UNC Charlotte Study Shows Region Has a Substantial Housing Deficit
A comprehensive report issued last week by the Childress Klein Center for Real Estate (CKCRE) at UNC Charlotte offered a sobering picture of the State of Housing in the eight-county Charlotte Region. Using a wide range of housing data from 2010 – 2017, the report concludes that our region is woefully under-producing both for-sale and rental housing, leading to a growing affordability crisis that is most directly impacting middle-income families.
Speaking at the Regional Housing Summit Thursday afternoon, where the study results were unveiled, CKCRE Director Dr. Richard Buttimer said the study showed almost every county in the region was suffering from a growing supply gap in every segment of the market, but most dramatically in the lower end of the price distribution. The result is that middle-income housing affordability is becoming a growing challenge that could eventually impact Charlotte’s ability to attract economic development.
“The bottom line is that region is not producing enough housing to meet the demands of population growth,” Buttimer said. “As a result, prices are rising for all housing faster than inflation.”
According to the report, the Charlotte region’s population has grown at a rate of about 2.03% per year since 2007, while the aggregate number of housing units has only grown at a rate of about 1.34%. The resulting supply gap has given Charlotte one of the lowest housing vacancy rates of any of its regional or national competitor cities.
The lowest prices homes have had the highest percentage price increases since the recovery from the recession started. Clearly, this is having a profound effect on not only low-income affordability, but on middle-class affordability.
Other key takeaways from the report include:
Land prices are rising rapidly, especially in Mecklenburg County. As land prices increase, developers will seek to build higher density housing, and consumers will be willing to drive further to find housing at a price point with which they are comfortable.Prices of owner-occupied housing have risen in both nominal and real terms. Both the median and average home price in the Charlotte market are higher than they were at the height of the housing boom.The supply of lower-priced homes is severely constrained. Since 2011 the number of homes available at the lower end of the price distribution has become very tight. For example, until 2014, homes priced at $150,000 or less had always comprised at least 35% or more of the total home sales, with that percentage frequently in the upper 40% range in the 2005-2011 era. That percentage has steadily declined to the point that in 2018 they comprised less than 15% of homes sold in the region.The owner-occupied market has become much more supply-constrained than it has been historically. Since 2009 there has been a steady downward trend in the inventory of homes listed for sale on the MLS even though the number of homes sold has increased. Homes are simply staying on the market for less time before they are sold.Middle-income housing affordability is becoming a significant challenge for the region. Only about 15% of homes available for sale meet the definition of “affordable” for households earning under $50,000/year. Even a household earning $65,000/year can only comfortably afford to purchase about 40% of the homes available for sale.There is an ongoing need for additional low-income housing. There are nearly 80,000 households in the region that have annual household income of $15,000 or less. To meet this need, there are only approximately 15,500 Low-Income Housing Tax Credit units available. The reality is that there are not enough subsidized or public housing units in the region to meet the needs of the low-income population.While the study showed that housing affordability in Charlotte region compared favorably to other regional and national metros, the current home price and rent trends are rapidly deteriorating that advantage.“Roughly 45% of renters in the Charlotte region meet the definition of being cost-burdened,” the study reports. “Among regional competitors, Asheville, Charleston and Columbia each have rates of 50% or higher. Among the national competitor set, only Cincinnati and Nashville had lower percentages of cost-burdened renters.”Overall, the report concluded that the current state of housing in Charlotte was ‘good,’ and that “the region does a good job providing adequate, relatively inexpensive housing for the majority of its residents.” It stressed however, that accelerating land price and housing supply challenges would continue to make middle-income affordability for residents as our population continues to grow.In a pair of panel discussions that followed the presentation of the study results, developers, home builders and affordable housing providers discussed how regulation at the local, state and federal levels contributed to the increasing cost of new housing. True Homes CEO Mark Boyce said entitlement time remained a huge impediment to delivering affordable product, citing the 9 months it recently took his company to secure zoning approval on a townhome community that was unopposed by neighbors.When regulatory hurdles are combined with the growing challenges of land and lumber prices, labor availability, and financing costs, the impact on housing prices continues to be dramatic. Spectrum Cos. Chief Operating Officer Steve McClure told the audience that delivery costs for each new apartment unit are now about $150,000, up from $90,000 just five years ago.All panelists agreed regional leaders needed to come together to find ways to expand the supply of housing at all price levels, particularly in exurban counties where land costs still allow builders to deliver homes at prices that middle-income and working-class buyers can afford.MetroStudy Regional Director Jennifer Gooch said that if current trends don’t change, “Charlotte will become a city of ‘have and have-nots’, where fewer people will have the opportunity to own homes.” And Tim Sittema, a partner with Crosland Southeast, told the audience that affordability was a challenge that should concern every segment of the community. “Affordable Housing isn’t a poor people problem,” he said. “It relates directly to the quality of life in our community.”The State of Housing in Charlotte Report was sponsored by a number of local partners, including the Charlotte Regional REALTOR Association®, which donated more than 15 years of MLS sales data — essential to ensuring the research team had accurate picture of home prices and market trends.The report will be updated annually for the next five years, to produce a reliable trendline of housing data that can help regional leaders and policymakers identify solutions that can help address the growing challenge of affordability and supply.