Exclusionary Zoning in North Carolina

By Elijah Gullett

This memo provides a brief summary of the history and background of zoning laws, both federally and within the state of North Carolina, as well as the impacts of NC’s current exclusionary zoning status quo on housing affordability, economic opportunity and development, racial and class disparities, as well as its environmental consequences. This memo also addresses counter arguments raised by proponents of exclusionary zoning practices, and specific measures the NC General Assembly can take to eliminate exclusionary zoning within the state.

Background

“Zoning” broadly refers to the range of land-use regulations designed to restrict the types of buildings that can be built on certain parcels of land as well as their design, height, size, and use. The most common residential zoning in NC, as well as much of the United States, is R1 zoning. R1 zoning only permits low-density, single family detached homes. Outside of formal zoning, other regulations exist, including parking minimums, maximum height limits, setback requirements, and minimum lot sizes. All of these regulations often work to promote low-density, urban sprawl.

In contrast, “upzoning” refers to liberalizing existing zoning regulations to permit higher density construction and potentially mixed-use development. Other states, such as California, as well as many municipalities (including Portland, Oregon and Minneapolis, Minnesota), have implemented upzoning policies. Upzoning can look radically different from place to place, as some municipalities only permit the development of duplexes or additional dwelling units (ADUs), while others go further to allow much higher density construction in what were originally R1 areas.

The History of Zoning

Zoning laws began cropping up throughout the United States beginning in the early 1900s, with the first being passed by the Los Angeles municipal government in 1908. In 1923, the North Carolina General Assembly (NCGA) permitted local city governments to develop zoning codes, and by the end of the century, a dozen NC cities had adopted such codes.[i] Zoning was supported and strengthened by the 1926 Supreme Court case Euclid v. Ambler, which established that local governments’ policing powers also encompass zoning powers. Beginning in 1934, when the Federal Housing Authority (FHA) was created, residential zoning was solidified by federal influence as the standard method of improving property values and ensuring only “desirable” development was permitted. As suburbanization spread and the “Baby Boom” population growth increased population density, zoning laws became increasingly common. By 1960, the majority of NC cities and towns had implemented zoning policies.[ii]

Zoning in Modern North Carolina

Modern zoning codes in NC, as in much of the United States, tend to be long and complicated. Local zoning codes, even for small cities and towns, typically exceed 100 pages in length. Zoning has also become increasingly powerful, as legislative changes and constitutional rulings have expanded the permissible uses of zoning codes to include aesthetics and historic preservation.

NC is somewhat unique compared to other states in that the state-level government has a considerable amount of power over localities, even when it comes to local zoning codes. In NC, local governments have no inherent power, all of their power is derived and permitted by the state government. The state government has granted broad authority to local governments to develop zoning laws; however, the state government also has a considerable history of interfering in local zoning conflicts.[iii] Attempts by Cabarrus County to zone based on school county were struck down by the NC’s Supreme Court on the grounds that the state-granted zoning authority did not explicitly include the ability to zone according to “efficient and adequate” provision of public facilities.

The NC state government also outlines strict procedures regarding the enactment and enforcement of local zoning laws. All rezoning attempts require a public hearing, two public hearing notices (with the exact dates specified), a review and comment period for the planning board, specifications for how many city council members must approve for a rezoning ordinance to pass, and a public statement explaining why rezoning is reasonable and within the public interest.

Housing Affordability

The connection between land-use policies and housing costs is hotly debated; however, there is compelling evidence that exclusionary zoning increases the costs of housing. At a theoretical level, exclusionary zoning restricts the supply of land that is available for construction, which — by extension — reduces the supply of housing. The argument follows that, if developers could build multifamily apartments without these supply constraints, housing stock would better match demand and prices would go down.

The empirical data on this relationship is broad and varied. Rothwell (2008) finds that upwards of 20% of the variation in metropolitan housing growth is attributable to anti-density regulation, and that these same regulations inflate housing prices during demand shocks.[iv] Quigley and Raphael (2003) find that every additional land-use regulation in California increases the prices of owner-occupied housing by 4.5% and increases the price of rental housing by 2.3%.[v] Glaeser and Gyourko (2005) exploits gaps between housing and construction costs to determine the role that land-use regulations play in increased housing costs in several metropolitan areas in the US.[vi] They argue that these regulations play a significant role in the inflation of housing costs, especially in New York City. Ihlanfeldt (2003) conducts a broad review of the literature on the association between land-use regulations and housing costs and finds mixed but compelling evidence that exclusionary zoning increases the cost of housing.[vii]

Upzoning is not a substitute for affordable housing policies targeted at low-income households; however, upzoning will be a necessary prerequisite for developing the affordable housing supply we need. These restrictive zoning laws often create the legal support for “NIMBY” (not-in-my-backyard) activism that opposes affordable housing construction on the grounds that these developments violate existing zoning regulations.

Racial Equity

This history of residential zoning is deeply tied to racial segregation. Zoning laws have historically been used to lock Black and other non-white populations out of economically dynamic areas, justified by white property owners arguing that the presence of Black residents would lower property values. Further, white urbanites feared the demographic changes that happened during the Great Migration, which motivated the implementation of explicitly racialized zoning laws. White homeowners used privately-held, government-supported covenants to prohibit homes in their neighborhood from ever being sold or rented to Black families.[viii] Even after the practice was legally prohibited in 1948, local white community members found extralegal ways to exclude non-white families. Their tactics included intimidation, threats, and even violence and firebombings of Black residences, all of which were overlooked by local authorities.[ix]

Although explicit racial segregation by law is no longer allowed, modern zoning restrictions still act as a form of de facto segregation. Single family zoning artificially inflates the costs of housing and prohibits alternative forms of housing to be constructed. This type of zoning is prevalent in economically prosperous suburbs, but the high housing costs lock out low-income families, who are often disproportionately Black or Brown. Even without racist intentions, single family zoning has racially disparate impacts. These impacts are not small, either. Economic opportunity research from Raj Chetty’s Moving to Opportunity study finds that moving low-income families to wealthier neighborhoods increases the likelihood of college attendance for children and increases children’s future earnings by 31%.

Beyond locking low-income people of color out of economic opportunity, single family zoning promotes environmental and public health inequalities. The history of toxic land-uses being permitted primarily near low-income, Black communities is well-documented.[x],[xi] This system is bolstered by a zoning policy that excludes large swaths of the local population from wealthier (and, by extension, healthier) communities. This inequity has serious impacts on the long-term health outcomes for low-income Black and Brown families. Racial minorities in the US have higher rates of asthma, lead exposure, certain cancers, and a wide range of other health problems related to environmental factors.[xii]

Environmental Impacts

Single-family zoning promotes and upholds inefficient land uses that incentivize urban sprawl. This sprawl has a wide range of environmental impacts, including impacts on water usage, energy efficiency, carbon emissions, and wildlife habitats. Suburban households, compared to both urban and rural households, produce the most carbon emissions.[xiii] Without legalizing denser urban environments, global climate change mitigation goals cannot be met.

Firstly, single-family zoning promotes the construction of large housing units, while actively prohibiting the construction of smaller housing units. The range of zoning regulations includes not only what type of housing gets constructed, but also minimum lot requirements, setback requirements, and parking minimums, all of which further encourage the use of more space. This increased lot size and house size per household increases the per capita carbon emissions of individuals.

Urban sprawl, especially in the United States, has also promoted urban design that necessitates individual car ownership. Transportation accounts for 29% of US carbon emissions, making it one of the biggest contributors to climate change.[xiv] In the US, much of this is driven by car dependency. Simply switching to electric vehicles, while certainly beneficial, is also not sufficient to address climate change concerns. The infrastructure needed to maintain car-centric design requires the extensive use of asphalt, energy-intensive batteries, and large swaths of land dedicated to parking and roads. Instead, allowing for denser development would encourage individuals to choose less energy and land-intensive transportation options, such as walking, bicycles, e-bikes, or public transit.

Climate change should be of utmost concern to the state of NC. Our coastlines are uniquely vulnerable to increased rates of natural disasters and increasingly intense storms. Hurricane Matthew killed 26 NC residents and cost NC $1.5 billion.[xv] Hurricane Florence in 2018 killed 15 NC residents and resulted in $22 billion in damages.[xvi] As these types of weather events become increasingly common and more severe, NC needs to take preventative measures by decreasing our carbon footprint. Fundamentally changing our urban design to become more dense and incentivizing alternative transportation methods is one of the most important tools that we have for combating climate change.

Population Growth

NC has seen the sixth largest population increase over the last decade, with most of this increase attributable to net migration from other states.[xvii] The State Demographer projects that 84% of population growth over the next nine years will be from net migration. Much of this population growth is driven by the placement of high profile companies in NC’s two major urban centers: Charlotte and Raleigh-Durham.

The geography of NC’s population is also shifting, causing further pressure to build more housing in urban centers. More and more individuals are living in urban areas, much of this change driven by inmigration. The state of NC should target Wake County, Durham County, Mecklenburg County, Guilford County, and Forsyth County to a.) propel the construction of new units to accommodate newcomers and b.) preserve existing affordable housing to prevent gentrification and displacement.

Arguments for Exclusionary Zoning

One concern is that upzoning will not meaningfully address the need for affordable housing.[xviii] The housing that would primarily be permitted would be market-rate, and therefore not accessible to the poorest members of the community. Upzoning is not enough, and as such, my proposal ties upzoning legislation from the NC state government to directives for local governments to substantially increase their housing costs based on market studies. Furthermore, my proposal includes affordable housing mandates based on local needs. Upzoning is a necessary prerequisite for creating the housing abundance NC needs in the coming years.

An additional concern over upzoning is a fear of gentrification. The research on the role of upzoning in gentrifying urban centers is mixed.[xix] However, urban economic research indicates that a “filtering” effect occurs over time.[xx], [xxi] As new, market-rate housing units are constructed, the older housing in the area becomes more affordable and prevents displacement by directing wealthier individuals to these new units. This is not a complete solution for the problems of affordable housing, however, it can still provide increasing housing affordability for middle class individuals and potentially reduce demand for lower-income units.

The Policy Solution

To address the above problems facing NC, I recommend that the NC General Assembly pass Senate Bill 349 alongside two amendments: 1.) require local governments to tie housing construction to market study predictions of demand, and 2.) require all private developers to set-aside 10% of units as affordable housing units for those making 50% AMI.

Implementing this policy is a necessary and meaningful first step to pushing NC into the future. These reforms will increase housing affordability as well as the supply of affordable housing, allowing more households to access economic opportunities in NC’s urban centers. These reforms will also act to reduce NC’s carbon footprint, moving NC away from car-centric infrastructure to more dense, sustainable development. Finally, removing these exclusionary zoning ordinances is a necessary step towards racial equity and expanding economic opportunity to all.

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[i] Owens, D. W. (2013). Introduction to Zoning and Development Regulation. UNC School of Government.

[ii] Owens, D.W. (2014). Authority to Enact and Enforce Ordinances. UNC School of Government.

[iii] Ibid.

[iv] Rothwell, J.T., (June 2009). The Effects of Density Regulation on Metropolitan Housing Markets.

[v] Quigley, J. M., & Raphael, S. (2005). Regulation and the high cost of housing in California. American Economic Review, 95(2), 323-328.

[vi] Glaeser, E., Gyourko, J., and Saks, R.E. (2005). “Why Have Housing Prices Gone Up?” American Economic Review, 95(2): 329-333.

[vii] Ihlanfeldt, K.R. (February 2004). Exclusionary Land-use Regulations within Suburban Communities: A Review of the Evidence and Policy Prescriptions. Urban Studies, 41(2), 261–283.

[viii] Shertzer, A., Twinam, T., & Walsh, R.P. (2016). Race, Ethnicity, and Discriminatory Zoning. American Economic Journal, 8,(3).

[ix] Moore, E., Montojo, N., & Mauri, N. (2019). Roots, Race, & Place: A History of Racially Exclusionary Housing in the San Francisco Bay Area. Othering & Belonging Institute.

[x] Taylor, D.E. (2014). Toxic communities : environmental racism, industrial pollution, and residential mobility. New York University Press: New York, NY.

[xi] Rothstein, R. (2017). The Color of Law: A forgotten history of how our government segregated America. Liveright Publishing: New York, NY.

[xii] National Academies of Sciences, Engineering, and Medicine; Health and Medicine Division; Board on Population Health and Public Health Practice; Committee on Community-Based Solutions to Promote Health Equity in the United States; Baciu A, Negussie Y, Geller A, et al., editors. (January 2017). Communities in Action: Pathways to Health Equity. Washington (DC): National Academies Press (US), The State of Health Disparities in the United States.

[xiii] Muñoz, Pablo & Zwick, Sabrina & Mirzabaev, Alisher. (2020). The impact of urbanization on Austria’s carbon footprint. Journal of Cleaner Production, 263. 121326.

[xiv] U.S. Environmental Protection Agency. (2021). Sources of Greenhouse Gas Emissions.

[xv] Reuters (2016). North Carolina estimates $1.5 billion in hurricane damage to buildings.

[xvi] Stewart, S.R. & Berg, R. (2018). Hurricane Florence. National Hurricane Center Tropical Cyclone Report.

[xvii] Office of State and Budget Management. (May 2021). North Carolina’s Population: Short-term Challenges, Long-term Growth Factors.

[xviii] Imbroscio, D. (2021). Rethinking Exclusionary Zoning or: How I Stopped Worrying and Learned to Love It. Urban Affairs Review, 57(1), 214–251.

[xix] Freemark, Y. (2019). Upzoning Chicago: Impacts of a Zoning Reform on Property Values and Housing Construction. Urban Affairs Review, 56(3), 758-789.

[xx] Weicher, J.C. & Thibodeau, T.G. (1988). Filtering and housing markets: An empirical analysis, Journal of Urban Economics, 23(1), 21-40.

[xxi] Rosenthal, S. S. (2014). Are Private Markets and Filtering a Viable Source of Low-Income Housing? Estimates from a “Repeat Income” Model. The American Economic Review, 104(2), 687–706.

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Edited by Cameron McBroom-Fitterer

Featured image: Redlining map in Durham, NC. Courtesy of National Archives and Records Administration.