Saturday, February 24, 2024

NC trend: Chronic housing shortages could threaten the state’s growth

Chatham County building permits for single-family homes. source: Chatham County

As North Carolina’s bedroom communities see steady growth from businesses coming to the state, inadequate housing supplies for
workers in these regions may stymie expansion plans.

Optimists respond that the markets always present opportunities. The state’s most anticipated housing effort might be Disney’s plan for the Asteria residential community, in Pittsboro in Chatham County. Asteria expects to offer about 4,000 residential units over 1,500 acres, with sales anticipated to start in 2027. 

Demand for housing can change in the short run, but supply typically only adjusts in the long run due to hurdles such as zoning constraints and building considerations, says Roberto Quercia, a UNC Chapel Hill professor who specializes in housing and community development. And a housing supply shortage dates back 10 years or more in many parts of the state, industry experts say. This poses serious implications for economic development, says Emil Malizia, also a UNC real estate development professor.  

Hendersonville is “looking all over the place for ideas because everybody’s kind of dealing with the same thing,” says Lew Holloway, the city’s community development director. He notes that Asheville’s 28% increase in population over five years has increased demand for housing in neighboring Henderson County. 

Of the 4,294 people who moved to the county from within North Carolina over the past five years, 47% came from adjacent Buncombe County, according to Census Bureau estimates. Henderson County is estimated to have a shortage of about 1,650 rental units and 311 for-sale housing units through 2025, according to a study conducted by Bowen National Research. The study estimates that Buncombe will be 5,439 rental units and 1,329 for-sale housing units short during the same period.

Chatham County is attractive to people working in Raleigh, Durham and Chapel Hill, as well as potential workers for the Wolfspeed and VinFast plants under construction in the area. The county’s population has increased by 21% over the past five years, while the percentage of vacant housing units has declined by 51%.

“We’re really at a [housing] shortage,” says Chatham County Planning Board member Eric Andrews. “There’s not enough [housing] projects in the funnel today, so we know we’re going to have a problem two to five years from now.”  

New homes require more utilities, which is another factor in the supply shortage. Chatham County doesn’t have wastewater capacity for building new homes in its two largest towns, Pittsboro and Siler City. In response, Pittsboro agreed to merge its water and wastewater utility systems with Sanford in neighboring Lee County. The move will increase Pittsboro’s water capacity by 150% and wastewater capacity by 566%, according to the town’s website. 

It takes time to install infrastructure, however. Sanford is scheduled to take over Pittsboro’s water and wastewater assets in July, but the connection line won’t be completed until late 2025. Finishing upgrades to the water transmission line and the Sanford Water Treatment Plant aren’t scheduled to be finished until early 2027. 

Pittsboro’s water merger with Sanford syncs well with Vietnamese automaker VinFast’s construction timeline for its local plant, which officials have said could create 7,500 jobs.

Nearby, Siler City has agreed to expand its wastewater treatment plant this year with Sanford’s help, says Chatham County Manager Dan LaMontagne. But that plan puts Siler City behind schedule for Wolfspeed, which anticipates creating 1,800 jobs at its semiconductor factory.

In nearby Randolph County, Toyota is scheduled to manufacture batteries in 2025 and create more than 5,100 jobs.

Elsewhere, Kannapolis has become a popular option for people with jobs in Charlotte, but it also faces challenges with infrastructure, says Planning Director Richard Smith. The Cabarrus County city is regionalizing its sewage system similar to what’s taking place in Pittsboro and Siler City, according to Smith. The expansion will take until at least 2027. 

Kannapolis reports 17 residential development projects with about 3,638 total units are on a waitlist for wastewater allocation. These projects may have to wait for completion of the expansion unless other developments drop off that list.

Topography and culture make adding housing difficult in western North Carolina, including Buncombe and Henderson counties. “If we’re going to put more housing in, where is it going to go, and how do we maintain the character of the community,” says Holloway. “People don’t want apple orchards to become subdivisions, but we also know we need more housing.” If it’s not an orchard, he adds, “it’s probably a mountain. There’s only so many places where we can put housing in and have it be reasonably affordable to develop.”

On a statewide level, Andrews says interest rates rising to the highest levels in 22 years is contributing to the housing shortage. Homeowners who bought before the pandemic typically have lower fixed-rate mortgages than those wanting to purchase a home now. This discourages homeowners who would typically move to a more expensive house.

“Because the middle people don’t want to give up the current mortgage that they have, it’s put a real bad gridlock in the system,” he adds. “We don’t have that cycle or flow that we normally have.”  

The lack of supply is causing people to pay a premium for housing in many areas, according to LaMontagne. 

In Burlington, Concord, Kannapolis, Mebane and Siler City, 30% of households are spending at least 30% of their income on rent or mortgages, which makes them “housing-cost burdened,” according to the conventional definition. In Clayton and Hendersonville, it’s more than a third. The statewide average is 27%. 

The lack of supply contributes to people paying more to live in substandard housing, especially renters, says Anna Tuell, director of development and finance at Chatham Habitat for Humanity.

“The rent that people are paying is super high for what they’re getting,” says Tuell. “People might look at that and say, ‘You’re paying $1,200 to live in a trailer and there are holes in the floor. You’re a renter; go find somewhere else to rent.’ But it’s really difficult to find something that’s the same level of affordability [in Chatham County], not that $1,200 a month is affordable for a lot of people. But, it’s hard to find something that’s cheaper or even that same price that’s not just as bad.”

The good news is that average incomes are expected to rise because of projects such as VinFast, Toyota and Novo Nordisk in Johnston County. But the tradeoff is that affordable housing in these areas may become even more scarce, according to UNC’s Malizia. “The odds that home builders will construct housing that’s more affordable than the existing housing stock is unlikely,” he says. “Homebuilders will target potential buyers who can afford the product they’re building.” 

Town and city planners try to address the need for a balance of higher-end housing and affordable housing through zoning and land-use plans, according to Holloway. But it often takes a significant amount of time for prospective residential developments to pass through the zoning process, in some cases contributing to housing supply limitations. 

If increasing housing supply takes too long, it can influence the timing of economic development projects, Malizia says. Employers planning large economic development projects understand the situation and believe they can attract a sufficient workforce despite the housing crunch.

“They already know and are aware of the problem and monitoring it,” he adds. “If push comes to shove, and they don’t feel like they have the ability to house the workforce within a reasonable commute, they’ll move.” 

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