John Hood: New Construction Moderates Home Prices
RALEIGH — State and local leaders say they want to lower the cost of living for most North Carolinians. In many cases, however, their actions don’t match their words.
Take housing, for example. While it remains easier for lower-to-middle income folks to buy or rent in North Carolina than in most other states, median home prices have shot up over the past decade — more than doubling in some markets.
The cause is no mystery. Our state has become an increasingly attractive place to live, work, and retire. Florida, Texas, and other Sunbelt competitors have plenty of attractive amenities, too, but have failed to produce enough new housing stock to meet demand. So, some job-seekers, retirees, and would-be entrepreneurs have rerouted to North Carolina.
We aren’t fully ready to accommodate them. Despite recent state legislation to speed up the permitting process and local reforms to promote higher-density development and accessory dwelling units, it remains overly difficult to add housing inventory.
Former N.C. Rep. Jon Hardister, now president of the Triad Real Estate and Building Industry Council, estimates that North Carolina as a whole is about 80,000 units short of meeting demand. The rising cost of housing isn’t just a barrier to relocation and homeownership. If the average resident in North Carolina is having to spend a lot of money on rent or house payments, Hardister told Triad Business Journal, “they’re not going to go shopping as often. Those miscellaneous purchases are not going to happen as often.”
This is no theoretical assertion. There’s good empirical evidence for it. A 2022 study published in the journal Housing Policy Debate found that across the 100 most-populous urban areas in the country, “decreases in housing affordability had a statistically significant negative effect on economic growth in these metros.”
Are policymakers responding to the problem swiftly and effectively? Alas, no. Many local boards are limiting or halting new construction, not welcoming it. The Charlotte Ledger recently reported that Union and Iredell counties have made it harder to build apartments. The city of Albemarle, in Stanly County, is preparing a new unified development ordinance intended to force high-density projects into tighter geographic confines. “You can’t build your way to affordability,” its planning director told the Ledger.
Nonsense. The only practical way to promote housing affordability is to build more units. Adding apartments and starter homes offers direct relief to young and lower-income people, but even adding new inventory at or above the median helps them indirectly, by freeing up the apartments and starter homes from which more-affluent consumers move into their new homes. A 2023 paper in the Journal of Urban Economics found that building 100 new market-rate units opens up the equivalent of 70 units in neighborhoods earning below the area’s median income. In the poorest neighborhoods, it opens up the equivalent of 40 units. “New construction reduces demand and loosens the housing market in low-and middle-income areas, even in the short run,” concluded study author Evan Mast of the W.E. Upjohn Institute for Employment Research.
Again, there’s no great mystery to be solved here. There has always been local opposition to new construction, especially of rental units and starter homes. Those already residing in the community may want their own property rights protected, but many view newcomers primarily as sources of trouble — traffic congestion, noise, political or cultural change, etc. — rather than welcoming them as new neighbors.
One reason Americans are leaving highly taxed, highly regulated states for freer ones is that the latter offer them more opportunities, better jobs, more space, and higher after-tax incomes. Yes, growth generates demand for more services. But it’s still far better to live in a growing community than a stagnant or declining community.
Going into the 2026 midterms, voters rank affordability as a top concern. They’re right to do so. Many of these same voters may also believe it’s possible to obtain lower prices and enjoy economic growth and throttle back housing development. They couldn’t be more wrong.
John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy with American history (FolkloreCycle.com).
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