- [Narrator] North Carolina is in the midst of a housing crisis.

We break down what's driving home prices up and what's being done to make housing more affordable.

This is "State Lines."

- [Announcer] Quality Public Television is made possible through the financial contributions of viewers like you who invite you to join them in supporting PBS NC.

[upbeat music] ♪ - Welcome to a "State Lines" special on housing.

I'm David Hurst.

Joining me today on our first panel is Town of Clayton Mayor Jody McLeod.

Jody, welcome.

- Thank you.

- [David] Erin Wynia.

Erin is the Director of Government Relations with the North Carolina League of Municipalities.

Erin, good to see you.

- Thank you.

- [David] Tim Minton.

Tim is the Executive Vice President of the North Carolina Home Builders Association.

Tim, thanks for joining us.

And finally, last but not least, Michael Jobe.

Michael is the owner of the Jobe Realty Group.

Michael, welcome.

- Thank you.

- Before we get to this important conversation though, let's take a look at the issue.

2/3 of Americans say it's hard to find an affordable home where they live.

The high cost of housing is driven in large part by the fact that there just aren't enough homes.

Let's look at how the housing crisis is impacting us here in North Carolina.

[traffic noise] - [Reporter] North Carolina is one of the fastest growing states in the country.

The migration is driving up demand for housing.

Economics teaches us that if supply remains unchanged with demand increasing, prices rise.

That's been the case with housing.

Since 2010, the price of a home in North Carolina has increased by 31.5%.

- We started going into the Raleigh market where it was really, really competitive, really, really expensive, and it was really, really disheartening.

- Yeah, you start to question like, what am I gonna do?

Where do I go from here?

What's my next move?

And you know, it got to the point where I started looking at apartments.

- [Reporter] Other factors driving up the cost include high mortgage rates and scarce housing inventory.

It's estimated that North Carolina needs 900,000 new homes over the next decade to meet the demands of our growing population.

- Michael, lots of numbers and data there.

What are you seeing as a realtor?

- There is a huge issue right now with affordability as well as a lack of inventory.

A lot of home buyers are kind of locked into their lower interest rates and the current interest rates hovering around 7%, 8% doesn't work for a lot of buyers.

Just in the last couple of months, I've had three or four clients who would've bought homes here who had to drop out of the market because they can't afford what they want.

Even had one who was considering moving to Winston-Salem, and these are all younger buyers who wanna put down roots here in the Triangle, but simply can't afford to currently.

So I probably sound like a broken record saying it, but high interest rates and low inventory, they just create a perfect storm of no buyers able to buy what they're looking for.

- And we'll circle back to the interest rate conversation a little bit, but first, Mayor McLeod, what are you seeing in the Town of Clayton?

- You know, in the Town of Clayton, we've been growing exponentially for the last several years.

And for us we're seeing a huge amount of increase in growth and building town homes and single family homes.

And the market is strong.

One of the greatest issues I think for us is that we're trying to make sure we've got a nice package of homes to be able to offer to people who want to come to live in Clayton at various price points, making it affordable for teachers and firefighters alike to be able to afford their own home.

- And Erin, you work with a lot of towns like the Town of Clayton.

What are communities telling you are some of their biggest challenges with housing affordability?

- Right.

We definitely hear from elected officials across the state at the local level about this topic.

And it's something that they feel really acutely at the local level.

The reasons though, are different depending on where you are in the state.

In the fast growing areas of the state, we've had an influx of people coming, it drives up the cost of land.

There are other cost inputs that also are increasing right now as well.

And that definitely contributes to the affordability issue.

In more rural areas, it seems that the problem is more related to the fact that the incomes haven't kept up with the cost of housing in those areas.

Tourist areas are another matter altogether.

Trying to get housing for people who service those tourist areas in areas that have a lot of second homes that are usually very expensive, that's difficult as well.

- Tim, help us understand what's at stake here.

Why is this important?

What does home ownership afford an individual?

What kind of opportunities does that create?

- Well, for all our citizens, it's the best investment we can make.

It's the biggest investment we all make.

Unfortunately, our studies show about 42% of households in North Carolina can afford a single family home.

And that's just those that are here today.

And so we just wanna make sure we can do everything we can to make sure everybody can buy that first home.

Because if you can't get the first one, you're not buying the second one or the third one.

And so, this I think has become probably the most important issue facing North Carolina now with the growth that we've seen in the state and all the businesses coming to North Carolina.

We've gotta have the houses to provide for those workers who either already live here or will move here.

- And Michael, you said we can't have this conversation without talking about interest rates.

What impact are those high rates having on the real estate market?

- So from my experience, it's making payments out of people's comfort zones, kind of breaking the budget so to speak.

You normally don't wanna spend more than around 30% of your monthly household income on your rent or mortgage, but with interest rates as high as they are, someone looking at a four or $500,000 home may be paying half of what their monthly household income is just on their mortgage, not including the bills.

So that is what creates the problem is that people are essentially house poor if they're gonna buy a home.

- And Erin, a lot of people deciding to stay on the sidelines instead and rent instead of buy for the moment, at least till those rates go back down.

What impact is the housing crisis having on the rental market?

- Sure.

Well, it certainly seems like rents right now are out of reach for a lot of folks.

And when that happens and you can't house everybody in your community, you see increase in homelessness as well.

And that's been an issue that local officials and many communities across our state, including some smaller ones that you'd be surprised at.

It's really difficult for them to deal with.

And when you're talking about building new construction, new rental units in your communities, those are subject to the same market forces with increased interest rates.

It is more expensive to build and therefore you have to charge higher rents.

It's really difficult.

- Tim, pick up on that.

What's the new construction housing market looking like?

We heard in that story, North Carolina needs about 900,000 new homes by the next decade in order to keep up with the growth.

What are you seeing?

Are we close to getting to that point?

- Oh no.

I mean, working for the Home Builders Association, it's great to hear, that means I'll have a job for the next 10 years.

But I mean the challenge is, and I think the story hits it on the head, it's supply and demand.

And North Carolina's gonna have to look at the issue of density.

We are gonna have to build more dense product, whether it's apartments, whether it's town homes, duplex, quadplex, all those different types of opportunities that are out there.

And the challenge is, I mean, especially the mayor faces this challenge.

He has residents who quite frankly don't want anything else built.

And so he's trying to balance the needs of his constituents with the needs of the folks who will be moving to that community.

And it makes it very hard for them trying to make decisions to create density, for example, when he'll have a lot of the folks that he has to answer to saying, "No, I don't want that."

- So Mayor, your thoughts, how do you balance keeping up with the growth while also preserving that small town feel?

- Well, you know, I think the balance of keeping up with the growth is you're always behind the curve on that.

And, you know, it's very challenging.

For us in Clayton, the average age is 35-years-old and a lot of those millennials don't really want to necessarily have a binding mortgage payment every month.

They would rather pay good money in rent so that they have the flexibility to up and go.

So it's a little bit different for us.

You know, we average 500 new townhomes built in Clayton annually.

We have over 4,500 that are either approved or in the process of being approved combined.

So we hear the message, we see what the future is holding, and we're taking action to make sure and planning to make sure that's gonna, Clayton's gonna be sitting right where we need to be sitting and keeping that balance of working with developers, and finding out what their needs are and really listening to people when it comes to how much traffic is on the roads and how much the schools are at capacity and all of that.

It all comes into play.

- And Tim, you alluded to this, but one way communities have been trying to help with the density is loosening their zoning restrictions.

What impact does that have on helping with our housing shortage?

- Well, I mean, the regulatory side has a huge cost when it comes to housing and when it comes to zoning, I think that really is the biggest challenge moving forward, addressing this issue of affordability.

When zoning was first created, it was residential and industrial, but now with residential you got R1, R2, R12, R50, R whatever.

And I think part of that is to help create that mix.

But also part of it is, I mean, Charlotte, at one point, 84% of their zoning was single family homes.

They've now changed that.

They've done some really good changes in terms of sort of solving that.

But I think that as we move forward is the whole issue of zoning and the process you have to go through for approval.

Pretty much every project today has to go through a rezoning process and that takes time, that takes money.

There'll be exactions as part of that process and that increases the cost as well.

And so I think that's something from a policy standpoint as we move forward, I think that's something we're gonna have to simplify and put shot clocks on to make it create more certainty in the marketplace.

- And Tim, if I can pick up on what you were saying about cities changing their codes to increase density, it is something they're paying a lot of attention to right now.

We did a study and a survey earlier this year of the fastest growing jurisdictions in North Carolina.

And over 2/3 of them reported back to us that they had loosened their zoning codes to increase that density.

They had reduced parking requirements, which helps free up land that you can put a home on instead.

They're looking at a lot of these different types of solutions to try to help generate more construction at the local level.

- And actually the density issue is not so much in the cities 'cause it's actually more in the rural areas where you have minimum one acre lots.

And that creates, that's an additional cost.

And so we, yeah, we really don't see it so much in the cities.

And I commend Durham, for example, who just addressed the parking issue.

So we're really seeing a lot more thinking forward in the sense of how to handle this but unfortunately that's not the case everywhere.

- Yeah.

For us in the Town of Clayton, we just, most recently, over the last year and a half completely redid our unified development code and meeting with developers to understand what their needs were and how we could get in alignment with what better suits what they're trying to get done to provide for everybody.

And it's been a huge plus for us to have the whole, I mean, it took a year and a half to get that code completely redone, but now it's in effect and it's been super beneficial.

- Michael, do you see a desire from home buyers for these types of homes, these duplexes, triplexes, ADUs?

- Absolutely.

I actually had a couple recently who didn't wanna buy a house where they couldn't put an ADU in the backyard for their parents.

So back to what they were saying as far as ADU's and zoning ordinances and whatnot, it has to be a collaborative effort.

And for a long time, at least from my experience, I think that a lot of developers and builders didn't have the best relationships with the townships and city council and whatnot.

I think that everyone's finally realizing that if we're gonna solve this problem, it's gonna take some teamwork and we're all on the same team, but buyers are at this point getting desperate to the point where they're gonna take what they can get as long as it checks their needs box and they'll sacrifice their wants box.

You know, as sad as it is to say, an entry level home in the Triangle right now is well over $300,000.

If you see anything under that price point that isn't a tear down, it's probably not gonna be the house that you want.

It's gonna be in pretty rough shape until you get further out of the Triangle proper.

But to answer your question, yes, buyers are, they're at a point of desperation where they'll take what's available.

For people who have to move here, it's not an option to not buy.

They go and look at rent and talking about how expensive rent prices are, that same three bedroom, two bath house that you can buy and pay a 2,000, $2,500 a month mortgage payment may cost you an extra 250 to $500, which squeezes the budget for a lot of people.

So as much as buyers, first-time buyers especially, want to buy their dream home, unfortunately that's just not the case.

A lot of people are just settling for what they can get.

- Erin, we've got about a minute left.

We'll give you the last word here.

Help us understand a little bit more about what are some other things communities are doing or maybe just one community has done to help with the housing crisis that encourage you, that inspires you.

- Sure.

Well, I think it is difficult always for local officials to make these whole scale changes like what Mayor McLeod was talking about with their unified development ordinances because there is this tension, Tim, you alluded to that as well.

There are people who have lived in those communities for a long time.

They like 'em, they like it to stay exactly the way it is, and you as elected officials have to really reconcile that with the need of these newcomers to your communities.

And so it has been inspiring to us to see communities like Clayton across the state taking a hard look, saying there are things we can do to improve this.

We can allow, without any further approvals, duplexes, townhomes in areas that maybe were just single-family before then.

Other innovations that maybe will in some ways address the crisis, but certainly not like a single silver bullet would be something like accessory dwelling units or ADUs where you can build an in-law suite in your backyard.

The city of Raleigh has plans pre-approved that any homeowner or landowner could take and then build on their property.

So those are some of the innovations that our cities are experimenting with right now.

- And Mayor, you brought her on just so she could brag on your town, is that correct?

- Absolutely, I've never been more proud to be a member of the North Carolina League of Municipalities and the great work that they do representing every city, town, and village in the state of North Carolina.

Thank you.

- Thank you.

- Well, thank you all for your great work on this topic and for your insight and perspective.

Appreciate your time.

- Thank you.

- Thank you.

- Thank you.

- We just talked about how many communities across our state are working to address the housing shortage through zoning changes.

Let's look at the impact of these changes on the housing market.

- [Reporter] Cities often respond to growth by building more apartments, but not everyone wants to live in an apartment.

So several North Carolina communities, including Charlotte, Raleigh, and Durham, have loosened zoning restrictions to allow for what's called missing middle housing.

Missing middle is a term that refers to housing that falls between single-family homes and apartments like duplexes and town homes.

It's referred to as missing because zoning laws in many cities have made it difficult for builders to build these kinds of homes in single-family neighborhoods.

- What the missing middle housing is supposed to do is allow these neighborhoods to preserve their built character, but provide more housing options for people with different stages of life for whom a detached single-family house may not be something they can either afford or is the right type of housing for them at the stage of life that they're at at that moment.

- [Reporter] The North Carolina General Assembly has tried to pass legislation to create more missing middle housing by freeing up certain housing projects from local zoning laws.

Most recently, a bill with bipartisan support wanted workforce housing to sidestep local regulations.

Regulations that typically limit factors such as density, design, and lot width.

But some communities spoke out against the bill saying it could strip municipalities of their ability to control planning and zoning.

- And joining me now is North Carolina Representative Vernetta Alston.

Vernetta serves Durham County.

Thanks for joining us.

As well as Senator Paul Newton.

Senator Newton serves Cabarrus County.

Thank you to you both.

Before we get into the politics, what we just heard talked about, I'm curious to learn a little bit more about what's going on in your respective districts as it relates to housing affordability.

Representative Alston, we'll start with you.

- Sure.

So in Durham we've tried very hard to be creative about solving our housing issues and still housing affordability is a huge issue.

You know, housing prices have gone up 15, 20, sometimes 30% in a lot of areas and that's due in large part to our growth.

You know, we're still on pace to double our population in the next 25 years.

And so with that it comes this increased demand for housing and we have less developable land.

And so I hear all the time about folks who are working in Durham but have to live in Person county and in Alamance County or Chatham County because they simply can't afford to live in Durham, which is a problem.

And so I think all told it's the problem is just, even though we've tried to be creative, the problem is outpacing the solutions that we have in front of us.

- Senator, what about Cabarrus County?

- Sure.

So Cabarrus County is one of our fastest growing counties in the state.

People have learned that it's a great place to live, work, play.

And so we've got lots of people wanting to live there.

So all the problems you've already heard about and that the representative described, we're not immune from those.

So we have the same challenges.

- [David] Where does this rank for you as a legislative priority?

- Very, very high.

My perspective on this is having now attempted and sponsored a couple of bills to try to get at this problem and having gotten the phone calls from local government leaders saying, "No, we don't want this, you know, exempt us from this or don't go forward with this," you know, it raises a challenge in that we need to solve this, we need to do the hard things to solve this because as you opened this show, it is a crisis.

So local government units do not want us to legislate this and they shouldn't, right?

Because we tend to err on the side of one size fits all.

So I would like to encourage and incent our local government units to find solutions that work for them in their cities, in their counties so that we don't have to legislate, that would be the ideal outcome, but their solutions are in fact effective.

And as we continue to bring job creators to North Carolina, we have homes for those new employees to live in.

- And Representative Alston, you have kind of a unique perspective here.

You used to serve on the Durham City Council, so you've been on the local side.

Does that kind of collaboration, how does that look as it applies to kind of approaching this as a state level?

- Sure, sure.

My local experience definitely informs I think how I approach this issue.

And if anything, it has taught me that this is a really difficult issue for us to solve at the local level, but also at the state level, I think, which just begs the need for us to work together as partners to try to solve this issue, whether it's just the practical realities of development or the severe impact of the market, which we heard about or just meeting what are unique and sometimes very different needs and wants of individual communities.

And so approaching all those things I think will require, like I said, just partnership.

And so that's something that I've learned and I've also learned that I think all of our goals are pretty much the same.

How we wanna get there I think can differ, but I think our shared goals is something that we have to prioritize as we look towards partnership in the future.

- And Senator Newton, you had mentioned some of those bills, where do we go from here?

How do we make sure that collaboration continues and we get on the same page?

- Right, so I have encouraged the League and the Association of County Commissioners to bring their memberships together to bring a proposed solution to the legislature.

So as I was driving here this morning, and we don't typically write legislation on this show, I know, but this is what came to mind.

What if, you know, it's a given that these communities know what they expect in terms of population growth, right?

So they can also calculate at least roughly the number of new housing units they need.

They can also take a stab locally at what affordable housing they're gonna need, workforce housing they're gonna need in the next decade.

And so what I would like to see is for local government units to have the autonomy to develop the solutions themselves there locally so we don't do that for them, but I would like to see a commitment that a certain percentage of their home building is going to be affordable or workforce housing.

And if they could do that and hold themselves accountable and just let the legislature know what the plans are kind of around the state, that would be so meaningful to us.

And I believe it would forestall any need for state legislation that I promise you as sure as I'm sitting here, most local government units would not like what we came up with because it would be one size fits all almost necessarily.

- And since you came up with this on the show, "State Lines" can be a co-sponsor, correct?

- Come on, we're gonna collaborate and we're gonna solve this problem.

- Representative Alston, outside of zoning, what are some other solutions you and your colleagues may be looking at to address this issue?

- Sure.

Well I think funding is always a big one.

It's a huge hurdle kind of for any step in the process.

So I've always been supportive of funding our statewide programs, whether it's workforce housing loan program or programs for home buyers or our housing trust fund.

But also I think we need to, again, in the spirit of partnership, kinda look towards incentives that actually work and towards looking at incentives that can be geared towards our local governments so that they, I think, again, just have incentive, have a reason to come to the table to talk about the types of regulation that I think are making processes longer, more expensive and more inefficient for builders.

So I think we have to have those conversations and really entertain the struggles that we're seeing kind of at the state level, but also the ones that our local governments are encountering.

- What impact do housing bonds play?

Durham passed a pretty significant housing bond a few years ago.

What impact can those have on the housing market?

- I think they can have a tremendous impact.

You know, speaking from my experience in Durham, I was on the council when we passed a $95 million housing or our voters passed a $95 million housing bond, which again, just funding is just huge.

It provides flexibility, obviously provides capital in a lot of instances.

In Durham, it gave us great leverage to work with other development partners to produce thousands of units or to plan to produce thousands of units of affordable housing, to try to maintain existing affordable housing, to create bridges and programs again for home buyers to deal with emergency sheltering issues for the homeless.

It just instantly, or maybe not instantly, but in pretty quick order just for, it's such a huge tool to have to try to build and preserve at scale, especially the scale we need in Durham.

- Senator Newton, we'll give you the final word here.

Should we expect any movement on this issue in the upcoming short session or should we expect to wait till after the elections?

- No, I think you'll see movement in the short session.

That doesn't mean we're gonna legislate a proposed solution.

I think you're gonna see a lot of dialogue, a lot of discussion between the League, the Association of County Commissioners, and legislators, because we know many of us have this as a very high priority to bring a solution to.

And I think if the League and the the Association are doing their due diligence with their members and informing us of creative solutions like Durham, like Clayton, I know in my county some of the mayors, the Mayor of Concord, the Mayor of Kannapolis, in particular, our Chair of our County Commission, they're coming up with localized solutions.

Legislature doesn't necessarily know about that.

And we need to be able to aggregate those solutions to make sure it's gonna have an impact across North Carolina.

And so we can only do that by understanding what steps are being taken, what the effect's gonna be.

So I see stakeholder processes between now and the short session and during the short session, but whether we actually pass legislation, who knows?

- We'll be on the lookout for it.

Thank you for joining us, we'll see you next time.

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