recently, now that we have a supply-and-demand problem, is that property owners are trying to push those older housing units to market-rate units.”

Unsubsidized affordable housing developments built prior to 1990 — known as Naturally Occurring Affordable Housing (NOAH) — are the largest source of affordable housing in the city, officials say. More than 71 percent of the housing stock in Knoxville is older than 30 years and 47 percent is older than 50 years.

While the city has used incentive programs to spur the development of new affordable housing complexes, the resolution approved by City Council would allow certain incentives to be used to preserve NOAH developments.

The NOAH resolution authorizes the Kincannon administration to use payment in lieu of tax (PILOT) agreements, the Affordable Housing Fund and the Affordable Rental Development Program to help developers to acquire or owners to perverse older, unsubsidized apartment buildings.

DuBose said PILOTs, which essentially freeze property taxes at current levels for a specified period of time, and the cash incentives could be used to pay for renovations. If no renovations are involved, owners would have to maintain their developments to standards enforced by Knoxville’s Community Development Corp. (KCDC).

In either case, landlords would have to agree through deed restrictions to keep rents at affordable levels for a specified period — typically anywhere between 10 and 40 years, depending on the individual arrangement. 

“I think that this is a step in the right direction, but I'd like to make sure that we are monitoring this to make sure that we're maximizing the number of years that these properties that they would make the commitment,” Councilwoman Gwen McKenzie said. “Ten years sounds like a long time but 10 years goes by really fast when you're talking about this is your home, this is where you live.” 

Forty-seven percent of the city’s renters are cost burdened, meaning they pay 30 percent or more of their income on housing. State law prevents Tennessee cities from imposing rent control, but they can use incentives to require affordable rents at individual properties. 

“It is a carrot,” DuBose said. “We don't have many sticks, that’s been established, but it is a carrot and I think a well-crafted development incentive will be attractive to some property owners.”

Councilman Tommy Smith said the NOAH program would provide smaller property owners and developers the same opportunities that larger firms have in the marketplace.

“We talk a lot about incentives for developers, and I've always kind of been of the opinion that we give it to the big ones, we should give it to the small ones, and nothing's more important than maintaining relatively affordable rents,” he said. 

Nikki Lynn, a founder of the Knoxville Area Tenants Union, told Council members that while she would have liked them to take action sooner and urged them to strengthen codes enforcement, she supports the NOAH initiative.

“I’m really excited that we’re offering incentives to these properties that can open up more affordable housing and keep that rent low for folks like myself and my neighbors,” she said.

Another provision of the resolution would authorize working with KCDC and the city’s Industrial Development Board to create housing in neighborhoods and along corridors such as Chapman Highway, Magnolia Avenue and Kingston Pike.

“We have lots of opportunities along the corridors to look at mixed use and to look at additional housing,” Roberto said. “In the numbers that we need to address this crisis, we've got to be addressing the spaces where we can have the most impact, and that's where we can do it.”

Council members voted 7-0 to approve the proposal, with Councilman Charles Thomas absent because of illness and Councilwoman Amelia Parken abstaining. Parker said she wanted to see more details of the program before committing to it.

Mayor Indya Kincannon said her administration would be bringing budget amendments and other necessary legislation to enact the policy in December.