North Carolina’s Tech Boom and Housing Affordability

By Elijah Gullett

In light of Apple’s announcement that they will be placing one of their headquarters in Wake County, many fear skyrocketing housing costs in response. Apple touts that this new 3,000 new jobs to the area, potentially encouraging mass migration to the Raleigh-Durham area. Google has also recently announced their plans to build a hub in Durham and claims that they will eventually create 1,000 jobs in the area. These announcements are being made during a time of large inbound migration to North Carolina, with North Carolina now considered the 5th most popular state to move to.

All these changes beg the question of how increased housing demand from high-income tech sector employees will affect housing affordability in North Carolina. This is of special concern to the currently booming metropolitan areas of NC: Raleigh-Durham and Charlotte. Who will be displaced by this mass migration? How big of a threat is gentrification? How can we ensure sustained affordable housing for North Carolinians?

North Carolinians’ fears about what happens if Raleigh-Durham becomes the “new Bay Area” are not unfounded. It’s easy to look at the Bay Area, California as a blueprint for the impact of expansive tech sector development on housing affordability. San Francisco is currently the most expensive housing market in the US, with other Bay Area cities such as San Jose and Oakland following closely behind. However, this future is not set in stone for North Carolina. State and local policymakers can begin to reform our current housing system to accommodate newcomers in a way that balances the needs of long-term residents with the goals of economic development.

SB349, the NC Senate’s “Increase Housing Opportunities” bill, is a good start. The bill legalizes “missing middle” housing in residential area (townhouses, duplexes, quadplexes), blocking local attempts at single family zoning that restrict more affordable housing options. It also legalizes additional dwelling units, or ADUs, without any parking minimums or conditional use permits, further increasing housing stock. It also blocks local downzoning attempts without substantial evidence indicating public health or safety risk. Compared to other state bills, NC’s bill goes further than most, preventing local governments from banning land uses that are not a demonstratable threat to health or safety.

In short, SB349 will make housing construction easier and avert local attempts to block new housing development. This bill is the floor that North Carolina needs to preserve existing housing affordability. By permitting housing construction, NC housing markets can meet growing demand from incoming tech workers. This isn’t purely theoretical either – research indicates that housing supply restrictions raise housing costs.

For those concerned about the displacement effects of new economic development, bills like SB349, and other laws permitting housing construction, are still the best bet. Some may argue that the construction of new, market-rate units creates an induced demand effect. Under this logic, new construction encourages wealthier people to move in, landlords appease these newcomers by evicting low-income tenants and raising rents, and low-income residents are then displaced.

However, evidence suggests just the opposite. Market-rate housing construction does not increase rents in nearby units. In fact, new construction lowers rents in nearby housing. A recent working paper by Xiaodi Li found that for every 10% increase in housing stock, local rents decrease by 1%. The construction of new, market-rate housing offsets potential displacement caused by migration. Artificial housing scarcity creates a system where low-income residents are competing against (and often losing to) higher-income, newcomers for the same units. By creating new housing units, however, newcomers with money can buy or rent the newer units, while low-income residents can keep their homes.

If NC policymakers want to create economic dynamism and growth while ensuring an affordable housing market, they should embrace SB349. It is a bold state bill that will protect the rights of individuals to build on their own property and increase housing stock. Beyond SB349, NC state and local authorities can do more even to encourage an affordable housing market. Many localities in NC have laws restricting the construction of manufactured housing and specific restrictions targeted at trailer parks. These should be repealed, as manufactured housing is an important element of NC’s affordable housing stock. The creation of community land trusts (CLTs) and affordable housing trust funds (such as those in Asheville) can also provide opportunities to support permanently affordable housing for low-income residents.

Without preemptive action, North Carolina risks creating the same problems that plague Silicon Valley and the greater Bay Area. That future, however, is not inevitable. Policies that promote housing development and affordable housing can create an inclusive, prosperous NC for everyone.

Elijah Gullett is a rising fourth-year undergraduate student majoring in Public Policy with minors in Urban Studies and Environmental Justice. His academic interests include fair and affordable housing, sustainable development, and LGBTQ+ urban life.

Edited by Emma Vinella-Brusher, Managing Editor

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