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- I'm Laura Ullrich filling in for Chris William.

Welcome to the longest running and most widely watched program on Carolina business policy and public affairs.

This show is aired weekly in North and South Carolina for over 30 years.

So what's currently going on in the housing sector in the Carolinas?

In many urban spaces demand has been up and available supply is down.

The result, higher prices that exacerbate already existing affordability issues.

In the more rural parts of North and South Carolina, the housing supply is aging and demand is much more uncertain.

We've assembled a fabulous panel of regional experts today to discuss these issues and more.

Our conversation on housing starts now.

- [Announcer] Major funding also by Blue Cross Blue Shield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association.

And Martin Marietta, a leading provider of natural resource-based building materials, providing the foundation on which our communities improve and grow.

On this edition of Carolina Business Review, Dan Horner from True Homes USA, Mark Etheridge of Ascent Housing, Darren Goss, Sr. Coastal Community Foundation and Rob Clemons of the Home Builders Association of South Carolina.

- Thanks guys for joining us today.

It's really exciting to see all of you here.

You're all new to the show, all four of you and it's my first time hosting, so what could go wrong, right?

- Bunch of rookies.

- This is gonna be great though.

And the topic we're talking about is one that I think just about everyone in the US is interested in in one way or the other.

It's such an important topic.

So Dan, let's just go ahead and jump right in with you.

So I know I saw the Redfin numbers from May and they showed that year over year growth in prices in South Carolina was up about 2.1%.

North Carolina 2.9%, but home sales were down by over double digits.

So what's going on there?

What's driving those results?

- When we look at the basics of what's happening on the affordable housing crisis, it's really being driven by macro dynamics that people wanna live and work in the Carolinas.

There's a reason we all live here and there's a reason people wanna live here.

And what's been happening over the last several years is we've had meaningful job growth and quite frankly, the ability to deliver enough apartments and homes to meet the job and and demographic growth, we just can't keep up.

And the best example would be is you said sales are down, but the months of supply are down even more.

And months of supply is what really is what's driving housing affordability and the prices that we're seeing in the marketplace.

- So are you seeing that across the Carolinas or is it only in certain markets where you're seeing those issues?

- We build in North and South Carolina and all the major markets and it is everywhere.

And it began the middle of last year and the supply is getting worse, it's not getting better and we didn't see the increase in the spring.

The spring supply did not show up.

And so in our sector of new home construction, there's more demand for what we are are providing because there aren't enough resale homes on the market either.

- Right, right.

So, so Rob, Dan mentioned something interesting cuz he said there's a reason we we're all here, right?

There's a reason why people wanna live in the Carolinas and both North and South Carolina have seen such large in migration numbers, but before COVID too, but certainly kind of post COVID.

So what about all these people that are moving in, are we able to keep up with that demand with the supply of housing?

I know you're in South Carolina.

- Yeah.

- What are you seeing?

- Oh, it's a great question.

Well, first of all in South Carolina we have some of the hottest housing zones in the whole country.

If you look at the Myrtle Beaches and the Hilton Heads and Greenvilles, I mean the places like this, you do have a large migration of people coming from New York, New Jersey, Massachusetts.

So do we have enough supply to keep up?

And the general answer is it's touch and go a little bit.

If you come into a typical housing market and you look at the MLS, you'll see that there's not a ton of supply out there and so building is more important than ever.

And having good building lots and having people getting into the industry and actually helping us build those homes, it's all very critical.

So we're definitely seeing that we're barely keeping up.

And I think that the other thing that's important to know is that the home prices are actually, at least in the Myrtle Beach market, slightly improved over last year.

And I mean upwards a little bit, and that's a little counterintuitive because we've all heard so much stuff about that, but still a very good time to get into the market and in particular in the hot markets.

- Let me add one thing on that point.

- Yeah, absolutely.

- In markets like Charlotte, Raleigh, some of our larger urban metro markets, for example we're sitting in Charlotte right now and in the last 12 months we've nearly, the success of our state is we've had nearly 60,000 new jobs in Charlotte to put that into what does that mean for housing demand, that means the housing industry needs to build about 38 to 40,000 new homes just to meet that additional population growth.

In the last same period of that 12 months, we built about 18,000 homes.

- Wow.

- And so we are falling way behind in supplying what our state is attracting.

- So, so given those stats, and given what we're talking about, when does this start becoming an issue with economic development?

Because we've had a lot of big economic development wins in all the places that you guys live and work and they continue to come, but at some point we've gotta bring workers in, right?

We know some of them are gonna come from outside of the Carolinas.

When does housing start really becoming an economic development issue, you think?

- Well and I do think that ties right into what we just talked about.

The fact of the matter is is you have to have attainable housing and in South Carolina we started talking about attainable, not just affordable.

- That's right.

- Cuz what does affordable mean?

If you're a millionaire, a lot of stuff's affordable, but for your typical household, it gets tough.

And there's stats at the National Association of Home Builders put out a research study in 2019 and I'd say it's still about the same now that every time a house goes up in value a thousand dollars that nationwide you can X 128,000 people out of buying a home that they would qualify for.

So we need to be continuously looking at making homes that people can afford to live in and let that work for us, get into town where they need to work so- - Darrin, what were- - Yeah, I was gonna, what I was gonna say is I think there's the in migration of talent from other places, but there's also the people who actually are here.

- Right.

- And those who return to the Carolinas, who have family here who have grown up here and are looking to come back that don't see themselves as necessarily from off.

- Right, right.

- But are here.

And so I think the economic development challenge already exists.

If you have to travel and drive 45 minutes to an hour, we say in the Charleston area, you drive until you qualify for housing, then that has a dramatic effect on teachers, on firefighters, on police officers, on the nonprofit sector in particular.

And those who we in service, in the service industry, who we depend on every day to provide service to this region.

And so I think the problem is already here.

And I think we need to address that as we think about the availability of housing.

- Yeah, absolutely.

Any comments?

- Well, it's all connected and it's not just economic development, but it's also recruiting and retaining employees.

And we've seen in Charlotte efforts to recruit teachers to our public school system and the healthcare system, jobs that we all need and rely on this community are becoming more and more difficult.

And unfortunately for a lot of income brackets, they're very strained on finding an attainable place to live in Charlotte.

And so it either exacerbates their commute or their ability to get to work or maintain that job.

And also for the organization or for the community at large, it mitigates their impact to really serve the community.

And so I think I agree that it's here and I agree it's a challenge that we have to confront.

And I agree that in some ways it's a self-perpetuating cycle.

- Right.

- And so it's something that we really need to be top of mind of across the region.

- Really interesting.

So Darrin, you know, I know it's not just housing demand that's driving prices up.

- Right.

- What else is pushing prices up in the area that Coastal Community Foundation serves?

- Yeah, at every level it's regulatory requirements, additional costs of impact fees.

There are additional requirements for how much you have to lift raise the houses off the ground a certain amount that carries with at an additional cost.

And then there are some things that we hold near and dear to our heart.

And in the low country of South Carolina, we love our coast.

And so conservationalists will tell you that density is not necessarily a great thing.

But when the cost of land acquisition is what it is, that creates a challenge for affordability.

And then the last thing, and I think it's an unintended consequence of the region in which I serve is our preservation community.

It requires a lot of money to bring certain homes up to those standards.

- [Laura] Right.

- Where people who live in those homes, who occupy those homes, may maybe can't afford that.

And that creates an escalation of housing costs that become cost prohibitive for middle income working class people.

- Other comments, Dan?

I mean, from your viewpoint as a home builder.

- I would add that the challenge of we're saying, we need workforce development.

We want more jobs, we want to see our economy grow.

And a lot of times that's being driven at a state strategic level or maybe even a county level.

But what happens is the housing to support that is done at a local level.

And that's where individuals see the local impact of people moving in.

And through that dynamic, the local municipalities aren't aligned with the state leaders to say, hey, how are we gonna collaborate- - That's right.

- With all of the jobs that we're gonna bring into your area.

And so we see in the business paper, hey, you know, 20,000 new jobs, 10,000 new jobs, billion dollars of investment, but there's no collaboration or cooperation with the local municipalities say, and how do we have those individuals work in our community and how do we have them participate in our community if they're gonna come and get these jobs?

And that's where I see a major disconnection.

- Right, really interesting point.

I wanna make sure we spend a good amount of time talking about solutions to these issues.

Cuz clearly affordability is a tremendous issue.

Mark, in the work that you do in the affordable housing space and workforce housing space, what solutions are you seeing that are working or have the potential to really work?

- Well, I think we've seen a sea change of new investment and attention paid to the affordable housing space in the last five years.

If you think about private sector engagement, a decade ago or two decades ago, it was really limited to a couple lanes, the low income housing tax credit vehicle, which has been around since tax reform in 1986.

And there really wasn't a myriad of options outside of that for the private or the philanthropic sector to get engaged in partnership with the public sector on this issue.

We've seen not only different project types and funding strategies, but also new players come to the table here in Charlotte and in many of the metropolitan areas across the Carolinas.

And I think that is really compelling.

The problem is we're still not meeting the demand enough.

- [Laura] Right.

- So in Charlotte we used to build 312 affordable housing units a year up to 2018.

We have anywhere from a 30 to 55,000 unit deficit at 80% and below units.

We really need to be creating between 3000 and 5,000 units a year.

We've probably gone from 312 to something north of a thousand.

- [Laura] Right.

- But we've gotta take that 3X in production and really do it again and sustain it for a quarter century for us to really be at a place where we're ending housing security in this region.

- Wow, that's overwhelming to think about.

- It is.

- So I'm curious too about maybe some solutions that provide a bit of a stop gap there, because thinking of this as kind of a quarter century project, which I think is important to do can be kind of overwhelming, but I'm curious Dan, about the idea of accessible dwelling units.

So could you let people know first of all, what is an accessible dwelling unit an ADU and why is your firm and why are other people interested in these as a potential solution?

Especially in the Charlotte area.

- ADUs are a standalone kind of a, let's call it a mini home.

In Mecklenburg County where we're at, it can be up to 800 square feet and it can be behind an existing property.

In Mecklenburg County by right, you can add an ADU as long as you don't have deed restrictions saying that you can't.

We've done an assessment in our market, there's over 120,000 people in our county who could say yes in my backyard.

And so they're completely empowered to say yes in my backyard.

And these units are perfect for family members that you can care for.

It's great to have individuals where you can provide really affordable rent in those solutions.

The challenge with ADUs is that there currently does not exist a meaningful funding mechanism to help the individuals who say yes in my backyard, to do that.

We are seeing meaningful movement to try to bring structural solutions in that arena.

And we believe if we do that with trying with a need to add so much more supply- - [Laura] Right.

- This is a meaningful way we believe it can happen in our community.

- Really interesting.

Rob, are there other things that you've seen or heard about in your role that seem promising?

- Yeah well the first thing I think is I'm gonna take a more working with your legislator side of things.

- [Laura] Okay.

- Because one thing that happens and I think it's gotta be tough to be a legislator who your constituents are looking to you to make decisions and it's always hard to say we're gonna have to have tax increases or whatever may be the case.

So a lot of times low hanging fruit comes down to your businesses and your builders and we impose regulations and there are stats that say that up to 30% of the cost of your home can be regulatory in nature.

And we're talking about impact fees and license fees and things like that.

So I think sometimes we need to work with our legislators to make sure they understand the impact of that on the affordability of homes in the overall.

And also I think an important and understated part of that is that we have to understand the value of building homes to a community.

- Right.

- For each new home that's been built, it's shown that that creates about the equivalent of three full-time jobs for a year.

And we talk about the strength of this nation, you talk about home ownership, being able to have jobs, right?

And that's two things that happen.

So sometimes it's natural for legislators to say, Hey look, we need to control things, we need to get more money in from this.

But we have to be careful to make sure we understand the value of home building and never to cramp it unnecessarily and unintended consequences of the raised prices of doing so.

- Right.

- And so Darrin, from your view, you lead a large nonprofit, what is the role for nonprofits and funders in this ecosystem?

- Yeah, I think we can play at least three roles as foundations and funders.

One is, and something we we've been doing for the last five years is creating what we call an impact investing fund.

Providing capital to nonprofit developers who are developing units, working with folks to create what we call the financing lasagna to get products done.

I think that's important.

The second thing is this idea that in some communities, particularly rural communities that you mentioned at the top of the show, where homes are becoming blighted, is to help people stay in those homes.

- [Laura] Mm.

- And through programs that we would offer funding for, we would call owner-occupied rehab.

And that's good for infill, that's good for really bringing up the value of homes so people don't actually end up losing it in the long run.

So that's a second way.

And then the third way is really investing in the capacity of smaller developers who can do projects from five to 10, 25.

It's not the big projects, but those all make a difference against the bottom line of need.

And so I think funders, nonprofits, getting aligned to the point made earlier around what the needs are and the opportunities are from an economic development standpoint, sort of growing that same direction is where we are.

- You mentioned the rural part of the area you serve.

- Yeah.

- And you do have quite rural places in your service area.

What are the differences that you see there in terms of housing demand, housing supply prices?

- Yeah, it's the uncertainty of if you build it, will they come right?

- [Laura] Right.

- Right?

But we also know that because that land tends to be a little cheaper, a little less cost for acquisition, that's very attractive attractive for developers.

And so trying to preserve a sense, a lot of that property is heirs property, which is generationally hard to deal with.

And so that creates a situation where gentrification could happen.

- Right.

- And so for rural communities, the complexity of that development, acquiring the land, understanding what the real needs are are so important.

So organizations like the Center for Heirs Property Preservation, headquartered in Charleston, but serves both North and South Carolina, is a good partner in helping work with families to determine the best use of their property on projects like this in terms of affordability.

So it's unique in rural communities- - Right, right.

- But again, I think it's an opportunity if we approach that from an abundance mindset and working with those communities.

- So Dan, I'm interested in kind of the private sector response to some of the things you said.

Are you guys building in more rural places now than you did previously?

- We are and it's true.

Our industry, I've been in this industry for 33 years and the principle's always been the same, drive until you can qualify and people wanna be as close as they can to qualify.

And what you're seeing and it is necessary is more density.

You are seeing in many markets where you could have gotten a single family home five years ago, you're now getting a town home because all of the costs have gone up.

COVID has structurally changed housing.

- [Laura] Right.

- Everything has worked against us.

Land prices are structurally going up, hard costs have permanently gone up.

We're not seeing any meaningful decrease in hard costs.

And through that process we've gotta come up with creative solutions.

And so town homes are part of that.

- That's right.

- To increase density, lower our per unit cost.

But also, for example, this year now we have an initiative to deliver affordable homes in our markets under $300,000.

Well, we sold about 250 so far this year.

The vast majority of those have been further out locations.

- Oh interesting.

Really interesting.

- The ones that are closer in have been through our foundation where we have literally been willing to go in and subsidize and bring prices in with a deed restriction as well as higher density through town homes.

- Yeah so Mark, he's mentioning density, which I hear about a lot and read about often.

And we live in a area that is pretty anti-density, the Carolinas in general.

Does density have to be a part of the solution?

Like what are your viewpoints on that?

- Well, it has to for a couple reasons.

One is obviously density brings the cost per unit down for developers, which makes that cost for the ultimately owner of that housing unit better.

It also is gonna make more cities more vibrant because the cost to deliver services to dense environments is much more efficient than it's to sprawling environments.

And so if we're gonna keep healthy vibrant cities in our metropolitan areas in the Carolinas, we're gonna have to have density so the tax base can cover the services that all this surge and population is gonna bring to us.

The problem with gentrification and densification of places like Charlotte and Raleigh and Charleston and Greenville, South Carolina, is that it puts a lot of that existing housing stock in a really vulnerable place because now you're getting to the point where land values are almost in excess of what a 1970s age building is worth.

And we recently went through an opportunity bidding on a 266 unit property built in 1971, where folks who are gonna buy it, tear the entire thing down and build from new paid within 10% as much as I could pay, buying it as a cash flowing asset to preserve it for affordable housing.

And so that really worries me, especially in our more affluent areas with higher land prices that we're gonna lose opportunities where naturally occurring affordable housing has existed in places of opportunity near jobs and transit in schools and lose those because land prices with that densification and the urbanization are really increasing rapidly.

- Right.

So Rob, as you know, working with the Home Builders Association, I'm certain that density comes up frequently as you're hearing about what's going on around the state.

What are your views on the role it needs to play?

- Well, I think it's healthy to have these discussions no matter what, we're in Myrtle Beach to go back to that zone and I can speak in Charleston, we see similar things, Hilton Head.

As you run out of that room, that natural room, it restricts the ability to get people where they want to be.

So doing a large multifamily can provide a easing of that.

And so I grant you that.

One concern is always gonna be the road systems to get into these places, right?

So I think it's healthy to have a discussion on can we exit.

Famously in the Ory Georgetown area, we've talked about what happens when a hurricane comes into town and can you get out safely?

Are the roads gonna provide that?

So I think it's a healthy discussion we have, but we always go back to making sure that there's proper planning in place for developments.

So a lot of developments and county municipalities and decision makers take that into account.

So we're seeing this as a major thing across this area for sure in South Carolina.

But I just think it's a healthy discussion regardless.

There's a supply and demand thing that always happens here.

And as our supply diminishes and the demand is still high, it will only drive prices up.

So we do have to find a healthy balance there to work with our delegation to get this done.

- Yeah, I think you just said something very important.

We talk about it this way, housing is infrastructure.

And so as you think about building more density, you have to think about the infrastructure around that.

Highways, transportation corridors, and then the other things, schools and all those things that make communities vibrant and accessible are a part of that housing as infrastructure issue.

One of the other solutions that I'll just point to that we're thinking about and the city of Charleston has done is community land trust.

It's a way to sort of make housing affordable for generations and trying to get that concept more readily accepted, understood, and then bought into, cuz people can actually give their property to a land trust and it creates a situation where it becomes permanently affordable even with what's going on around it.

- Right, that's great.

- So that's a good, that's one of those solutions that we're absolutely in favor of in support of.

- That's excellent.

So we're about out of time, but for our closing question I wanna ask all of you, what's the one policy, this could be local, state, or federal that you think if improved or changed could make the most difference?

So in other words, if you were king for a day, what policy would you change first and about really quickly around the table?

Dan?

- That's an easy one for me.

It would be greater collaboration with the desire for job growth in an area and then thinking about how can we meaningfully increase land supply approvals and entitlements to create a streamlined process, especially for workforce housing.

- Okay.

- And get that into the business.

- Awesome.

- Mark?

- I'd look at the state government and look at property tax statutory reform as well as investing in alternative uses of affordable housing outside of what they currently do.

- Awesome, Darrin?

- Yeah, I think for me it's about zoning, particularly on the coast of South Carolina.

I think we have to consider the unintended consequences for some of the decisions that are made at the hyper-local level to the ability to create density or supply at the (indiscernible) level.

- Rob?

- I'm gonna say that a large part of the cost of building a home is your workforce and the labor cost.

So I believe that we need to have more things in place from a legislative level that help develop incentives for kids to get into the construction industry and that starts with the schools and legislative.

- Awesome.

Thank you guys so much all for joining me today.

You all did fabulous.

So great.

Great first show for all of you and thanks for joining us.

- Thank you.

- [Announcer] Gratefully acknowledging support by Martin Marietta, Blue Cross Blue Shield of South Carolina, Sunoco, High Point University, Colonial Life and by viewers like you.

Thank you.

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