Allowing Accessory Dwelling Units Would Contribute to Housing Affordability in North Carolina

Committee on Local Government – Land Use, Planning and Development

Chair Brody and members of the Committee on Local Government – Land Use, Planning and Development, thank you for allowing me to offer testimony on the issue of allowing homeowners across North Carolina to build accessory dwelling units. I am Emily Hamilton, a senior research fellow at the Mercatus Center at George Mason University, where I am codirector of the Urbanity Project. I study housing policy and affordability across the country and how reforms to housing policy like those proposed in Senate Bill 374 have affected housing market outcomes.

So far, policymakers in eight states have passed laws allowing homeowners to add accessory dwelling units (ADUs) to their properties. I have attached to this testimony a policy brief I authored on state laws legalizing ADUs to provide more information. Here, I will focus on three points:

1. Restrictions on the right to build housing in North Carolina are responsible for high housing costs.
2. Allowing homeowners across the state to build ADUs would be an important step toward permitting a relatively affordable type of housing to be built. Accessory dwelling units are banned in many single-family neighborhoods in North Carolina.
3. State policymakers have an important role to play in setting limits on how much localities can restrict the right to build housing as a way to improve housing affordability.

LAND USE REGULATIONS LIMIT PROPERTY OWNERS’ RIGHT TO BUILD HOUSING AND DRIVE UP HOUSING COSTS

When increasing demand for housing meets a market where zoning rules constrain housing supply—as is the case in high-cost regions in North Carolina—the result is that a limited supply of homes becomes more expensive and lower-income families are forced to live elsewhere. This harms the state’s most vulnerable residents and undermines the state’s continuing role as a center of economic opportunity.

In large part, owing to these rules, many residents across the state are suffering from high housing costs. About half of North Carolina renters who earn less than half of their region’s median income are housing cost burdened, meaning that they spend more than 30 percent of their income on rent.

HOUSING AFFORDABILITY AND ACCESSORY DWELLING UNITS

This bill would give homeowners across the state the opportunity to build an attached or detached ADU. It protects homeowners from three local rules that have proven to be barriers to ADU construction: owner-occupancy requirements, requirements that ADUs must have their own parking space, and conditional use permitting. It would also expand rules that are working well in Durham to benefit homeowners and residents of ADUs across the state.

Accessory dwelling units offer homeowners several potential benefits. They create an opportunity for homeowners to offset a portion of their mortgage payment by renting out part of their space. One study on ADU construction in Los Angeles finds that homeowners who choose to build them increase their property values by 46 percent on average.

Accessory dwelling units also create opportunities for greater housing flexibility to meet peoples’ needs as the country’s demographics change. They make intergenerational living feasible, allowing young adults or elderly people to live with family members in spaces that can be built to accommodate any accessibility requirements.

Accessory dwelling units have the benefit of being one of the most affordable types of housing that can be built. Because they are built on land that is already attached to a single-family home, their land cost is zero. They are also often more affordable than alternative types of housing for renters. In Washington, DC, basement apartments are the most common type of ADU, and they tend to rent for hundreds of dollars less per month than standard one-bedroom apartments in the same neighborhood. A survey of homeowners with ADUs in Los Angeles County found that ADUs typically rent for $400 less per month than the county’s median rent.

THE STATE’S ROLE IN ALLOWING ACCESSORY DWELLING UNITS TO BE BUILT

Zoning and other land use regulations are generally implemented at the local level, but the state has an important role to play in setting limits on how much localities may stand in the way of new housing development.10 Because localities are creatures of their states, states have the legal authority to set limits on local regulation. The effects of local rules that prevent homes from being built in one locality spill over to the next. Local land use regulations that limit population growth, economic growth, and income mobility within one city or county limit growth and opportunity for the state as a whole.

CONCLUSION

Housing affordability is a central challenge for many North Carolina residents, and the principal source of this challenge is local land use regulations that limit property owners’ right to build housing. Permitting North Carolina homeowners to build ADUs is one way to provide greater housing choice and allow for a more flexible housing supply. It is appropriate for state policymakers to step in to set limits on local land use regulations and to increase homeowner rights, because regulations that stand in the way of housing affordability and economic opportunity affect the entire state.

ATTACHMENT

Emily Hamilton and Abigail Houseal, “A Taxonomy of State Accessory Dwelling Unit Laws” (Mercatus Policy Brief, Mercatus Center at George Mason University, Arlington, VA, March 2023).

Citations and endnotes are not included in the web version of this product. For complete citations and endnotes, please refer to the downloadable PDF at the top of the webpage.