Sound Strategy: Further incentives can help address the region’s essential housing issue

Sound Strategy: Further incentives can help address the region’s essential housing issue

January 27th, 2023

As we think about growing our commercial foundation (and subsequent tax base) as a region, we tend to think about the ingredients that, when combined, make growth an inevitable outcome.

Whether it’s at the government level, the nonprofit sector, or the private world, one ingredient is standing out more clearly than perhaps any time in recent memory — the availability of quality housing for working families.

While we all agree that great housing is critically important, we tend to fall apart in terms of a consensus when we discuss who should or how to address it — imagine, for example, a graph that combines along one axis agreeableness and along the other specificity.

In short, the line would suggest that we agree on big things with a lack of specifics but increasingly disagree as they become more specific — the more specific things are, for example, the less people tend to agree widely with them.

It’s that trend line that supports the NIMBY model that has so far hobbled quite a few government efforts–in practice, saying we need more housing in Dare County is widely agreed upon.

Saying we need more housing in Nags Head (more specific), for example, doesn’t get us there.

But the conclusion that NIMBY is the reason for a lack of great housing simply doesn’t explain what we’re seeing regionally — it explains it in one place or another but not at scale.


More accurately, in areas where housing and development experiments have worked what has emerged is this simple idea — it is simply not the role of government to provide housing at scale. It is the role of government to incentivize the private sector to produce it.

When government provides an incentive, markets will respond by production. When the government provides no private sector incentive, government by default becomes the solution. That’s a better explanation and that’s what we’re seeing.

When we talk about incentives, though, they can be controversial in terms of who receives what from whom.

It’s not a popular idea to reward private risk-takers with public-facing funds, of course, but at the same time think about the other things the government incentivizes–health care, for example, and retirement savings. Historic preservation. Research and development. Education (look no further than the GI Bill). Investing (T-bills, for example, have tax advantages).

And, despite the controversy, those things work really well in the market. We accept their imperfections because they bring enormous good to many of our citizens.

More locally, that means things like county or town tax incentives that make longer-term rental units as financially appealing as shorter-term ones.

Shorter-term rentals make more money and if the taxes are the same as compared to longer-term rentals the market responds to the greater profit incentives. Taxes could change that if they were lower for longer-term rentals.

It also means things like private sector consortiums–look no further than the extraordinary Carolina Core or the burgeoning Charlotte Business Alliance as examples.

Sure, incentives come with restrictions.

As the GI Bill comes with ongoing certifications, so too can housing come with restrictive — use covenants which in essence mean that essential housing must be used for essential housing (no AirBnb) and that the entire process is auditable to continue the incentive.

If our government has state-directed funds to use, as in Dare County, that’s great–use them for essential government workers but incentivize the private sector to a greater degree. That’s what will move the needle.

If we envision a long-term and sustainable fix for essential housing in our region, we will need to develop a consensus that, by government getting directly involved in the housing market as compared to incentivizing it, government in effect drives out private competition and by extension shrinks the housing market — that, in effect, is what explains the regional lack of great housing more so than NIMBY’s triumphal march.

Three cheers for a conversation on regional housing development incentives that would move the market, and not just abandon it.

“Sound Strategy”, a weekly commentary from our publisher Clark Twiddy, features issues, ideas and information focused on our mission statement of “Covering the Business News of the Greater Outer Banks”.

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