By Donna King
Carolina Journal
People are coming to North Carolina in droves for the weather, low taxes, and strong economy; driving up demand and, consequently, housing prices. As the November election nears, candidates are talking about more policy, and what they would do to bring down prices.
Over the last five years, housing prices in North Carolina have risen by approximately 47%, according to a report from the North Carolina Housing Finance Agency. This sharp increase has been driven by strong demand, limited supply, and the state’s growing population. Over that same time, rent prices are up approximately 28%, slightly above the national average increase of 26%, and significantly outpacing wages, particularly in service industries.
According to North Carolina’s Department of Commerce, wage growth in the state has been moderate, but inflation has eroded much of the gains workers might have otherwise experienced. This trend reflects broader national patterns where housing affordability has become a significant issue, with both home prices and rents rising substantially faster than incomes.
According to Jim Burling, author of ‘Nowhere to Live: The Hidden Story of America’s Housing Crisis,’ the reason for high prices is basic — an imbalance in supply and demand, caused in part by poor public policy decisions.
Housing affordability has become an unavoidable issue in the 2024 presidential campaign, with both Vice President Kamala Harris and former President Donald Trump proposing strategies to put more roofs over American heads. As in other policy areas, the proposals reflect a very different approach to economics.
REGULATIONS DISRUPT SUPPLY AND DEMAND
Burling, who is VP of Legal Affairs at Pacific Legal Foundation, said that local zoning, regulations, and lawsuits are the key drivers of cost increases in housing. Restrictions on multi-family dwellings and development in green areas, plus litigious opposition to development, drives builder costs up and leads to housing crises, including gentrification and homelessness.
According to data from the National Association of Home Builders, more than 25% of the cost of a new home is the direct result of government regulations. That climbs up to 42% for some new multifamily construction.
“There’s a whole myriad of regulatory oversight that just makes it a terrible disincentive to build,” said Burling. “That’s something I think people, consumers, are not aware of being so impactful on the availability of housing.”
But regulations like eviction moratoriums and price controls also limit supply. For example, during the COVID pandemic, the state of North Carolina imposed a ban on evictions, led by the federal Centers for Disease Control. While the moratorium was a lifeline for some families whose employment evaporated during the government-imposed shutdowns, it was extended multiple times, and ultimately drove up costs for property owners. It created a disincentive for building new rental housing or putting existing homes up for rent. When the eviction bans were lifted, evictions statewide returned to pre-pandemic levels. In Mecklenburg County, evictions exceeded pre-pandemic numbers.
Data indicates that in some regions, rental prices rose sharply due to the surge in demand from those previously shielded by the moratoriums, as landlords sought to recover lost income during the pandemic.
“You can’t tamp down prices without shortages developing,” said Burling. “New supply is not going to enter into a price control environment. The new supply is not there, so demand keeps going up. Once the controls are lifted, you have a bigger disparity between supply and demand.”
WHAT DO THE PRESIDENTIAL CANDIDATES PROPOSE?
Donald Trump, a real estate developer, has proposed strategies for improving housing affordability as part of his 2024 campaign. One of the primary ideas is to reduce regulations that Trump argues are stifling housing development.
During his previous administration, in 2019 he signed an executive order to create the White House Council on Eliminating Barriers to Affordable Housing Development. The group focused on eliminating barriers to affordable housing development, particularly by addressing restrictive local zoning laws. He says he will build on these deregulation efforts if re-elected.
Trump has also focused his policy platform on reducing interested rates and inflation overall, and offering tax incentives to first-time homebuyers. The platform also includes a promise to end housing benefits for illegal immigrants and use that savings to house homeless veterans instead.
Kamala Harris’ campaign recently proposed regulating rental markets, with some nationwide rental controls. She also supports restricting corporate landlords from using software that measures area supply and demand to set rental rates.
“If you have nationwide rent control it would take a local problem and make it a national problem,” said Burling. “Rent control is politically popular in narrow segments, but I’m not sure that the Harris campaign is actually going to get that much out of it because there are a lot of people that don’t think much of rent control outside of the rent-controlled cities. More importantly it’s going to cause, it’s going to make the problems worse because if you have rent control, people stop building.”
Harris has also proposed expanding the Low-Income Housing Tax Credit (LIHTC) and introducing a new tax incentive for homebuilders who construct starter homes for first-time buyers. Her housing plan also includes spending $40 billion in federal taxpayer money in an “innovation fund” for local initiatives like construction financing, and giving $25,000 in federal money to first-time homebuyers with first-generation homeowners getting even more. According to the Hoover Institute, the $25,000 promise would cost $500 million taxpayer dollars.
“What it will do is shovel more money into an industry or a sector of the economy without increasing supply,” said Burling. “Demand will be the same, prices will increase. That’s generally what happens when you shovel money into an industry.”
Both Harris and Trump have proposed selling surplus federal land to developers who would commit to building affordable housing. That idea does resonate with Burling, but he is on the lookout for policy red flags.
“There’s no free lunch from the federal government,” Burling added. “There could be a bunch of strings attached, and what strings I envision could be a racial component to it, that it has to be achieving equity as opposed to equality of opportunities, it could be project labor agreements… the supply advantage of the land is going to go away.”
HOMELESSNESS IN NC
It is difficult to talk housing without including homelessness, which has climbed significantly in North Carolina since 2019. According to the North Carolina Housing Coalition, higher housing prices disproportionately impact people on the economic margins.
From 2019 to 2022, during COVID lockdowns, homelessness in North Carolina increased by approximately 23%. It climbed again from 2022 to 2023 by another 4%. The increase in homelessness was most notable among veterans, youth, and black North Carolinians. From 2022 to 2023, data from the U.S. Department of Housing and Urban Development (HUD) showed that the number of homeless veterans in the state rose by 10%. Estimates from the North Carolina Coalition to End Homelessness (NCCEH) also suggest that approximately 30% of individuals experiencing homelessness also have a serious mental illness. Burling says that addressing their immediate treatment and housing needs is critical.
“I’m a free-market guy, but there are times that I think private charity or government, or both, need to step in and, with people who are seriously mentally ill, need to have some kind of treatment facilities that make sense; not the huge warehouses like the one I volunteer at, but not the streets,” Burling said. “The streets or the jails is where mentally ill people go now, and if you have any predilection to addiction, it’s only going to get worse.”
North Carolina’s population has grown by 10% over the last decade. As the state continues to grow, cost of living issues move to the top of voters’ priority list. In a recent Carolina Journal poll, more than 50% of voters said that inflation and prices are their top concern going into the November election.
