Summary:
- Government and Business have different roles to play in society: businesses make profits, governments make policy for the public good.
- Government policy shapes business incentives and determines what is profitable.
- North Carolina’s government needs to make it profitable for North Carolinians to build affordable homes.
The role of a business in a capitalist economy is to maximize profits for its owners or stakeholders. Often, there’s hope that the business will demonstrate social responsibility, but that’s not its primary goal. Government, on the other hand, is intended to serve the public good, not to make a profit.
These differing roles often come into conflict when we’re talking about policy. That’s been particularly evident this legislative session as it relates to housing policy. Several bills were introduced to reduce regulations and make it more profitable for builders to construct more affordable housing.
- HB 369 – Parking Lot Reform and Modernization Act
- Eliminates square footage minimums for residential structures and prevents local governments from requiring minimum parking space sizes or numbers, or from requiring additional access roads for developments.
- HB 765 – Save the American Dream Act
- Legalizes duplexes, triplexes, and quads in residential zoning; allows tiny houses and accessory dwelling units (ADUs) in larger cities and allows higher housing density by right across North Carolina, with a minimum of six units per acre in larger cities; Reduces the regulatory burden on home construction (excluding essential safety requirements) and abolishes parking minimums (excluding accessibility and ADA requirements).
- SB 492 – Single Stair Building Code Reform
- Allows a single, wider exit stairway rather than two in buildings below certain heights that meet strict fire safety requirements.
- SB 495 (HB 627) – Regulation of Accessory Dwelling Units
- Enables homeowners to add a separate structure for habitation on their property.
- SB 497 – Expand Middle Housing
- Permits townhouses, duplexes, and sixplexes in all residentially zoned areas.
- SB 499 – Allow Housing Near Jobs
- Authorizes residential development in all commercial zones.
While some affordable housing policies are thwarted by NIMBYism (opposition to development not because of the kind of development, but because it is located near one’s home or neighborhood), many proposed policies are killed by confusion over the respective roles of business and government.
For instance, municipal regulations often require new housing to include a minimum number of trees and/or a sidewalk. These things can potentially improve residents’ quality of life, but they aren’t a necessity of home construction, and requiring them drives up builders’ costs, making it less profitable for them to build lower to mid-priced homes. As a business, builders seek to maximize profits. If affordable housing isn’t profitable, they won’t build it.
As outlined in a July story from NPR, North Carolina’s legislature isn’t alone in its attempts “to force cities to build affordable housing.” It also isn’t alone in being thwarted by municipal governments.
Trees and sidewalks are in the public interest and, as such, should be the responsibility of the government. If we want to address the current housing crisis, we need to make it profitable for homebuilders to build starter homes. Eliminating requirements like trees and sidewalks would help.
In Carolina Forward’s comprehensive policy paper on affordable housing, The Road to Home, we propose several policy recommendations that would reform municipal zoning and create more affordable housing:
- By-right development mandates
- An end to exclusionary zoning for single-family homes
- Medium-density housing formats (townhomes, duplexes, quadplexes, etc.)
- Repeals of minimum lot sizes
- Elimination of parking and setback minimums
All these proposals were included in the housing legislation introduced this session. These are all bills with bipartisan support based on an agreed-upon recognition of the need for more affordable housing. Yet none of them have been approved, primarily due to objections from municipalities.
According to the National Association of Realtors, “the average age of first-time U.S. homebuyers is 38, an all-time high.” That’s up from an average age of the late 20s in the 1980s. Housing is simply too expensive for young people to afford, a fact that threatens their economic security and weakens our economy as a whole. Without affordable housing, the workers who make our cities run can’t live in them, and the only way to make housing more affordable is to increase supply.
Zillow reports a 4.7 million housing shortfall in the United States. Estimates from the NC Chamber of Commerce place 764,478 units of that deficit in North Carolina. To make a dent in that demand, builders will need to be able to make a profit building affordable housing.
The political party that addresses the high cost of housing, as well as other rising costs such as childcare and healthcare, will have a significant advantage in the next election cycle. The next general election for state and federal offices is scheduled for November 3, 2026. That means state legislators still have time to move these housing bills. However, bills considered in even-numbered years (the short session) are limited to specific types, including those directly affecting the state budget, constitutional amendments, local bills, elections, appointments, and bills recommended by study committees. That means the bill sponsors would need to reintroduce the existing housing bills as part of legislation that satisfies those requirements. But it can be done.
