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HomeMy WebLinkAboutNHC Housing Needs Assesment_Executive Summary Root Policy Research 789 Sherman St., Denver, CO 80203 www.rootpolicy.com 970.880.1415 Executive Summary New Hanover County Housing Needs Assessment PREPARED FOR: Draft: New Hanover County, NC 4/14/2025 EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 1 Introduction The Housing Needs Assessment (HNA) is a component of Destination 2050: New Hanover County’s Comprehensive Plan update, designed to 1) present demographic trends; 2) identify changes in the supply of and demand for housing; and 3) identify current and future housing gaps in New Hanover County. This report documents current and future housing needs through data analysis. Defining and Measuring “Affordability” The most common definition of housing affordability is linked to industry standards. The federal government considers housing as affordable when the housing payment—the rent or mortgage payment plus taxes and utilities—consumes 30% or less of a household’s gross income. Households paying more than 30% are “cost burdened.” Households experiencing cost burden have less money to spend on other essentials like healthcare, education, groceries, and transportation—adversely affecting their household well-being, limiting their economic growth potential, and constraining local spending. Households paying more than 50% are “severely cost burdened” and considered at risk of homelessness. A balanced housing stock accommodates a full “life cycle community”—where there are affordable housing options for each stage of life from career starters through retirees—which in turn supports the local economy and contributes to New Hanover County’s community culture. Report Organization: I. Demographic Trends II. Housing Supply & Demand III. Housing Needs Analysis Income & AMI The HNA analysis uses both household income ranges and “Area Median Income (AMI).” AMI is a measure of income based on the median, or middle income household. Housing programs base program eligibility on income limits that are represented as percentages of AMI. HUD publishes current-year income limits based on an internal calculation that estimates AMIs by household size and region. The table below presents 2024 AMI limits for a 2-person household in New Hanover County based on the county’s average household size (2.20 members/household). 30% AMI Extremely low income $23,800 50% AMI Very low income $39,700 80% AMI Low income $63,500 100% AMI Moderate income $79,400 120% AMI Moderate income $95,280 AMI Level 2024 Income Limits (2-person HH) EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 2 The graphic below illustrates common pathways by which residents move across the housing continuum. Not all households individually experience each point on the continuum; but all communities have members experiencing each point on the continuum and need shelter or housing options that open housing pathways and facilitate community stability. Mobility across the housing continuum is driven by both individual/household circumstances as well as systemic conditions, which can create structural barriers for historically marginalized populations. Economic consequences of unstable housing. Housing stability occurs when markets are free of discrimination and households can consistently afford to pay their rent or mortgage without cutting back on essential expenses like food, or health care. When households have stable housing, they can contribute to their local economy, support the economic growth of their families, and manage their families’ health and well-being. Rising housing costs have increased the number of New Hanover County households that are housing unstable. There are many negative consequences of housing instability that have broader economic effects, such as:  Low income renters who are cost burdened or severely cost burdened may be leave the county due to rising housing costs or become homeless;  Low income homeowners cannot make needed improvements to preserve the condition of their homes and enable them to age in place;  Moderate income renters have difficulty achieving ownership and passing on wealth to their families so may leave the county for more affordable options;  As households spend higher proportions of their income on housing, they spend less in the local community—impacting local businesses as well as local sales tax revenue; and  Existing businesses may have difficulty finding workers. The Housing Continuum The HNA is designed to evaluate and quantify housing needs across the full spectrum of housing—from homelessness to market-rate homeownership. EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 3 Population: New Hanover County’s population saw strong growth most years since 2010, with the Balance of County growing faster than Wilmington. Growth in Brunswick and Pender Counties outpaced New Hanover County, though all three counties had higher population growth than the state overall. Population growth is expected to continue at a similar rate, reaching 328,626 by 2050. The county’s population is aging, and forecasts show continued growth in the senior population. Racial and ethnic diversity increased by about 2 percentage points since 2018: minority groups now represent 25% of the overall county population. Residents are increasingly likely to have at least a bachelor’s degree. Homeownership rates in New Hanover County, Wilmington, and the Balance of County increased since 2018 as homeownership was stable in N.C. overall. However, households earning $50,000 to $150,000 have seen decreases in ownership as the market offerings affordable to them decline. Racial and ethnic disparities in homeownership persist. Homeownership rates are 65-67% for non- Hispanic White and Asian households and at least ten points lower for all other groups. Mortgage loan denials are disproportionately high for racial/ethnic minorities, even accounting for income differences. Income shifts over the last five years show a sharp rise in the number and proportion of New Hanover County households earning more than $75,000/year. The median income for households in the county increased by 52% from $52,200 in 2018 to $79,500 in 2023—a growth much faster than that of the U.S. (+25%), North Carolina (+31%), and all peer communities. Migration: Households moving to New Hanover County had higher average incomes than households leaving each year since 2015-2016. Moderate income households are moving to the county as lower income households leave the county (likely for more affordable areas), contributing to the county’s above-average increases in income (these are also due to rising wages). Figure ES-1. Homeownership by Income, New Hanover County Source: 2018 and 2023 1-year ACS and Root Policy Research. Figure ES-2. Household Income Distribution, New Hanover County Source: 2018 and 2023 1-year ACS and Root Policy Research. Figure ES-3. Average Income of In-Migrating and Out-Migrating Households, New Hanover County Source: 2018 and 2023 1-year ACS and Root Policy Research. Demographic Trends Growing and aging population; income and ownership shifts driven by both wage and migration trends (people moving in- and out- of the county). EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 4 Poverty. The county’s poverty rate decreased from 18% in 2010 to 11% by 2021, inching back to 12% by 2023. Poverty decreased in Wilmington and increased in the Balance of County in recent years, converging near the county’s 12% in 2023. Employment. There are currently about 129,000 jobs in New Hanover County. Job growth averaged 2-3% per year from 2010 through 2019 and has accelerated since 2021 (4-5% each year). The fastest growing employment industries in the past five years (2018-2023) were education and healthcare, financial activities, and construction. Wages. The average wage across industries increased by 30% from 2018 to 2023, exceeding national inflation (+22%). Average wage growth between 2018 and 2023 varied widely by employment industry: wages increased by as little as 6% in Manufacturing and up to 55% in Information. It is worth noting that wages grew faster than average in the lowest paying industries, including leisure and hospitality (wages +39%) and “other services” (+41%). Still, wage gains failed to keep up with housing prices—rents rose 38%, home prices rose 66%, and the income required to afford a typical home more than doubled (+111%) due to higher interest rates. Work from Home & Commuting. The COVID-19 pandemic increased the share of workers working from home across the country and in New Hanover County—11% of workers in 2019 worked from home compared to 21% in 2023. Balance of County residents are slightly more likely than Wilmington residents to work from home. The proportion of jobs filled by in-commuters has shifted up slightly over the past few years. Nearly half of workers in the county are commuting from outside the county—most commonly from Brunswick and Pender Counties. Figure ES-4. Total Employment, New Hanover County Source: Quarterly Census of Employment and Wages. Figure ES-5. % of Jobs Filled by In-Commuters Figure ES-6. Commuting Dynamics, New Hanover County, 2022 Source: Quarterly Census of Employment and Wages. Source: Quarterly Census of Employment and Wages. Economic Trends Strong job growth and rising wages, though income gains still lag housing cost growth. Increases in working from home and in-commuting from other counties. EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 5 Housing stock and production. Housing production lagged employment and household growth in New Hanover County from 2013 to 2018 but in more recent years (2018 to 2023) production has kept up with job growth and new households. Single family detached homes make up a majority of homes (57%) in the County, despite strong multifamily construction since 2018. Figure ES-7. Building Permits, 1980-2023 and Housing Stock, 2023 Source: U.S. Census Building Permits Survey and Root Policy Research. Rental market. Between 2018 and 2023, median gross rent increased by 38% in New Hanover County (from $1,064 to $1,466), by 44% in Wilmington, and by 26% in the balance of county. Typical market rate asking rent—what renters would find in searching for a unit without rental assistance—was higher at $1,702 in 2023, up 57% from 2018. Median renter income increased by 45% between 2018 and 2023, lagging growth in typical asking rent but outpacing growth in median gross rent. More than half (53%) of the county’s rental units cost less than $1,000/month in 2018; by 2023, this fell to 21%. The share of units priced at or above $1,250 more than doubled from 25% in 2018 to 58% in 2023. Figure ES-8. Rent Distribution, 2018-2023 Source: 5-year ACS and Root Policy Research. Housing Stock and Market Trends Residential construction starts to keep pace with job and household growth. Growing multifamily inventory. Rising renter incomes lag market rent increases. EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 6 Home purchase market. The median sale price in New Hanover County increased by 45% from $287,000 in 2020 to $415,000 in 2023. Prices increased at similar rates in Wilmington and the balance of county, and median prices remain higher in the balance of county than in Wilmington. Home price increases outpaced income gains since 2020, and rising interest rates have a severe impact on affordability. While condos and townhomes offer more affordability, they constitute a smaller share of total sales (24%) than more expensive single family detached homes (75%). Since 2020, the proportion of home sales affordable to the median household (earning 100% AMI) dropped from 50% to 5% due to rising prices and declining purchasing power at higher interest rates. Figure ES-10. Share of Home Sales Affordable by AMI Level in 2020 and 2023 Source: New Hanover County Assessor, FRED from the Federal Reserve of St. Louis, HUD 2- Person AMI Limits, and Root Policy Research. Vacancy and STRs. Residential vacancy rates have been stable overall at 13-14% in the county since 2018, though there has been a slight increase in the share of vacant units dedicated to seasonal or vacation use, particularly in the balance of county. Seasonally occupied units—including second homes and short term rentals—make up 7% of all units countywide, 3% in Wilmington, and 12% in the balance of county. Within the balance of county, seasonally occupied homes constitute 42% of total housing units in the beach towns of Carolina Beach, Kure Beach, and Wrightsville Beach and 2% of total units in the unincorporated county. Seasonally occupied homes constrain supply and contribute to already-rising prices in the beach towns. Figure ES-9. Median Home Price vs. Affordable Price at Median HH Income Source: 2023 1-year ACS estimates, New Hanover County Assessor, Federal Reserve of St. Louis, and Root Policy Research. Figure ES-11. Share of Vacant Units Vacant for Seasonal Use Source: 2023 1-year ACS estimates. Housing Stock and Market Trends (continued)… Price growth and interest rate hikes cause dramatic loss in purchase affordability. Second homes and STRs may limit supply and raise prices in select areas. EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 7 Workforce housing affordability. Declining purchase affordability has critical implications for the county’s essential workforce. A single earner New Hanover County Schools teacher could have afforded 21% of homes sold in the county in 2020 but only 1% of homes sold in 2023. As of 2023, median priced homes are unaffordable to single earner households earning average wages in every industry in New Hanover County. In the rental market, median rent is unaffordable to single earners earning average wages in four industries which account for 42% of the county’s employment. Cost Burden. Approximately 35,000 New Hanover County households—including 53% of renters and 21% of owners—pay more than 30% of their gross income for housing and are cost burdened. Cost burden has increased for renters at all incomes—and especially for renters earning $35,000 to $74,999. Current “Catch-up” Needs—mismatches in existing supply and demand by price-point: The current “catch-up” gaps analysis indicates that affordability needs for current households are concentrated below 50% AMI in the rental market and below 120% AMI in the for-sale market (though for-sale needs persist up to 150% AMI).  Collectively, there is an affordability shortage of 7,377 units in New Hanover County (6,267 units in Wilmington and 1,795 units in the balance of county) for renters earning less than 50% AMI, even after accounting for affordable, income restricted inventory. The most acute needs are for households earning less than 30% AMI.  Thirty-nine percent of New Hanover County renters have incomes between 50% and 120% of AMI— a range historically in consideration for first-time home purchase. However, only 12% of homes sold in the county in 2022/23 were in their price range. Potential buyers do not see proportional affordability in the market unless they have incomes over 150% AMI. Figure ES-12. Current Rental Affordability Gaps. Source: 2023 ACS and Root Policy Research. Figure ES-13. Current For- Sale Affordability Gaps. Source: 2023 ACS, Assessor, and Root Policy Research. Current affordability gaps can be addressed either through new production of housing units at the needed price points and/or through subsidies of existing units. Housing Affordability & Needs Rising renter cost burden across incomes, mismatches in supply and demand impacting renters earning <50% AMI most severely. EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 8 Homelessness. Based on PIT Count data, 497 people were experiencing homelessness in New Hanover County on a single night in January 2024. Homelessness decreased slightly since 2023 but has increased significantly since 2020–2022 when 247- 318 people were counted as homeless each year. Unsheltered homelessness has increased, partially due to the closure and continuing reconstruction of a local shelter. HMIS data show that African American residents are dramatically overrepresented in the homeless population (35%) relative to their share of the total population (10%) in New Hanover, Pender, and Brunswick counties. According to McKinney-Vento data, which use a broader definition of homelessness to measure homelessness among public school students, 910 pre-K to 12th grade New Hanover County Schools students experienced homelessness in 2023-2024, down from 1,264 students in 2022-2023. Approximately 3.6% of pre-K to 12th grade students in the district are experiencing homelessness, compared to 1.9% of students in North Carolina public schools overall. Saving for a down payment is increasingly challenging as home prices rise. In order to avoid mortgage insurance on a median priced home in 2023, households need to save $78,050 for a down payment in Wilmington and $86,400 in the balance of county. Access to mortgage financing presents another barrier to homeownership. Debt to income ratio is the most frequently given denial reason for mortgage loan applicants of all income levels and all races and ethnicities. Credit history and collateral are also significant barriers to mortgage loan approval. Mortgage denial rates vary widely by race and ethnicity in New Hanover County. Black or African American households have a disproportionately high denial rate (19%) relative to the denial rates of non-Hispanic White households (6%) and households overall (7%). Asian households and households of other races have the second highest denial rates at 14%, followed by Hispanic households at 10%. Racial and ethnic disparities in mortgage application outcomes are not explained by racial and ethnic differences in household incomes: even among high income households, African American applicants have a disproportionately high denial rate. Figure ES-14. People Experiencing Homelessness in New Hanover County Source: Cape Fear Homeless Continuum of Care PIT Counts and Root Policy Research. Figure ES-15. Mortgage Loan Denial Rate by Race and Ethnicity, New Hanover County, 2023 Source: HMDA 2023 and Root Policy Research. Barriers to Housing Rising homelessness, barriers to homeownership, disproportionately high mortgage denial rate for African American applicants not explained by income. EXECUTIVE SUMMARY, NEW HANOVER COUNTY HNA PAGE 9 Population and Household Projections. The North Carolina State Demographer projects that population growth will continue at a similar rate, with the county’s population increasing by in the next twenty years from – in 2023 to – by 2043. Based on these population projections and trends in household population and average household size, growth in households is expected to continue at a similar rate through 2043: households are projected to reach 116,557 by 2028, 127,028 by 2033, 134,728 by 2038, and 142,427 by 2043. Future Housing Needs (“Keep Up” Needs): In order to keep up with projected growth, the county needs to create an additional 21,187 units in the next 10 years and 38,697 units in the next 20 years. Of those units, 61% (21,906 in the next twenty years) would need to be for ownership to maintain current homeownership levels. Figure ES-10 also shows the affordability distribution needed to align those units with the county’s current income distribution. The market is most likely to deliver rental units above 50% AMI and ownership units above 150% AMI; but public assistance is likely needed to create rental units below 50% AMI and ownership products below 150% AMI. Figure ES-17. Projected Housing Needs through 2043 Source: NC OSBM State Demographer, 1-year ACS, Decennial Census, Root Policy Research. Figure ES-16. 20-Year Population and Household Projections, New Hanover County Source: NC OSBM State Demographer, 1-year ACS, Decennial Census, Root Policy Research. Demographic Projections and Future Housing Needs Quantified housing needs by AMI in the next ten and twenty years.