Image Credit: fotog/Getty Images

May 3, 2021

Filling North Carolina’s Housing Gaps

A state bill would open up the Tar Heel State to new housing
Emily Hamilton Senior Research Fellow , Kelcie McKinley MA Fellow

An ambitious housing bill in North Carolina would, if passed, increase homebuilders’ opportunities to build more lower-cost housing across the state. The wide-ranging Act to Increase Housing Opportunities includes a component that would prevent localities from banning “middle housing”—duplexes, triplexes, quadplexes and townhouses—in residential zones that are served by local sewer or water infrastructure. The bill would also give homeowners across the state the right to build and rent accessory dwelling units, such as backyard cottages or basement apartments.

We have previously detailed the past decade’s slow rate of housing construction and corresponding increase in housing costs for North Carolina homebuyers and renters. Nearly three-quarters of the state’s residents who have very low incomes are housing cost burdened, meaning that they spend more than 30% of their income on rent. State preemption of local land use restrictions can make it feasible to build more housing at lower price points, reducing the housing affordability problem facing low-income residents.

Local governments get their authority to implement the zoning rules that limit housing construction and increase its costs from the state government, and state policymakers set the rules that define local zoning authority. Therefore, state policymakers have a role to play in setting limits on local zoning restrictions when they go too far in restricting property rights or causing affordability problems that in turn burden households and businesses across the state.

In recent years, policymakers in several states have passed legislation that sets limits on local zoning and increases opportunities for new lower-cost construction. A 2019 law in Oregon has preempted single-family zoning in many of the state’s localities, requiring localities to permit duplexes, and in some cases fourplexes, on lots where only one unit would have been permitted previously. The Oregon law states that many of its localities must permit “a duplex on each lot or parcel zoned for residential use that allows for the development of detached single-family dwellings.”

The North Carolina bill, in contrast, would define single-family zoning to include middle housing under state law. State law prohibits local zoning ordinances from using definitions that conflict with the state definitions, so the North Carolina bill could potentially have a similar result. The North Carolina text could be strengthened and clarified, however, with language stating that localities must permit middle housing on any lot where a single-family house would be permitted.

Policymakers in many North Carolina cities have already taken some steps to permit lower-cost housing construction, including accessory dwelling units (ADUs) and middle housing. The city of Charlotte is now considering a proposal to permit additional middle housing. The table below explains how the state’s largest cities currently regulate middle housing and ADU construction.

The state’s largest cities already permit ADUs to be built under some conditions, but the state bill would reduce or eliminate many remaining restrictions. For example, many cities allow homeowners to add ADUs, but only if they go through a special use permitting process, which can be costly and uncertain. Homeowners are more likely to build ADUs when they are permitted by right, which the state bill would require. The bill would also prevent localities from requiring additional parking spots for accessory dwelling units.

When it comes to middle housing, the bill would require every large city to permit triplexes and quadplexes in their areas zoned for residential development. But it could go farther to ensure that these middle housing units are feasible to build by clarifying that middle housing must be permitted on the same size of lots as single-family houses. Currently, Raleigh and Fayetteville permit duplexes in their largest residential zones, but only if they’re on larger lots than those required for single-family houses. These cities therefore see little duplex construction, since requiring a larger lot limits a primary benefit that middle housing options can provide: sharing high-cost land between multiple households. Further, the state could make middle housing construction more prevalent and affordable by limiting parking requirements for these units. It’s often difficult for homebuilders to provide required parking for middle housing development when multiple units share a relatively small lot.

The proposed Act to Increase Housing Opportunities takes important steps to increase the right to build lower-cost housing in North Carolina. It could be strengthened with amendments to clarify that localities are required to permit middle housing anywhere a single-family dwelling would be permitted and to preempt some local rules that commonly stand in the way of middle housing construction. These changes would make housing more plentiful and affordable for all the state’s residents, particularly low-income residents currently facing the largest housing affordability problems.

Support Mercatus

Your support allows us to continue bridging the gap between academic ideas and real-world policy solutions.Donate