Housing Abundance Requires Long View

RALEIGH — After years of inadequate housing supply, have homebuilders and apartment developers worked their way into a housing glut? That’s the impression some North Carolinians may have gotten by reading recent headlines about falling prices in the Triangle, declines in new building permits in the Charlotte metro, and choosier buyers across the state extending the average number of days new and existing housing stock stays on the market.

These news stories all contained verified facts, as far as I can tell. But none should be interpreted as signaling an end to North Carolina’s housing crunch.

Short-term fluctuations are manifest in nearly every sector of the economy. For real estate in particular, the lead times required to acquire, plan, permit, and build new inventory create significant risk that can itself be exacerbated by unexpected changes in such variables as interest rates, the cost of raw materials, and the availability of labor.

The past year has brought something of an (im)perfect storm. Persistent inflation and fiscal recklessness have pushed up interest rates. Tariffs on lumber, steel, and other imported goods have jacked up construction costs. And heightened enforcement of immigration laws has diminished the pool of construction workers, at least for now.

Still, North Carolina continues to import residents. They need somewhere to live. Because of past constraints, regulatory and otherwise, on the supply of new inventory, our state remains hundreds of thousands of housing units below what will be required to meet demand. Yes, I mean demand over the intermediate- and long-term, not the short-term, but that’s just it. Housing isn’t a short-term or disposable good.

Moreover, some recent declines in housing starts reflect not forecasted demand but continued restrictions on supply. Joe Padilla, director of land acquisition in the Carolinas for Keystone Custom Homes, explained the point in a recent interview with the Charlotte Business Journal. Land prices are elevated by “a catastrophic lack of available sewer capacity,” he said, and “an increased unwillingness by many local governments to approve zoning for anything more than one home per acre, even in those places where water and sewer both exist.”

Housing affordability is a top priority of voters in the upcoming midterms, although many candidates for federal, state, and local offices pay the issue more lip service than real attention. Here’s what I think policymakers should be talking about:

• Regulatory reform. The North Carolina General Assembly should continue to modify building and housing codes, protect the rights of property owners in zoning disputes, and subject more state and local regulations to “shot clocks” that speed up the permitting process.
• Infrastructure investment. To facilitate new single- and multi-family developments, some localities will have to devote significant resources to expanding or renovating their water and sewer systems. For other localities, and the state Department of Transportation, the pressing need is to build new roadways or widen existing ones to accommodate commercial vehicles during construction and residential vehicles after occupation. Fiscal conservatives should support these expenditures when prudently planned and efficiently executed.
• Fiscal restraint. Because infrastructure investment is expensive but household and business budgets are already stretched, local governments and the state need to exercise restraint in other segments of their budgets or else produce costly and unpopular tax increases. Fighting poverty and raising the standard of living of North Carolinians are goals best accomplished by enhancing the affordability of housing and other goods and making it easier for businesses to form and create new jobs. They are not likely to be accomplished by gimmicks, giveaways, or handouts.

If the public leaders of our state set the right conditions, private actors will, over time, align long-term investment in housing inventory with long-term demand for housing stock. Prices will rise and fall, as will new-home starts, leases, and closures. Rather than fixate on or chase news headlines, policymakers should focus on the proper role of government here — which is important but necessarily limited — and otherwise let markets do their job of coordinating buyers and sellers.

John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy with American history (FolkloreCycle.com).