SOUTHEASTERN N.C. — Some leaders believe local government control of zoning could be used as a tool to help address the affordable housing crisis, but the policy remains highly controversial in North Carolina.
READ MORE: Supportive housing use proposed for by-right in seven NHC zoning districts
ALSO: ‘We believe we have the right person for the job’: Former judge, lawyer hired to lead endowment
Inclusionary zoning refers to a local government applying its power to make private developers include a certain percentage of affordable units in new residential projects or donate to an affordable housing fund. It can take several forms, such as a conditional agreement that provides incentives to an individual developer or a mandatory requirement for an entire municipality.
For example, Chapel Hill — one of the few North Carolina municipalities with a mandatory inclusionary zoning program — requires new residential developments to make 10% to 15% of units affordable to households earning between 65% and 85% of area median income or donate an equivalent amount to an affordable housing fund.
The program’s legality was recently challenged by developer Epcon Homestead LLC, who claimed the ordinance was unconstitutional and requested a refund of over $800,000 in fees. North Carolina Court of Appeals judge Jeff Carpenter described the case as a “collateral attack” on the inclusionary zoning statute. He dismissed the case in July due to exceeding the statute of limitations and Chapel Hill’s program remains in effect.
Mandated inclusionary zoning in North Carolina operates in a “legal gray zone,” according to the Duke University Leadership Forum. The state constitution and statutes do not include a provision giving municipalities authority to use inclusionary zoning. Local governments do have authority to regulate the location and use of buildings, however, which advocates have argued allows them to use inclusionary zoning.
Beyond legal ambiguities, the effectiveness of inclusionary zoning policies is fiercely debated. Supporters argue it can be a valuable tool to increase the supply of affordable housing, while critics, including the North Carolina Realtors Association, contend it unfairly burdens developers and can lead to increased costs by distorting markets.
A 2022 American Planning Association analysis of diverse inclusionary zoning programs throughout the country found mixed outcomes; past studies found inclusionary rezoning reduced the construction of new homes in some scenarios but increased affordable housing units in others. The analysis argued it should be considered if a local government has the capacity to tailor its program for its unique conditions, such as housing needed for specific incomes in an area.
Inclusionary zoning programs are generally considered to be most effective in communities anticipating growth and rising real estate values, enabling developers to maintain profits despite the burden of creating lower-cost units.
Brunswick Homeless Coalition board president Joe Staton argued the conditions apply to his region; Brunswick and Pender counties have ranked among the fastest-growing counties in the state in recent years.
According to the NBC Home Buying Index’s July report, the cost of a median priced home in Brunswick increased from around $250,000 in 2020 to $367,400 in 2024. Brunswick County is ranked in the 99th percentile among 1,274 counties for the index’s category measuring competition and demand; however, the housing stock in Brunswick County has a 37% vacancy rate, according to the North Carolina Housing Finance Agency.
“Inclusionary zoning shows promise, in that it can encourage the provision of housing,” Staton told Port City Daily. “So it sounds very encouraging as part of the solution. We have such a low percentage of affordable housing as a total percentage, but that housing is keeping people warm and safe.”
Brunswick County spokesperson Meagan Kascsak said the county is considering the policy in its Blueprint Brunswick 2040 Comprehensive Land Use Plan and the county’s Unified Development Ordinance (UDO) Modernization Project.
Pender County Planning Director Daniel Adams said the county has not considered using mandatory or conditional inclusionary zoning policies. According to the NBC Housing Index, Pender County’s median home price has increased from around $260,000 in 2020 to $494,000 in 2024. The county’s vacancy rate for housing stock is 25%.
The North Carolina Housing Coalition’s 2024 Housing Need Survey found 49% of renters and 21% of homeowners in Pender are cost-burdened — meaning they pay more than 30% of their income on housing.
The same report noted 35% of New Hanover County households are cost-burdened. Several residents spoke favorably of inclusionary zoning in a 2021 Affordable and Workforce Housing public opinion study carried out by the county and City of Wilmington, but the county planning department told Port City Daily that legal concerns have discouraged officials from considering mandatory inclusionary zoning as a potential tool.
New Hanover County spokesperson Alex Riley noted the county has used voluntary inclusionary zoning for a few recent rezoning cases. Last year, commissioners approved a 128 unit development on Carolina Beach Road under a condition dedicating 10% of units to workforce housing and a March rezoning in Castle Hayne specified that 68 units would be affordable.
Wilmington spokesperson Jerod Patterson said the city has opted to use incentives in the city’s recently revised land code to encourage the addition of affordable units in new developments; developers can qualify to build a higher number of units by dedicating a certain percentage of units at below-market rates for a set period of time.
Rep. Deb Butler (D-New Hanover) sought to address the legality of inclusionary zoning by sponsoring House Bill 645, a 2023 bill to expand local government authority over zoning regulations, including inclusionary zoning. The bill died in the rules committee.
“I sponsored the bill to help address the affordable housing shortage we suffer here in NC,” Butler said. “The bill is not a mandate. It simply gives governing bodies another tool to address this important issue should they feel it is appropriate in their jurisdiction.”
North Carolina Home Builders Association legislative affairs director Steve Webb told Port City Daily his organization opposes both conditional and mandated forms of inclusionary zoning. He argued the policy ultimately drives up costs, as developers are forced to recoup the burden of building a certain percentage of under-market units by raising costs on other properties.
“If you really want to tackle housing affordability, we would loosen up the zoning process to allow builders to develop the housing that’s needed,” Webb said.
Because rent control is illegal in North Carolina under a 1987 state law, municipalities with mandated inclusionary zoning — including Chapel Hill, Davidson, and Manteo — decided not to include rental housing in their programs.
Webb and other critics argue the policies have incentivized developers to focus on building rentals rather than for-sale units that have inclusionary zoning stipulations.
“You’re seeing the rise of these rental communities,” he said. “We believe homeownership is one of the best tools to move yourself forward in life.”
The state builders association argues municipalities should be required to get permission from the General Assembly to use zoning authority for affordable housing programs.
“The zoning process is a place where [municipal officials], for a lack of a better term, extort things from the developers that they want,” he said.
Alternatively, Butler criticized NCHBA and other opposed lobbyist groups for limiting municipal authority.
“The right-wing leadership for years has talked about local government being best,” she said. “Now they’ve apparently changed their mind about that because they seem well-poised to tell every municipality how to behave and govern.”
Dan Winslow, who will become CEO of the New Hanover County Endowment in October, advocated for the use of a conditional inclusionary zoning program in Massachusetts to address affordable housing issues. The endowment’s strategic priorities include affordable housing and it committed $19 million to the issue in May.
Winslow is the executive director of the New England Legal Foundation, a nonprofit that advocates allowing municipalities to use “overlay districts” that cap rent at 30% of annual income while reducing local regulations on height, lot size, and other dimensional requirements. Winslow referenced the proposal during a public announcement last month.
[Update: This article has been updated to remove a statement attributed to the endowment regarding its consideration of the NELF zoning district proposal. The endowment does not have a position on the proposal at this time.]
Tips or comments? Email journalist Peter Castagno at peter@localdailymedia.com.
Want to read more from PCD? Subscribe now and then sign up for our morning newsletter, Wilmington Wire, and get the headlines delivered to your inbox every morning.
