Chattanooga residents face rising rents as market forces, investor activity drive increases

Real estate investors are buying up Chattanooga area apartment complexes for prices that have shot up 35% to 40% over the past several years, and rents are rising along with those values, leaving some tenants struggling to hang onto their housing.

“We’re all mad. It ain’t right. But it doesn’t make a difference,” said Britney Cordell, 34, who has lived at Rainbow Creek apartments on Standifer Gap Road for more than a decade.

In December 2019, Philadelphia-based Springer Capital — which bills itself as a proactive real estate private equity firm — bought the 200-unit Rainbow Creek complex for $9.1 million. In the past year, residents of the complex said, the new owners let leases expire and go month-to-month and ended the property’s acceptance of federal Section 8 housing vouchers for low-income residents. They began renovating the apartments.

In a series of letters posted on doors, the new management told dozens of current residents in the coming weeks they would need to pay the new price, around 40% more, to live in what would later be marketed as The Emery. A two-bedroom, two-bathroom apartment now leases for $1,049 a month, according to local listings.

The Rev. Sheila Harris can see the work crews renovating Rainbow Creek from the parking lot of her church next door, St. James A.M.E. Church.

“I am very concerned about the displacement as a whole,” Harris said. “We talk about fair housing and equitable housing in this city and then we allow people from out of town to come in and buy property and displace Chattanooga residents.”

When his office reappraised property values for 2021, the prices that local apartment complexes were fetching had jumped 35% to 40% since 2017, said Marty Haynes, Hamilton County assessor of property.

“Apartment complexes are always attractive to investors because there is continual income,” said Haynes, who added that the complexes that sold in 2020 were typically about 98% occupied. Early indications are that 2021 sales are running 10-20% over even those prices, he added.

READ MORE: Pace is slow, need is high for affordable housing in Chattanooga

“Everybody keeps saying this is going to bust, but the numbers are not showing it,” Haynes said.

Rental rates are following suit, according to a study released in December by online rental service Zumper.

Chattanooga rents average 19% less than the U.S. average of $1,487 for a two-bedroom unit, but local rents are among the fastest rising rates in the country, growing at more than six times the increase in average income in the past year. A study of apartment rental rates showed the average two-bedroom apartment in Chattanooga renting for $1,200 a month, or 17.6% more than a year before.

In 2020, there were sales of more than $400 million of multi-family housing properties in Hamilton County, nearly double the $233 million of multifamily sales in all of 2019.

Four of the five highest prices ever paid for Chattanooga apartments came from sales to out-of-town real estate investment firms in late 2019 and throughout 2020, including the $63.15 million purchase of the BlueBird Row Apartments in March and the $46.8 million purchase of the Parc 1346 apartments in November 2020.

“These increases are unprecedented,” said Tom Dillon, a commercial appraisal evaluator in Hamilton County with 33 years of experience.


The letters began appearing on apartment doors at Rainbow Creek about four months ago: Residents could pay hundreds of dollars more in rent each month, or they could leave.

“It was nothing but greed and business,” said Karmen Riad, 43, who got her notice at the end of December. “Just because it’s legal for you people to do this doesn’t mean that it’s moral. And it’s disgusting.”

Thomas Farnoly Jr., principal at Springer Capital, told the Times Free Press at the time of the Rainbow Creek sale the firm had no immediate renovation plans for the facility, and the group intended to buy other properties in the Chattanooga area.

“We like the Chattanooga market and what is happening in this corridor,” Farnoly said at the time of the purchase.

In making acquisitions, the new owners of Rainbow Creek “target properties from financially distressed owners, non-strategic holders of real estate and other motivated sellers,” according to Springer’s website.

Once the firm buys properties that are typically selling “at a discount to their intrinsic value,” Springer “reposition[s] assets by replacing and improving existing on-site employees while implementing targeted capital improvement plans, expense savings programs and aggressive leasing strategies.”

Springer Capital did not respond to email and voicemail requests from the Times Free Press for comment over multiple weeks for this story.

Watching her neighbors move out, Riad is filled with anger and heartbreak.

“They’ve busted up a whole community,” she said. “We were so much more than an apartment complex of elderly, disabled and welfare recipients, but that’s all that they saw when they bought this place.”

Ten Rainbow Creek tenants who spoke with the Times Free Press said the few places that accept Section 8 housing vouchers have waitlists, some as long as 12 months. Non-refundable application fees cost hundreds of dollars on top of the cost of a possible security deposit. Most residents asked that their names not be used because they fear retaliation from the property managers who still control their security deposits and help transfer their housing vouchers. Riad, who was once on vouchers, knows people in the program are extra worried about finding a new place.

Many residents of Rainbow Creek are on fixed incomes, including disability or Social Security. One resident in her 80s, who has less than $900 a month in income, said paying the new price for her apartment would mean she would have no money left for food or utilities. A two-bedroom, one-bathroom unit like the one she lived in for more than a decade is now being listed for $999 a month.

Cordell said she is particularly concerned about elderly residents, many of whom lived at Rainbow Creek for more than a decade. Some do not have immediate family nearby who could help or, if they do, they may not be in a stable enough financial situation to take on caring for a family member.

“They expected to live the rest of their lives here,” Cordell said.

Apartment sales

In 2020, there were more than $400 million of sales of multi-family housing properties in Hamilton County, nearly double the $233 million of multifamily sales in all of 2019.

> The 283-unit Bluebird Row Apartments at the Chattanooga Choo Choo sold for $63.15 million in March 2020, to Hamilton Zanze, a privately held real estate investment company in California. The purchase price was equal to $223,145 for each of the apartments, which was a record high for any major apartment complex sold in Chattanooga.

> The 316-unit Parc 1346 apartments off of Gunbarrel Road in East Brainerd sold for $46.8 million in November 2020. Atlanta-based real estate investment firm The Shoptaw Group paid nearly 60% more than the former owners paid for the property just six years earlier, according to the Hamilton County Register of Deeds. The purchase was the second highest price ever paid for an apartment complex in Chattanooga. The group also bought The Shallowford apartments in 2019 for $32 million.

> The 308-unit Marina Pointe Apartments on Lake Shore Drive in Hixson sold for $44.5 million in October 2020, to Capital Square Acquisitions LLC of Glen Allen, Virginia. The purchase price was nearly double the $23.2 million paid for the same property in 2013 by the Miami-based BC Property Invest LLC.

> In 2019, equity investment firms from New York to California spent more than $230 million buying rental properties in Hamilton County, according to property records by the Hamilton County Register of Deeds. Three major apartment complexes — Hunters Point and the Shallowford Apartment Homes in East Brainerd and the Riverview Grande apartments in North Chattanooga — sold for more than $30 million to out-of-town investment companies.

Source: Hamilton County Register of Deeds







A recent study from the University of Massachusetts Gerontology Institute found that more than half of older adults living on their own in the Chattanooga area do not have enough income to make ends meet without help. The Chattanooga area ranked 22nd among 100 metropolitan statistical areas across the country for the highest percentage of elderly residents facing economic hardship.

More than 50 people used Section 8 housing vouchers at Rainbow Creek, according to the Chattanooga Housing Authority. The vouchers, part of a federal program, subsidize the cost of apartments to make them affordable for low-income people, who then pay around 30% of their income on rent.

The local housing agency said it does not know how many people have found a new place to live. Tammie Carpenter, director of the organization’s Housing Choice Voucher Program, said the Rainbow Creek property managers are filling out the necessary paperwork for each resident to make the relocation process as smooth as possible.

Just before the pandemic hit last year, Riad began a job processing health insurance claims. Though she could work from home, the job was demanding. She worked from 9 a.m. to 8 p.m. six days a week.

Wednesdays were her only day off, and the only time she had to search for a new home. She put hundreds of miles on her car, driving to put in applications from Hixson to Fort Oglethorpe to Soddy-Daisy. Two of the leases she signed fell through.

“It’s been horrible,” Riad said. “All of my stuff, my entire home is packed up in boxes and in tubs right now. The only thing that’s not packed up is my desk and my computer equipment for my job. I was absolutely humiliated to have to call my manager and have to tell him I was getting put out of my apartment and had to convince people that it was for no reason. I don’t owe them a dime.”

Cordell has lived a similar, half-packed anxiety for weeks. She counts herself lucky compared to some of her neighbors since she can drive. But her black Chevy Trailblazer is a reminder of the community she is losing. She would take neighbors grocery shopping in her vehicle, she said.

“This community is like a family,” Cordell said.

Many of the longtime residents brought up their children at Rainbow Creek. Riad, who has lived at Rainbow Creek three times, raised her son there. Cordell is the mother of a teenage daughter there. The elderly who live alone check in on one another.

“It’s an entire community of people that these folks came in and just upended,” Riad said.


Harris, the pastor next door to Rainbow Creek, said she knows what Springer Capital is doing next to her church is legal, but it damages the community.

“We have outpriced our people, the citizens of Chattanooga,” Harris said.

Springer Capital owns about 21 other apartment complexes in six states and bought the Autumn Brook Apartments in Hixson for $14.7 million in early 2020. The new owners have since rebranded and renovated the complex.

According to the website for the complex, now called The Alden, the least expensive unit is $1,000 a month for 847 square feet. When Springer bought the complex, Farnoly said the average apartment included 1,052 square feet and rented for between $800 and $940 a month.

According to the Tennessee Housing Development Agency’s 2020 housing indicators report, about 22% of the city’s 84,000 renters are at “high risk” of losing their housing because they pay 50% or more of their monthly income toward housing, and another 22% are considered housing cost burdened, meaning they pay 30-49% of their income.

“We have people who have already lost their housing. Sometimes that’s legally and sometimes that’s illegally that people get evicted,” said Tyler Yount, who served as director of special projects for former Mayor Andy Berke. “And so, we have a lot of people on the streets that we need to house, as well. And that depends on landlords being willing to work with us, and take subsidies.”

The city faces challenges in developing new affordable units or making existing units affordable by repairing rundown homes or convincing more property owners to participate in subsidy programs. Either approach typically relies on government subsidies.

The patchwork of federal, state and local programs requires a lot of expertise — and a lot of patience — to work through to make affordable housing projects successful, said Heather Bradley-Geary, director of supportive housing for the Missouri-based Vecino Group, which has been working for more than a year to establish low-income housing in a property on West Main Street.

New funding through the American Rescue Plan Act will target the development of supportive and affordable housing for people who have been homeless, but it is a long journey between applying for funding and actually putting a roof over someone’s head, she said.

“I am a social worker,” she said. “I need to get people housed.”

In early April, Riad moved out of Rainbow Creek. Her new home costs about $100 more a month, but she is leaving Chattanooga. Instead, Riad will live in North Georgia.

“I am happy I found a place but it’s going to be bittersweet to leave here,” Riad said. “This was my safety net.”

Cordell is still looking for a home.

Staff Writer Mary Fortune contributed to this report.

Contact Wyatt Massey at [email protected] or 423-757-6249. Follow him on Twitter @news4mass.

Contact Sarah Grace Taylor at [email protected] or 423-757-6416. Follow her on Twitter @_sarahgtaylor.