Tennessee did not build enough homes to keep up with the people moving here, and the pressure has spread well beyond Nashville, Memphis and Knoxville.
That is the main message of a new brief from the Sycamore Institute, the Nashville-based nonpartisan policy research center. The October report, "Housing in Tennessee: 6 Insights about Housing Trends and Policy Trade-Offs," is part of a series the institute is releasing for the state's next governor and General Assembly.
A decade of falling behind
The brief says homebuilding slowed sharply during the Great Recession and, despite a recovery in the 2010s, "never fully caught up with population growth and rising demand." The pandemic made the gap worse.
Much of the new demand came from people moving in from other states, often from higher-cost, higher-income places. Sycamore points to Los Angeles, Orange and San Diego counties in California and Cook County, Illinois, as top origins for new Tennesseans in 2021. Their median household incomes and home list prices ran far above those of the Tennessee counties where people landed.
The brief calls housing the single largest expense for the average Southern household. It says housing costs, including rent or mortgage, taxes, insurance and utilities, made up about one-quarter of average household spending in the South in 2024, measured against pretax income.
People also moved around within the state. Using IRS migration data for 2021–2022, the brief shows Davidson County losing residents to its neighbors. The biggest flows went to Rutherford (6,491 people), Williamson (4,438), Wilson (3,794), Sumner (3,482) and Montgomery (2,221). Shelby County's largest outflows went to Fayette and Tipton counties, and Knox County's went to Anderson.
One way to measure supply is "months' supply," which compares homes for sale with recent sales. Sycamore says four to six months is generally healthy. Tennessee hit a low of 1.5 months in January 2022. It has improved since then, which the institute says shows supply catching up with the pace of sales.
Costs spreading to small towns
The brief says housing costs rose faster than incomes in many areas, and that in the years just before and after the pandemic the strain reached "suburban and rural communities that haven't typically faced them." In some cases, smaller and rural areas saw the gap between incomes and housing costs grow faster than in cities.
There are signs of easing in places. Memphis and Kingsport-Bristol saw slight dips in median home prices in early 2026. But the statewide median sale price hit a record $360,000 in 2025, according to the brief, and prices rose in most counties.
Sycamore also lays out the policy tools that shape what gets built and what it costs: zoning, minimum lot sizes, density limits, building codes, permitting and infrastructure requirements. "Policies that limit density or require larger lots can constrain the number of homes that can be built, while streamlined approvals or greater flexibility can make development easier," the brief says. It adds that extending roads, water and sewer can raise costs where existing systems lack capacity.
The brief highlights recent changes, too. At the federal level, the 21st Century ROAD to Housing Act was signed into law in July 2026. In Tennessee, a 2026 law set deadlines for local governments to review development applications, conduct inspections and release financial guarantees on projects. The state also expanded the authority of industrial development boards to support eligible affordable housing and public infrastructure.
Sycamore is careful not to oversell any of it, saying the effects of these changes "remain to be seen" and "will depend on implementation."
Why it matters for Contractors
The brief puts numbers on a shift that matters for anyone building outside the big cities: demand has moved into the suburbs and small towns. The county-to-county migration figures for Rutherford, Williamson, Wilson, Sumner and Montgomery show where much of Middle Tennessee's growth landed.
The new state deadlines for application reviews, inspections and the release of financial guarantees could matter on job sites. Slow inspections and guarantees held up after the work is done cost contractors time and cash. Builders should learn the new timelines and know what to do if a local government misses one.
The brief also notes the trade-offs. Higher-density projects and faster approvals can lower costs, but Sycamore says they can strain infrastructure and stir up opposition from neighbors. Its point about infrastructure is worth remembering in fast-growing counties, where the brief says extending roads, water and sewer can add to development costs.