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Local and County Governments
Housing and Urban Development

Homeownership is widely viewed as a necessary first step for community development. Once renters become owners, they begin to take a proprietary interest in their own property and that of the neighborhood. They set down roots. They begin to accumulate assets (most families use homes to a greater degree than bank accounts or mutual funds to save for the future) and, as property taxpayers, participate in local public affairs.

But state and local policymakers disagree about how best to promote homeownership. And problems associated with public housing projects and blighted downtowns continue to plague cities and towns across North Carolina.

The Role of Excessive Regulation

In 1991, a commission of the U.S. Department of Housing and Urban Development organized by then-Secretary Jack Kemp reported that one of the most serious barriers to affordable housing was the existence of costly and counterproductive government policies.

“Exclusionary, discriminatory, and unnecessary government regulations at all levels substantially restrict the ability of the private housing market to meet the demand for affordable housing,” the commission concluded, “and also limit the efficacy of government housing assistance and subsidy programs.”

The report estimated that regulations increased the average price of housing by between 20 percent and 35 percent.

North Carolina has long had a higher home-ownership rate than the national average, but in recent years, the gap has narrowed dramatically. Now North Carolina is only two percent above the national average, down from 5.1 percent in 1990. All of North Carolina’s neighbors, except Georgia, have higher homeownership rates (see chart, "Homeownership Levels by State, 2005"). Government-imposed requirements on housing, along with building codes, housing codes, and zoning regulations, unnecessarily raise the cost of housing in North Carolina, thereby lowering the homeownership rate.

A 1990 study by the John Locke Foundation found that housing codes regulating the amenities of houses (as opposed to their structural soundness) reduce the amount of space the families can rent or own and reduce homeownership rates among low-income residents by as much as 15 percent.

Local governments also reduce homeownership through zoning practices that discriminate against lower-income residents. Manufactured homes, for example, apply principles of factory production to homes and can cost far less than a comparably sized site-built home. But many municipalities strictly regulate the placement of manufactured homes, sometimes forcing them essentially out of the municipal limits.

While these regulations may be designed to promote higher-quality housing, in reality they restrict competition and make housing more expensive — pushing homeownership out of reach for many families.

A 1998 Locke Foundation study concluded that the relative presence of manufactured homes in a North Carolina locality’s housing mix had a significant impact on homeownership rates in that locality, suggesting that changing zoning rules to allow manufactured housing would be an effective policy to increase affordability and access.

The Problems of Public Housing

Faced with the difficulty of finding low-cost housing in closely regulated private markets, many North Carolinians of limited means enter public housing projects.

Unfortunately, public housing projects in North Carolina, as in the rest of the United States, are typically in poor repair, are costly to administer, and serve as a breeding ground for crime, drug abuse, and welfare dependency.

One national study found that girls reared in public housing are five times more likely than their peers to bear children out of wedlock, and boys in public housing are more than five times more likely to commit crimes.

Projects concentrate single-parent families with little work experience or role models, rather than dispersing them throughout a wider population of low- to moderate-income families that are stable and responsible.

They also make residents essentially prisoners of bureaucratic bungling and government authorities’ inability to enforce order. Finally, they reduce the incentive for tenants to develop self-sufficiency and take responsibility for their homes and their neighborhoods.

Goal

North Carolina should take steps to maximize the number of its citizens who can become self-sufficient homeowners.

That not only helps them take the first step to realizing the American Dream, but also it serves as an important precondition for developing healthy communities.

Recommendations

1. Local leaders should reduce or eliminate building, housing, and zoning regulations that increase the price of housing and aren’t directly related to health and safety considerations. Localities should also avoid new policies, such as draconian growth controls, that have reduced affordability in cities such as Portland, Oregon.
2. City and county leaders should revise their zoning ordinances to end discrimination against manufactured and modular homes. All forms of housing with similar safety standards should be treated the same.
3. Local leaders should take the lead to reform public housing by hiring tenant management and maintenance firms, setting strict rules for residents, finding operational efficiencies, fighting crime, and pressing Congress to convert all public housing assistance into vouchers to be used for rent or saved in Individual Development Accounts (IDAs) for future use in getting off welfare and buying a home

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