Higher costs threaten housing affordability

Few states are adding housing stock more quickly than our state — but far too many North Carolinians struggle to find reasonably priced residences to rent or buy.

Those are among the findings of a recent report by the National Association of Realtors that assessed each state on two sets of criteria: homebuilding and affordability. In the first category, North Carolina fares well. We’re home to 3.3% of the US population but accounted for 6.4% of all housing permits issued across the country last year.

On affordability, however, North Carolina doesn’t fare as well. Across the Southern states, only Florida and Tennessee have a higher ratio of housing prices to household incomes. We’re adding new inventory. But we’re not adding it fast enough, at the necessary price points, to meet market demand.

In the long run, unaffordable housing will crimp our state’s growth. Today’s healthy rate of in-migration will slow. Young North Carolinians with ambitious career aspirations or growing families will choose other places to live and work. And those who remain in North Carolina will find it harder to move up the economic ladder — to relocate within the state to counties with better job prospects, for example, or to build net worth over time by owning their own homes.

Are you concerned about future rates of family formation and childbearing? You should be. Children are a blessing not only for their families but also for economic and community health. According to newly released federal data, places with higher levels of homebuilding are also places where birth rates outpace the national average.

From 2023 to 2024, US births rose 1%. North Carolina births rose 2.2% — the highest rate in the South — after adding more housing stock in the preceding years than most other states. Kinda puts a new spin on the popular phrase “build, baby, build,” doesn’t it?

Alas, dark clouds loom on the horizon. Although state and local policymakers have been opening up North Carolina’s housing markets in recent years, allowing a greater diversity of options and units per acre, it still takes too long to obtain permits and complete inspections. Construction workers and skilled subcontractors are also hard to come by, a constraint that education reform may ease over time but strict immigration enforcement will tighten in the short run.

More ominously, the Trump administration’s new taxes on imports could make it substantially harder to construct affordable homes. American builders make extensive use of low-cost lumber, fixtures, applicants, flooring, and countertops imported from the Americas and Asia. If currently scheduled tariffs proceed, the average price of a new home could go up as much as $9,200.

Our homebuilders are creative. They’ll try their best to cope with such adversity. Triangle Business Journal recently profiled one Durham-based company, BotBuilt, that uses artificial intelligence and robots repurposed from auto plants to produce wall panels and other housing elements.

“Every stud, every nail, every piece of sheathing, it’s all right there and the AI visualizes it for you,” the company’s CEO, Brent Wadas, told TBJ. “Rather than overbuying on your lumber or overbuying on your labor, you can frame a whole house in a matter of hours with just a couple of people.”

Meeting the challenge of housing affordability will require all hands on deck. Companies need to keep innovating. Government needs to keep opening up the housing market, as four new bills from North Carolina Sens. Tim Moffitt, R-Henderson; and Julie Mayfield, D-Buncombe, would do. Schools and community colleges need to train more workers. More North Carolinians need to take them up on the offer and enter the construction trades.

Yes, we’re doing a lot better than the likes of California, New York, and Massachusetts. The study I referenced earlier gave them failing grades. By contrast, North Carolina got a B-plus. But Iowa and Texas got A-minuses. And South Carolina got the nation’s only A.

We can do better. If North Carolina is to reach its full potential, we must do better.

John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy and American history.