How does Habitat for Humanity build homes in Knoxville where the median price is $400K?

It’s not one of those billion-dollar prizes, but it’s still the jackpot when a family walks through the doors of their new home, a home they helped to build alongside volunteers and neighbors.

“A lot of our homeowners have said they felt like they won the lottery,” Angie Hatcher Sledge, the former chief development officer for Knoxville Habitat for Humanity, told Knox News.

But getting to that special moment of a family beginning a new chapter of their lives is challenging, particularly given the state of Knoxville’s housing market.

Home prices and rental rates are surging in Knoxville as the city’s population continues to grow. The median home sold price in Knoxville was $385,500 in March, according to Realtor.com data. The median listing home price was $419,000. And the average apartment rent ranges from $1,230 to $1,599 in 2024, according to Rent.com.

Simply put, it's becoming increasingly harder for people to own homes, and people are being priced out of neighborhoods and rental properties.

Knoxville Habitat is fighting for land for its affordable home builds just like other developers, as well as coping with a 60% increase in construction costs since the COVID-19 pandemic. The nonprofit is pressing on, however, currently in the final stages of its newest neighborhood development Ellen’s Glen. The organization also is focusing more on critical home repairs to ensure homeowners can stay in their beloved homes.

Building homes in Knoxville during challenging times

One nail at a time, Knox Habitat’s team of volunteers and licensed contractors is finishing up its fourth neighborhood. Ellen’s Glen in Strawberry Plains is expected to be completed by December and will be home to 35 families in need of permanent housing.

The neighborhood features 3-, 4- and 5-bedroom homes, underground utilities, single-car garages and sidewalks. The project broke ground in 2021 and is named in honor of Knoxville Habitat founder Ellen “Sis” Roddy Mitchell.

The Plains, a fifth neighborhood for 74 families, also in the Strawberry Plains area, is scheduled to break ground this summer. Homeownership applications for this development are expected to open by early fall.

These are major developments in the affordable housing space in Knox County. But progress has been gradually slowing since the pandemic and a rise in inflation. Ten years ago, Knoxville Habitat would build around 25 new homes every year.

“Now, if we get up to 15, we're like, ‘Wow, we did that!’" Anna Engelstad, interim Habitat CEO, told Knox News in January.

“We can't recreate land, as we all know. So, land is increasingly difficult to find, secure, pay for – all those things. All of our infrastructure expenses have gone up,” Engelstad explained.

“We are competing on the open market just like every for-profit developer is doing. The only difference between us and a for-profit developer is that we only sell homes at affordable rates to low-income buyers,” added Hatcher Sledge.

It now costs approximately $155,000 for Knoxville Habitat to build one new home, which only covers all the building materials and labor. The land is an additional expense for the organization.

Land donations are possible, but the organization is on the hunt to buy land, which is limited in Knox County when competing against bigger developers. Financial donations and contributions are crucial for Knoxville Habitat to continue its work. Contributions primarily come from companies and organizations (76%), according to the organization’s 2023 report. Other contribution sources include individuals, foundations, and churches. None of it comes from government agencies.

The organization also explores creative and cost-effective ways to use properties. For instance, 4 acres that included a small church was recently acquired. Knoxville Habitat sold the church building to a congregation in need of a permanent meeting place and plans to subdivide the remaining land.

The challenges families face

The ringing telephones reverberate throughout the office as Knoxville Habitat is flooded with calls after the organization’s homeownership applications open. It doesn’t take long for over 400 people to reach out, seeking a permanent home.

“We can't touch 400 applications,” Engelstad said. “That's a process that none of us enjoy because we know we're leaving someone out who desperately needs that opportunity. (There are) just not enough opportunities.”

Rental rates and the costs of Knoxville homes both have skyrocketed in recent years. Some relief in 2023 still might not be enough to ease the burden on renters and prospective homeowners.

Rent growth slowed in the Knoxville Metropolitan Statistical Area in 2023 after rising by double digits in 2022, which made it one of the fastest-growing rent markets in the country, according to East Tennessee Realtors data. Rent growth is expected to slow to an average 3.1% increase in 2024. The apartment occupancy rate is forecast to decline slightly to 96.4% this year, too, after surpassing 99% back in 2021.

Median home prices are expected to rise 3.6% this year, East Tennessee Realtors forecasts. That’s an average increase compared to the 16.7% surge that occurred in 2022. However, Knoxville is projected to have the biggest home value increase (5.1%) in the South by 2025, Knox News recently reported.

Meanwhile, the median income per household in Knoxville is just under $53,000 and is $32,000 per person, according to the U.S. Census Bureau. The general rule is to spend no more than 30% of your monthly income on rent.

Longtime renters are facing overcrowding, drastic rent increases, landlords no longer accepting Section 8 housing vouchers, inflation and other barriers, Hatcher Sledge said. So, Knoxville Habitat aims to help families that have been renting for an extended period to become homeowners, which then can free up apartment and rental space for others.

“Ownership is the game-changer for family stability,” Hatcher Sledge said.

“This is not an exaggeration; hundreds of people walk through our front door every single year asking for an application, desperate to know when it's going to open up again because they're long-term renters who are desperate for permanency.

“And while we are happy and applaud the city's efforts to raise the number of affordable housing rental units, we know that success and vibrancy for families doesn't come through rental; it comes through ownership,” Hatcher Sledge added.

Creating more affordable housing is a priority for Knoxville leaders, but the process has been slowed by homeowners opposed to affordable housing developments in their neighborhoods and by out-of-date zoning rules.

Knoxville's proposed 2024-25 budget includes $8 million to invest in affordable housing, a $500,000 increase from last year's proposal.

Money will go toward:

• The Transforming Western redevelopment project that will add 740 low- and mixed-income housing units to Western Heights by 2028

• The Affordable Rental Development Fund, which incentivizes developers to build affordable rental housing

• Permanent supportive housing for residents with disabilities.

The city also has pledged to invest $50 million over 10 years in the Knoxville Affordable Housing Fund.

Preserving homeownership critical repairs

With demand and need outpacing the supply, Knoxville Habitat cannot build a home for every person who needs one. And just owning a home isn’t the end goal; persevering at home ownership is. Knoxville Habitat has been providing critical repair services to existing homeowners for about five years, completing over 70 projects.

“Someone may be able to shoulder a mortgage, but they can't shoulder the mortgage, plus inflation, plus home repairs,” Engelstad said.

The critical home repair program helps to alleviate financial burdens for families. Big-ticket expenses such as HVAC maintenance and roofing repairs are the primary focus, especially if other repairs are needed in the home. If a home needs a new floor, but the roof is leaking, the critical repair team steps in to address the roofing issues first, which clears the way for a separate organization or company to repair the floor.

The critical home repair program serves seniors right now, but the organization intends to open it eventually to homeowners who do not qualify for home equity line of credit at a bank.

Building and supporting community

The families that eventually will live in Ellen’s Glen and The Plains will be neighbors, yes, but beyond that, they’ll be a community. A community that’s established well before move-in day.

“When you're invested in your neighborhood, you become a better citizen,” Engelstad said.

Future homebuyers begin their journey by taking classes together covering budgeting, home repairs, construction, neighbor etiquette and other information through the homeownership education program to ensure preparedness. Knoxville Habitat has partnered with organizations such as the Knoxville Area Urban League, HomeSource and UT Extension to provide some of these classes.

And then the cohort helps to build their homes for each other.

These required courses and “sweat equity” hours build a lasting sense of community and accountability and a vision of what the future can be. The process is the same for all Knoxville Habitat families.

Eric Peacock, 61, helped with framework and drywall to build the place he’s called home for more than 20 years. Earning his sweat equity, he also helped build the homes of his longtime neighbors who have become friends.

To move into his first home, Peacock participated in programs through Knoxville Habitat and Sertoma, a local nonprofit that provides assisted living, employment, wellness care and other services to people with learning and developmental disabilities.

He works and enjoys the independence living alone allows, but his situation could have been completely different.

“If I didn't have a Habitat house, I'll be out on the street somewhere … but now I have my own house,” Peacock told Knox News.

“Our families succeed as homeowners. Our families succeed in their job. Their kids succeed in school,” Hatcher Sledge added. “The outcome is extraordinary. Putting those keys in their hand is the start of the story not the end of the story."

A community beyond the builds

Habitat for Humanity has been in Knoxville since 1985. Back then, the organization was virtually 100% volunteer-based. Volunteerism remains a core component of its business model, but today’s building codes require licensed contractors, and the quantity of volunteers has decreased post-pandemic.

Over 3,000 volunteers helped the organization last year, according to the 2023 annual report. Partnerships with 38 companies helped raise over $184,000.

That’s a big impact. But as Engelstad noted, Knoxville Habitat can’t build a house overnight, and the need for affordable housing continues to grow. So, just like the families, the nonprofit builds community and support by being in constant coordination with local organizations.

Knoxville Habitat, which works in the permanent housing space, regularly collaborates with Knoxville's Community Development Corporation, Knoxville Leadership Foundation, SEEED, United Way, HomeSource, the Urban League and other agencies to provide families with the proper resources and services.

Peacock, who regularly volunteers with local organizations, said collaborations across nonprofits are important because of how they impact people’s lives. It would have taken him a lot longer to have his own home, he said, if not for Knoxville Habitat. He’s grateful, but it also draws bittersweet emotions.

“I know some people (who are) homeless, they don't have a place to live … and I got one,” he said somberly. “I think more clients need to get into a Habitat house.”

A new chapter for Knoxville Habitat

Navigating Knoxville’s competitive housing market and the post-pandemic economy isn’t the only thing on Knoxville Habitat’s agenda. The nonprofit is in search of a new CEO and president following the retirement of Kelle Shultz last year. Shultz had served as the CEO for 30 years. Chief Operations Officer Engelstad has temporarily stepped into that role.

“I will gladly sit in this seat until we find the right person to take over,” Engelstad said. “But we are very excited to just continue what we all know how to do and continue to build upon what we've learned … to make an impact in Knoxville.”

The CEO search is ongoing, with the organization aiming to have a new leader by end of summer.

How to apply for a Habitat for Humanity home in Knoxville

Knoxville Habitat homeownership applications are expected to open this fall. Families eligible are those with household incomes ranging from 50% to 80% of the Area Median Income, which is $43,200-$69,100 for a family of four in Knoxville. AMI is set annually by the U.S. Department of Housing and Urban Development.

The Habitat family selection committee assesses each applicant's level of need, preparedness and ability to repay a zero-percent interest mortgage through an affordable payment plan. The selection committee is comprised of Habitat board members and community volunteers.

Knoxville Habitat follows fair housing rules and laws, and there is no wait list, Hatcher Sledge noted. These guidelines ensure an equal opportunity for applicants and that affordable Knoxville Habitat homes go to those with the most need.

More information regarding homeownership program applications and ways to donate or volunteer is available at knoxvillehabitatforhumanity.com.

Devarrick Turner is a trending news reporter. Email devarrick.turner@knoxnews.com. On X, formerly known as Twitter @dturner1208.

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This article originally appeared on Knoxville News Sentinel: Knoxville Habitat for Humanity battles challenging housing market