Orange County

Chapel Hill wants affordable housing, but creates an unaffordable town – Michael Jacobs

Michael Jacobs
Michael Jacobs

The chorus for using taxes to build more “affordable housing” is growing louder across the Triangle. As we witness in Chapel Hill, the lack of low-cost housing is a predictable consequence of many conscious decisions, which other Triangle communities should avoid.

Chapel Hill boasts the highest all-in property tax rates in the state. It has the most expensive housing, caused by an intentional lack of supply of single-family homes. It has the highest water rates for anyone with a house and yard. It has the highest sales tax rate in North Carolina. And it has banned the retailer where most low-income households buy their groceries. Yet residents are distraught that their community it is not more economically and racially diverse.

Not surprisingly, Orange was one of only two counties in North Carolina that saw a decline in black population in the last decade. (The only other is the second-most progressive county, home to Asheville.) So the solution being proposed in Chapel Hill to re-balance the local demographics is higher taxes to subsidize housing that would be built at similar prices without subsidies if the community allowed it. As George Orwell said, “There are some ideas that are so absurd only an intellectual could believe them.”

There are two primary reasons there are so few affordable neighborhoods and homes in Chapel Hill and Orange County, both of which are easy to resolve. The area surrounding Chapel Hill is effectively off limits to low-cost home builders, thanks to the “Rural Buffer,” which should be re-named the “Poor-people Buffer” because it serves as a buffer that keeps low-income residents out by not allowing development in rural areas that are less expensive.

The other reason there are so few affordable homes is that most regional home builders and architects who have done work in Chapel Hill have the attitude of “never again.” The approval process is far more cumbersome, expensive, unpredictable and lengthy than in surrounding communities. This curable dysfunction constricts the supply and raises the cost of homes that would be targeted to those with more modest incomes.

Policy choices matter. If you ask a group of progressives in Raleigh, Durham, Cary or Chapel Hill what the most important public policy issue is, they would likely cite poverty, education or income inequality. If you ask conservatives, one of their top choices would be jobs, i.e., whether their state is “business friendly.”

So one thing both camps should be able to agree on is that if there was a state that ranked in the bottom 10 in K-12 education, in the top 10 in poverty, had the greatest income inequality in the nation and ranked 50th in business climate, it would be a state nobody would want to emulate from a policy standpoint. Yet California is the political role model for most Triangle progressive voters.

In typical California fashion, progressives there implemented a law regarding raising chickens that seems heartwarming for our feathered friends. The only problem is that it caused the cost of eggs and chicken, two primary protein sources for low-income households, to skyrocket. Do progressives care more about chickens or poor people? The cost of heating a poor person’s home in California is 50 percent higher than the national average. I could go on. Sadly, progressives frequently ignore the impact of most policies on the cost of living, which is toxic to low-income households.

To seal their spot as North Carolina’s most unaffordable community for generations to come, Chapel Hill and Orange County are pursuing a light rail system that is an economic train wreck. Never mind the fact that before a light rail system could be operational, everyone could have access to electric vehicles to pick them up and carpool them to exactly where they want to go on the most efficient route, without owning a car. It would be cheaper to buy the estimated number of riders for this light rail line a new $100,000 Tesla than to build the rail line.

But who runs numbers when you can rally around yesterday’s green solutions?

With the influx of residents from fiscally-handicapped blue states into the Triangle, we are starting to see some of the same elitist policies popping up in Raleigh, Cary and Durham that have existed in Chapel Hill for decades.

Before driving out more low-income and middle-class residents with further tax increases, elected officials need to consider how everything they do impacts the local cost of living and the community’s affordability. If a community is affordable, you don’t need to raise taxes to make it more affordable. Just the sound of that logic has to make you chuckle. Orwell was right.

Michael Jacobs is a former U.S. Treasury official, CEO of Jacobs Capital and a member of the finance faculty at UNC’s Kenan Flagler Graduate School of Business.