This past week, I had the opportunity to catch up with my buddy, architect Eric Kronberg, at the National Town Builders Association conference in Florida. Eric is the founder and lead architect at Kronberg Urbanists + Architects, where he and his team make sharp graphics in pursuit of a single goal: affordability. He does this effectively because few have more experience navigating the effects zoning and building codes have on affordability than his firm.

What most people don’t realize is that affordability now splits into two very different camps. On one side is demand-side affordability, which is politicized, subsidized, expensive, and often operates with little regard for cost. On the other side is supply-side affordability, which is market-based, unsubsidized, and inexpensive, led by developers obsessed with reducing costs.

Ninety-five percent of what we read and hear about affordable housing focuses on the demand side. Supply-side operates mostly behind the scenes. I suspect this is because politicians can’t easily take credit for it (since they don’t control it), and journalists don’t praise builders because doing so would violate pre-ordained narratives.

WHICH IS MORE AFFORDABLE?

I witnessed this cognitive disconnect firsthand in Detroit at the Congress for the New Urbanism in 2016. A speaker asked a room of about 50 people — 40 planners, students, and academics, opposite maybe 10 builders and developers, “Which housing type delivers the lowest cost per unit: single-family homes or tall multifamily?”

Almost without fail, the planners and academics raised their hands for tall multifamily buildings. When asked, “Who thinks small single-family homes delivered the lowest cost per unit?” the builders and developers all raised their hands.

The builders were right. And they were also the ones who wrote the checks, so they knew the numbers in a way the planners didn’t.

UNDERSTANDING THE THRESHOLDS

That disconnect stems from building code thresholds, and nowhere is this more evident than in Kronberg’s diagram. The cost per unit doesn’t decline in a straight line as density increases. Instead, costs spike each time you cross a threshold.

Jumping from the International Residential Code (IRC) to the International Building Code (IBC), which happens at just three units, can raise costs by $50,000 to $90,000 per unit.

Once you go over three stories, you need an elevator and two stairs, which drives costs up again.

At seven stories, the whole building must be made of steel or concrete, and the numbers climb once more.

Each threshold works the same way. Costs peak at the entry point, then gradually decline as economies of scale take effect, until the next threshold triggers another spike. Affordability is lost not in vague policy debates but in these concrete, code-driven jumps.

In places like Durham and Atlanta, builders are delivering new units for $150,000 to $200,000 under the residential code. By contrast, institutionally financed demand-side developments — the ones that politicians and journalists love to celebrate — are routinely coming in at $400,000 a unit or more.

The lesson from this is simple. If affordability is the goal, small and simple units are the path. Supply-siders understand this. Most everyone else does not.

There are grave societal costs to removing the lowest rungs on the property ladder. If young families cannot afford their first home, they cannot afford their second either, and they remain renters for life. Nothing is wrong with being a renter by choice, but it would be a policy failure if we prevent families who do want to own from doing so.

America has seen a radical decline in starter homes this century (see graph below). I would refer to it as a collapse. For multiple generations, young families have had a relatively inexpensive path to buying a new home, enabling them to climb the property ladder and grow their families. Since 2000, this has changed.

Who Killed the Starter Home? is the subject of much research now, including Marina Rubina’s eponymous podcast, on which I was a guest last year. I will save my thoughts on the disappearance of the starter home for a separate post, as this one will deconstruct what my hometown did about it.

DURHAM’S SOLUTION

Prior to 2019, property owners in Durham couldn’t build a small home on a small lot if they wanted to. Zoning provisions dictated that the minimum lot size for a house be no less than 5,000 square feet (a pretty typical requirement in American zoning codes).

Because the minimum lot size correlates with the minimum house size, it results in larger homes being built, which in turn makes the community less affordable.

To address this problem, the Durham City Council passed a reform known as Expanding Housing Choices (EHC) by a nearly unanimous vote of 6-1.

EHC is anchored in a transformational small lot code, which allows for lots as small as 2,000 square feet, provided the homes are no larger than 1,200 square feet. Notably, the 2,000-square-foot lot represents a 60% reduction from the zoning norm of 5,000 square feet. And, because lot size correlates with house size, and house size inversely correlates with affordability, lot size reductions result in lower-cost housing.

DOES LOT SIZE MATTER?

These ambitious reforms have sparked multiple research studies.

Organizations ranging from Strongtowns to Harvard Joint Center on Housing Studies are asking:

1. What effect does lot size have on a city’s ability to deliver affordability?

2. Can reducing the minimum lot size help revive the largely dormant market for starter homes?

To explore this query, I conducted research using publicly available sources. I filtered on Zillow for sold homes built in Durham after 2019 with a maximum size of 1,250 square feet and a maximum lot size of 5,000 square feet.

The results show that Durham built and sold 129 homes that meet these criteria, whereas Raleigh had 7, and Chapel Hill only 1.

CALIBRATING FOR NOISE

Zillow is an extraordinary resource, but it can, at times, be imperfect and noisy (i.e., many search results that appear to meet the set criteria actually do not). To address this, I manually filtered each city’s results to eliminate homes that were any of the following: townhomes, built before 2019, and larger than 1,250 sq. ft.

In Durham, nearly all of these 129 were clearly built under the small lot code.

But the actual numbers for Durham are higher for two reasons. First, I am aware of many small lot homes that sold but did not appear in the search results. Second, Durham has developed a cottage industry of small lot homes for rent. None of those homes will show up as “sold” in a Zillow search.

For example, there are developments like The Corner of Trinity Park, which features seven small lot homes, but only four of them appear on Zillow.

My best estimate is that a total of 200-300 small lot homes have been built since 2019. I suspect another 200-300 are currently in schematic design or the permitting process.

CONCULSION

Citizens, builders, and developers are opting to construct a greater number of smaller homes, rather than fewer larger ones. The vast majority of detached infill housing in Durham is now on small lots, rather than larger conforming lots. This is no coincidence; it is the direct result of the ambitious EHC reforms. The results are relatively unique to Durham, indicating that, given the opportunity, the market will not operate at lower price points—it will thrive.

Share

If you would like to view my data on Raleigh and Chapel Hill, please feel free to reach out.

Stay tuned for a report on my work with the Harvard Joint Center for Housing Studies

Mayor Brandon Johnson's now-deleted tweet reveals more than just a math error. It exposes how politicized housing, uncritical media, and a broken discourse make it harder to build homes.

I was in Chicago last week, touring colleges with my daughter and reconnecting with old friends. Chicago rode the golden wave of American city building from 1870 to 1930, emerging as the world's tallest city. I consider it to be the purist laboratory for American urbanism.

It’s also a city of intensely politicized land use.

After the 1871 fire, Chicago was rebuilt into something astonishing. Its population exploded tenfold. It birthed the skyscraper. The Chicago School—with Louis Sullivan and his disciple Frank Lloyd Wright—defined The American Architecture. The downtown is so dense that 60-story buildings are irrelevant to the skyline. It’s a city of big ideas—and big contradictions.

Chicago’s 50 aldermen wield local veto power over development in their wards, a legacy of machine politics known as Aldermanic Privilege. It results in back-scratching, delays, and dysfunction. It also makes it difficult to have honest and professional conversations about housing.

This brings us to Chicago Mayor Brandon Johnson's viral tweet and what it reveals about the modern land use and media worlds.

Wait, How Many Homes? For How Much Money?

In March, Johnson posted that his administration had committed $11 billion to build 10,000 units of affordable housing.

The tweet didn’t live long.

Why? Because the math is as simple as it was damning:

$11,000,000,000 ÷ 10,000 units = $1.1 million per affordable home.

For my readers who might similarly struggle with the maths, this is a contradiction in terms. You can’t have affordable homes that cost 1.1 million dollars.

You can’t have affordable homes that cost 1.1 million dollars.

For context, in Durham, local builders deliver new housing for a tenth of that cost. I’ve seen the homes. I’ve developed the permit sets. These aren't luxury compounds. They’re modest, efficient, and well-designed. They are simple and affordable for one reason: they are depoliticized.

But the real scandal here is not that a politician flubbed a tweet. It’s that no paid journalist bothered to ask the most basic questions.

The Mass Media Vibe Machine

Consistently, journalists don’t check basic development math. Editors don’t assign follow-ups. The frame is already set: Government = Good. Business = Bad. If a nonprofit receives a $400,000/unit subsidy, it’s celebrated. If a private developer builds the same thing for $200,000, they’re attacked for being greedy.

Journalists and politicians co-produce these narratives. So when an elected official declares a massive housing investment, the default response is applause, never scrutiny.

And when projects are labeled Affordable they tend to float above criticism entirely.

In this politico-media environment, builders are portrayed as villains, even those delivering real affordability. Narrative wins. And facts don’t matter.

Citizen Journalists, Assemble

But on Twitter, the response to Mayor Johnson’s assertion was immediate and devastating.

People posted memes. The mayor was exposed as unprepared on the topic. And, after persistent ratioing (Twitter lingo for a tweet that generates more comments than likes), the tweet disappeared.

What happened?

Citizens did the division. Citizens checked the market. I personally documented 5,199 homes for sale in Chicago at the time of the tweet. Of those, 4,601 were under $1 million, and 3,207 were under $400,000. You could buy all of those affordable homes for about 1/10th the cost of Mayor Johnson’s program.

A politician made a huge, inaccurate claim, and the big boys of media were nowhere to be found. Who stepped up? It was people with free social media accounts, no bylines, and some basic calculator and Zillow skills. It was not the recently acquired-for-$630,000,000 Chicago Tribune that held Johnson accountable. It was Twitter.

This is, frankly, weird. But the story is not new.

This Is How the YIMBY Movement Was Born

In San Francisco—the belly of the beast for progressive NIMBYism—wealthy, overhoused residents have dominated local land use politics for 50+ years. They weaponize ostensibly neutral and professional institutions, such as planning commissions and neighborhood associations, specifically to prevent development.

For years, nobody noticed. Newspapers didn’t cover it.

Then, a new generation of younger, left-leaning activists began to attend these meetings. They brought their camera phones. Leaders like Jordan Grimes tweeted transcripts. They demonstrated how meeting leaders were bending (sometimes breaking) rules to protect their views, their parking, and their appreciation rates.

When the San Francisco Chronicle wasn’t in the room, YIMBY Twitter was.

A Broken Discourse on Housing

What’s happening in Chicago now is just the latest chapter in a larger breakdown in national housing discourse. Here are the uncomfortable truths:

• America politicizes housing, then excludes anyone who understands housing from politics.

• Politicians and traditional media vilify businesspeople, especially builders, then demand they solve the housing crisis unilaterally.

• This system perpetuates a media culture that rewards vibes, ignores math, resists reform, and creates civic environments where it is challenging to build anything.

The result is that the people managing housing policy generally don’t know much about housing, like Mayor Johnson. And the professional journalists covering those policymakers don’t know much about housing, either. So the conversations get dumber and dumber each year.

That’s where traditional media is in 2025.

It’s ironic that the only critical discourse on housing is happening in a deeply dystopian digital space, sandwiched between AI bots and conspiracy theorists.

Weird times, indeed.

Golden Gates: Fighting for Housing in America was featured in March as part of the Citybuilder Book Club. Citybuilder Members get access to virtual and in-person events to discuss the application of essential books to local policy and practice. On May 23, in Raleigh, I will lead a conversation about Sarah Susanka’s The Not So Big House. To attend, Subscribe today.

In "Golden Gates: Fighting for Housing in America," Conor Dougherty dissects the multifaceted housing crisis, focusing on the San Francisco Bay Area. Three compelling themes emerge: restrictive zoning laws, grassroots activism, and economic inequality. These narratives offer valuable insights applicable to North Carolina's housing landscape.​

Restrictive Zoning Laws

Dougherty emphasizes how local zoning regulations have stifled housing development, exacerbating affordability issues. He observes, "At least at the local level, zoning is democracy, and democracy is zoning." This highlights the profound influence local communities wield over land-use decisions, often leading to restrictive policies that limit housing supply.​

In North Carolina, similar zoning challenges persist. Efforts to introduce "missing middle" housing—such as duplexes and townhomes—face resistance due to existing zoning laws favoring single-family homes. For instance, Raleigh's recent approval of "gentle density" measures aims to diversify housing options, but such initiatives often encounter community pushback. ​

Grassroots Activism

The book showcases the rise of grassroots movements advocating for increased housing development. Activists like Sonja Trauss and groups such as the Bay Area Renters' Federation (BARF) challenge the status quo, pushing for policies that promote housing growth. Dougherty illustrates how these activists confront entrenched interests and navigate complex political landscapes to effect change.​

In North Carolina, similar grassroots efforts are underway to address housing affordability. Community organizations advocate for policy reforms to increase housing supply and reduce costs. For example, discussions around eliminating parking minimums statewide aim to facilitate more flexible and affordable housing developments. ​

Economic Inequality and Housing Affordability

Dougherty examines how economic disparities exacerbate housing challenges, noting that "America is willing to subsidize as much debt as homeowners can gorge themselves on but that poor renters... are a penny-ante side issue unworthy of being prioritized." This critique highlights the imbalance in housing policies that favor homeowners over renters, deepening inequality.​

North Carolina's housing market reflects similar issues. The state faces a significant housing supply gap, with a shortage of approximately 764,000 homes. Addressing this deficit could generate substantial economic activity and create nearly 2.2 million jobs. However, without targeted policies to support affordable housing, economic disparities may continue to widen.​

Community Resistance to Development

Dougherty highlights the entrenched opposition to new housing developments, often rooted in nostalgia and resistance to change. He notes, "NIMBYism is so entrenched and rooted in nostalgia that you could propose new apartments on an abandoned lot and still have someone protest the building on the grounds that the abandoned lot 'was the first place I got fingerbanged.'" This underscores the emotional and sometimes irrational resistance to development, even in underutilized areas.​

In North Carolina, similar sentiments manifest as communities resist changes to neighborhood character. Efforts to increase density or introduce affordable housing often face opposition from residents concerned about property values, traffic, and preserving the existing community aesthetic. Overcoming such resistance requires comprehensive community engagement and education on the benefits of inclusive housing policies.​

Disparities in Housing Policy Priorities

Dougherty critiques the prioritization of homeowner subsidies over renter assistance, highlighting a systemic bias in housing policies. He states, "America is willing to subsidize as much debt as homeowners can gorge themselves on but that poor renters... are a penny-ante side issue unworthy of being prioritized." This reflects a broader societal tendency to favor wealthier homeowners over low-income renters in policy decisions.​

In North Carolina, this disparity is evident in the allocation of resources and support for affordable housing initiatives. While programs exist to assist low-income renters, they lack the funding and political backing afforded to homeowner subsidies. Addressing this imbalance is crucial to creating a more equitable housing market for all residents.​ In my view, nothing is more powerful or critical than ensuring the least wealthy have strong property rights and can provide for themselves.

The narratives explored in "Golden Gates" offer valuable insights into the housing challenges confronting North Carolina. By examining restrictive zoning laws, fostering grassroots activism, addressing economic inequalities, overcoming community resistance, and rebalancing policy priorities, the state can work towards a vibrant and robust housing market.

Leave a comment

This blog is produced in alignment with the Incremental Development Alliance. Want to learn more about Incremental Development Alliance? Watch the video and become a member today.

Sources Goodreads The MIT Press Reader

Accessory Dwellings are small houses that are subservient to primary dwellings and often placed in backyards. They are colloquially known as granny flats, mother-in-law suites, or simply “ADUs.” Across the country, ADUs are fast becoming a large part of the housing solution because they are generally citizen-developed, skirt toxic housing politics, and require no public subsidy.

My hometown of Durham is a leader in the form.

In Durham, ADUs are regulated by section 5.4.2 of the Durham Unified Development Ordinance (UDO), which articulates several entitlement rights:

1. ADUs are allowed by right on single-family and duplex lots.

2. No additional parking is required.

3. The heated floor area of the ADU shall not exceed 1,000 square feet on a single story and 1,200 square feet total.

4. The maximum height of an accessory structure shall not exceed the greater of a) two stories and 32 feet or b) the height of the primary structure in feet.

While these standards are permissive relative to most American cities, the most important clause was added as part of the city’s 2023 reforms. It allows for Duplex ADUs, one of the first cities in the country to do so. It reads:

1. If a primary dwelling is a single‐family residence, an accessory structure may be a duplex, so long as the total heated sf of the Accessory Dwelling Unit (ADU) does not exceed 1,200 square feet for both units combined.

The logic was pretty simple. A growing number of citizens wish to build housing for their community, and 2019 reforms (known as Expanding Housing Choices) allowed each lot to build a duplex plus an ADU—three homes on residential lots. But, a problem arose because many prospective citizen homebuilders wished to build housing but did not wish to duplex their primary home (often for build code complexities or privacy reasons).

Since three homes were already allowed on a lot by the 2019 reforms, the more recent 2023 reform allowed two of those three homes to be located in an accessory structure. It didn’t allow for more housing on the lot; it only allowed for a more viable allocation of those homes. This added flexibility enhances citizen choice, resulting in variability customized to the unique needs of the lot, owner, and community.

Durham can now see beautiful homes like the Washington Duplex (recent winner of the or Urban Guild’s Missing Middle Merit Award), which is now allowed by right.

CONTRARY TO OPINION, ADUs DO MATTER

In housing discourse, a group of naysayers is always on standby to scoff at any attempt to reform zoning or create additional housing. They are particularly vitriolic toward incremental reforms, which ADU reform clearly is.

In Durham, the typical retort was that “ADUs are too small to matter.” Oddly, this was presented as a reason to oppose the reform, even though their ostensible argument was that the growth of ADUs would be too small in number to rise to the level where it would be worthy of objection. Sadly, such hyperbolic contradictions are now the new normal for NIMBY arguments in central North Carolina.

In any case, California is proving this thesis untrue. ADUs do matter. According to Cottage ADU’s Impact Report, 1 in 7 homes built in California in 2021 was an ADU. According to CaliforniaYIMBY’s Nolan Gray, since 2017, Los Angeles has permitted nearly 35,000 accessory dwelling units—homes that were largely illegal prior to state intervention.

All of this is the result of an ambitious statewide SB 13 Bill that made ADUs legal statewide, overriding the local Californian NIMBY obstruction campaigns that had long banned them. Similar legislation passed the North Carolina House in 2023 (HB409), penned by Durham’s Vernetta Alston, but was never heard in the Senate.

Reforms at state and local levels are essential. Contrary to the narrative some anti-housing advocates are now trying to establish, the state does not “do zoning.” Mostly, states have nothing to do with local zoning, but they do, from time to time, restrict local governments from stripping certain property rights that might be viewed as natural and inalienable. Today, because so many property rights are over-encumbered by a century of overzealous central planning, state legislatures are re-establishing those rights by handcuffing cities.

Statewide ADU reform is precisely such a restriction. Legislatures are punishing cities for decades of bad behavior—anti-citizen behavior, anti-consumer behavior, anti-choice behavior.

FOSTERING THE MOST LOCAL OF LOCALISM

The primary playing field for incremental housing is now in the backyards of non-professional citizen builders, who are starting to build small homes across the country.

In the Duplex ADU photographed here, the square footage is spread evenly over two floors, with two identical 500sf 1-bedroom apartments. Each is given a generous private porch, critical in the Southern climate.

The porches also create semi-private space, which is key to living well in densified areas. “Semi-private” means that it faces the public realm and would not be completely sealed off from others’ spaces, but it is designed to be exclusively used for the tenant, so they can feel free to furnish it and use it how they please. This indoor-outdoor play is needed to live well in small spaces. In this case, both duplex units overlook a large fenced backyard.

My opinion is that it is gorgeous and will create unprecedented new access for students, young people, and the working class to live in a relatively wealthy neighborhood close to downtown. Win and win.

DUPLEX RIGHTS MATTER

This project would not have been viable if not for Durham’s 2023 reforms. Prior to that, only single-family duplexes could be built, which carry a higher cost per unit burden, making them less financially viable to build. Inevidibly, as that threshold lowers, more projects pencil, and more projects get built. And projects become more affordable as they are built.

The math on new construction for-rent products is ruthless right now. It’s hard to get anything to work. Where things do work, they are typically small, multiple units per fixed-cost lot, with simplified architecture (often rectangular to maximize footprint and minimize costs).

They also usually require some combination of free or cheap land (such as an already existing backyard), good location with high demand (most of urban Durham would quality), and/or free or cheap debt (which continues to be a problem because ADUs are hard to finance, which I will flush out in a separate post).

Small duplexes are great examples of what Chuck Marohn of Strong Towns calls “The Next Increment Up.” When districts become unaffordable, they should, in principle, rezone to The Next Increment Up—essentially what Durham did. This allows for incremental change, protecting historic fabric while not undermining universal principles of equity, access, and opportunity.

In short, if your whole neighborhood is single-family homes, you don’t want it to be rezoned for skyscrapers or Texas donuts. But duplexes should be OK. Most look and scale consistently with the original fabric.

Duplex ADUs are even better. ADUs, generally, are in the backyard. It’s the perfect place to experiment and even do wacky things.

People who know me know that I loathe modernism, but if you are going to do something weird, wacky, and different from the rest of the neighborhood, it's undoubtedly less disruptive to do it in your backyard than in the front.

ADUs are the least invasive tool for adding density. In this case, the homeowners, both nurses, are providing affordable housing, increasing the flexibility of their family's visits, providing choices in the community, and increasing the tax base—all with zero public subsidy. They are also tripling the density of the lot without affecting the historic streetscape at all.

CONCLUSION

There are no silver bullets in housing or affordable housing, but there are some universal truths. Citizen builders are the way. They have always been the way. It’s not lost on me that until recently, all of the truly lower-cost homes in Durham (and across the globe) had been built by local hands with local money. This method is scalable, organic, unique, local, historically accurate, and, most importantly, requires neither subsidy nor the politics inherent in larger projects.

Imagine what your city would look like with thousands of these ADUs.

• Would it be more affordable?

• Would it be more interesting to have thousands of locally owned small homes?

• Would it be more equitable for people of lower wealth to access the amenities of wealthier neighborhoods?

This is the way. I applaud the work and look forward to seeing more of it.

This summer, I was part of a cohort of new urban designers and builders who traveled to England to study Garden Cities. This post is part of a series in which I unpack the lessons from that trip. One of the things that struck me was how cheaply we build things in the United States—possibly too cheaply.

The word “cheap” can have positive or pejorative synonyms - it can be substituted for “affordable” and “practical” as well as for “corner cutting” and “second-rate”.  The same principle now applies to the word “affordable” - depending on who you ask, it has a good and bad connotation.

The Garden Cities of the UK (and their brethren in the Northeast United States) are all built of modest homes, generally less than 1200sf, primarily as semi-attached two-story gabled boxes. As envisioned, they were the attainable homes of the day, targeted at the working man or entrepreneur class as an alternative to the bifurcated extremities of wealth found in industrial-age London.

Still, these homes, 10-30 miles north of the London City Center, were built of a higher quality than comparative products built in the US today- they are built out of brick and predominately with slate roofs.  Such materiality is practically unheard of in the States, and you’d never see these relatively permanent materials on working-class American houses.

By comparison, our affordable housing is impermanent and, correspondingly, not resilient.  Under intense pressures to build cheaper, faster (and maybe?) better, I have seen American affordable homebuilders be accused of building “instant ghettos”.  This raises the question - is it possible to be “too affordable”?

THE THIN ASPHALT LINE

American houses are relatively disposable.  There are arguments for a disposable housing culture, though few have an environmentally solid rationale.  Japan has a culture of teardowns, and when a new house is needed, they build one. It’s not a fuss. In Japan, houses are not meant to be permanent, and it is not as if Japan has a reputation for being wasteful or environmentally reckless.  American detached houses are socially presumed to be permanent, which is why teardowns can ruffle social media feathers, but other American-built forms are renowned for their impermanence.  Sports stadiums and public housing often have shelf lives of 30-50 years, sometimes less. As Joe Minicozzi at Urban3 has pointed out, a Wal-Mart is designed to last 15-20 years.

In the States, you can judge a residential home's expected longevity by its materiality.  Few new homes are built of brick, which should last (relatively) forever, require little maintenance, require no painting, and look great.  Most today are built with fiber-cement siding, which is cheaper than brick or, even less expensive, vinyl.

The fact that we built much of the last 50 years of US Suburbia with synthetic materials, it is no wonder that younger generations are now so aggressive in their pursuit of authenticity. 

Vinyl is the bottom of the barrel. You would never ever see vinyl in a British Garden City.  Besides the harms of its manufacturing process, documented in movies such as Blue Vinyl, it’s also of questionable longevity. “If it’s vinyl, it’s final!”. On top of the environmental concerns, flimsy vinyl just looks terrible (the solid stock looks better but still evokes disdain from many architects and builders).  Often, woodgrain is molded into plastic. It is peak American fakeness, and the fact that we built much of the last 50 years of suburbia with synthetic materials, it is no wonder that younger generations are now so aggressive in their pursuit of authenticity.  We humans are not supposed to live in plastic boxes.  

HOW LOW CAN WE GO?

The trend is troubling. There seems to be no bottom to how low we are willing to go. I heard of a case of vinyl siding being installed over insulative foam board, not OSB sheathing, and the omission of sheathing made it possible to cut into the house, through the wall, with nothing more than an exacto knife. Surely this is too far.  

But I have learned never to bet against America’s ability to do it cheaper. And here I mean cheaper in the pejorative. It’s all a metaphor for America’s cardinal sin of suburban sprawl, which is penny wise and pound foolish, the equivalent of burning the furniture to heat the house.  We, as a country, seem unique in our ability to deliver short-term results with wanton disregard for the long-term costs, or any costs, really, that are not on our immediately quantifiable financial statements.  

Short-term thinking discounts that brick - the dominant material of choice throughout Garden Cities - simply looks better, which can also drive a rent (or sales) premium, let alone the quality of life. Short-term thinking also discounts the hassle of managing a painter at origin and every 10-20 years.  That’s work. The painting is work.  The managing of it is work.  The financing of it is work.  It’s work that the Garden Cities largely forgo simply by building in a more sustainable, long-lasting, relatively permanent material. 

FAKE BRICK.  REALLY?

Now, in America, even fake bricks are a thing. To me, these buildings ooze with short-term thinking - they look like the prime mover has the motivation to get out as soon as possible and leave the maintenance issues to the future investor or society.  They feel icky to the trained eye (and maybe the lay one, too). Why haven’t secondary buyers picked up on the game?  Is there no variable line item to increase or decrease Operating Expenses (OpEx) based on materiality and quality of construction?  Why do we seem to be in a race to the bottom with materiality?

It’s remarkable that such calculations appear to be dismissed even by those qualified to perform them, including the Wall Street investors now so active in real estate investment.  Brick might cost more upfront (it varies significantly by region), but it drives long-term returns by lowering OpEx, generally justifying the front-end investment. 

Does the long-term savings exceed the capital or debt required to build it in the first place?  I have never seen evidence that anyone is asking this question. 

In the US, it seems like we are so obsessed with lowering start-up costs that there is no longer oxygen left to discuss long-term costs, which is a financial question that inevitably precedes any social and environmental follow-ups. 

Ironically, this blind spot for the future can increase overall costs, profitability, and resiliency.  Short-term thinking can increase overall costs while lowering quality. That’s a problem. And it drives one of my major conclusions from touring the UK’s Garden Cities architecture - we might be doing it wrong. 

Last month, Durham's House Representative Vernetta Alston filed HB 1067, an interesting bill named Employee Housing in Durham County.   It matches a Senate Bill (SB 905) filed by Durham County Senator Mike Woodard. 

The bill authorizes two subject beneficiaries, Durham County and the Durham County School Board of Education (Durham Public Schools, or DPS), to provide affordable rental housing for teachers, police, first responders, and other county employees.

It allows these two entities to enter into a partnership, land trust, or joint venture to provide housing on the property now owned by the public school or the county.

Section 3 allows the beneficiaries to contract with any person, partnership, corporation, or business entity to finance, construct, and manage such affordable housing.

75% of the homes must be reserved for teachers.

"Under current state law, school boards are prohibited from doing anything not related to education on their property. This bill would allow DPS to develop housing on its property." 

HB 1067 is remarkable to me for a few reasons: 1) Alston now has an established history of filing housing bills in the legislature, and 2) it is odd that a statewide bill would be limited to one county.

Sen. Woodard helped clarify via email: "Under current state law, school boards are prohibited from doing anything not related to education on their property. This bill would allow DPS to develop housing on its property."  

But couldn't school systems subdivide their oversized parcels and shave off enough land for an affordable cottage community? According to Woodard: "School systems do not have the authority to do this." 

Thus, the bills.

TALK OF TEACHER WORKFORCE HOUSING IS NOT NEW

Building intentional community housing on school property isn't a new concept.   

• Liz Schlemmer at WUNC reports that a new foundation called Partners for Bertie County Public Schools will open a 24-unit apartment complex in Windsor designed to house teachers.

• UNC's School of Government penned a piece about the State Employees Credit Union partnering with school districts to construct affordable housing for teachers. Schools have "donated surplus land for development, local governments have worked closely to ensure the property infrastructure is in place, and the SECU finances the construction with an interest-free loan."

• A WRAL piece by Sarah Krueger indicates that housing for teachers on school property idea dates back to at least 2017.

Still, teacher housing on school property appears to be more smoke than fire. Despite lots of talk about it, there are very few examples of completed projects to cite. The few out there are stock garden apartments, often for teachers but not on school property, and radiate that affordable housing patina of impermanence where they look marginally functional but uninspiring. 

CRITICS

There are fair critiques of the intentional teacher-housing model.  

First, the most uncomplicated and straightforward objection is that governments don't have a good recent development track record, and it would be better and cheaper to let the private market fill these voids.  More than anything, regulatory reform is required to make smaller, more affordable homes that teachers (and others) demand more widely available.  Governments should start there.

John Locke Foundation argues, "Instead of turning school districts into landlords, better options might be to increase teacher salaries and improve zoning and regulations to bring about more housing options" 

Second, it's fair to assert that teachers deserve to be their own favored class.  Many North Carolina communities are struggling to recruit and retain teachers, and in this sense, teachers might be considered a critical job that deserves special favor.

However, filtering by employment type and not income excludes other equally deserving but less identifiable classes, such as bartenders, janitors, yard maintenance workers, and even other public school employees. I only point out that the same can be said of many other roles, such as police and perhaps a dozen other workers. Are we expected to count on our cities, which are historically bad at developing anything, to create intentional housing for each and every class?

INTENTIONAL COMMUNITY IS HARD WORK

A substantial part of my work focuses on the design of intentional communities. I believe that identity practice is a private matter, and when it shifts to the public domain, it becomes somewhere between messy and immoral. Governments are designed to be fundamentally neutral and, as such, should not be in a position of discrimination. Functionally, the way these class-based affordable housing programs are designed will inherently discriminate against otherwise income-qualified people specifically because they are not teachers.  That goes against the principles of equal protection and equality in the eyes of the law. 

Now, if ten teachers sought to organize to build their own community and restrict it to teachers, that would work.  And it would be great. And it should be encouraged and supported in every way.

Freedom to associate means freedom from association, too. But that's a private practice and employment type is not a protected class under the Fair Housing Act. In other words, teachers can legally build a cottage court, and the deed-restrict occupancy to teachers. 100% legal.

But it's messy when a government performs the same task. It’s messy when a government intentionally excludes. I have concerns about the legality and exclusion of a government from taking those same steps.

HOW TO MAKE IT WORK

With the above concerns noted, I wholeheartedly support building low-cost housing and aggressively pursuing high-quality developments on public land. Let's talk about what needs to happen to ensure it works:

1) Will the affordable housing have to comply with the city's byzantine and practically unworkable rules?  If it does, it will delay housing, making it significantly more costly and (critically and often ignored) more scarce. A simple alternative would be to deed restrict teacher housing in perpetuity, cap the rents at a fixed value, and skip all the unproductive compliance nonsense.

Why restrict the units to rentals?  Do Durham's teachers, police officers, and first responders not want to own their homes?

2) Why restrict the units to rentals?  Do Durham's teachers, police officers, and first responders not want to own their homes? There may be many reasons for this: titling may not allow the schools to sell land; a relevant power broker in this project may believe that rentals are more important; DPS is famously bureaucratic and grossly over budget with development; to expect it to execute a complex project with multiple variables would be hopeful at best. While the current all-rental plan limits choices and might not serve many deserving teachers, restricting the project exclusively to rental OR for sale makes operational sense.

3) Can we really count on the public schools to build public housing?  I'd be concerned about an execution problem here. Schools don't really develop, and there's no reason to expect they'd be any good at it.  There is no risk motive, no reward motive, and few (if anyone) on staff with experience building things, let alone housing (there is a Building Services Division, headed by an architect, that appears to outsource all construction activity to third parties and act mostly as a funding conduit).

With everything local governments build being 1) subjected to politics and 2) reliant on third parties for execution, teacher housing has all the ingredients for yet another Durham project that fails to execute and probably can't even get past the engagement phase.  At this point, we should openly acknowledge these past failures in the hope of not repeating them.

The first step is admitting you have a problem.

Durham suffers from what a county manager once labeled "Progressive Paralysis," the inability of blue cities to get things done.

The reason is what I call “The Participatory Paradox," which states that the more engagement there is, the less productive a process becomes.

Here, in the case of proposed housing on public lands, we should all expect Durham to host public teacher housing events (for maybe a year?), none of which will have anything to do with site design (or architecture, or amenity, or development, or ongoing management).  Many will turn into complaint sessions. Most will be unproductive, and the longer it goes on, the less it will have anything to do with the primary beneficiaries of the proposed housing. 

The diagram above explains the problem. In any development project, there are three phases: Program, Design, and Build. Public entities cannot execute because they are perpetually investing in the Program phase and, worse, cannot get out of it.

Often, cities can take years to run an engagement cycle, and at the end of it, politics have changed, and new people want to be heard, so the simplest solution is to just start it over again. And again. I call it “Groundhog Day Planning”.

There are many reasons for this execution problem, all worthy of unpacking later, but it appears self-perpetuating. As housing gets worse, we feel the need to talk about it more. As we spend more and more (and more) time talking about it, we spend less time designing and building it.  Which makes housing worse, which people want to talk about. And so on.

I have one suggestion for Rep. Alston and Sen. Woodard to solve this problem: Treat the legislative bills as the Program phase, and, if they pass, go straight to the Design phase.

Short-circuit the groundhog.   

Immediately after passage, start drawing site plans. Show the decision-makers and the teachers what these homes can look like. Because then, and only then, can we have a productive conversation with teachers about housing teachers.  

If we put the cart in front of the horse, as Durham historically does, then that cart ain't going up the hill.  Design is iterative. In my experience, engagement is largely fruitless until AFTER there is a design. That is because design is iterative, and engagement (in Durham) rarely has anything to do with a design. Design first. Then, directly engage the development’s proposed residents. Adjust. Improve. Design again. Engage the residents again.

Using terms of professional project management science, good design is iterative, not predictive. Public entities get this wrong always.

Lastly, should Durham be blessed with the opportunity to build housing on public school lands, it will be critical to subscribe to the principles of incrementalism. Why? Because the nefariousness of central planning can only operate at scale. Robert Moses could only execute when he had the power to take out entire ethnic neighborhoods and exclusive rights to billions in parks and toll monies. He had no ability to build incrementally or obstruct the many incremental builders that have always constructed the spirit of New York City. Not only is incrementalism necessary to build great places, but it is also the antidote to those willing to build bad places in a desperate attempt to prove their ideology true.

Incrementalism matters.

In my world, you walk before you run. When grandiose actors seek to take over a process and run before you walk, the results are disastrous. There is a sad history of this with public housing in America.

As housing (particularly social housing) is politicized, critical focal points shift from qualitative community building to a strictly quantitative number of units (as happened with many Great Society projects). Design dollars can be shifted to unproductive (or counterproductive) engagement. Money dedicated to a communal park can be reallocated to (nice but poorly allocated) PV panels and EV batteries. When people with no tacit skills take over a project that requires tacit skills, good projects go wrong. Invariably. 

To suceed, everything must be laser-beamed on low-cost housing for low-income citizens. Period.

If affordable housing is the goal, then all other priorities must be shelved. Building unprecedented housing requires an unprecedented focus. To succeed, everything must be laser-beamed on low-cost housing for low-income citizens. Period.

Everything else (defunding police, minimum wage, job training, etc.) should be identified as a red herring and a distraction to this goal. Project leaders must filter for noise. And that requires a gatekeeper with uncommon fortitude to protect the project from people with less than sincere intent. Because in any progressive city, they will come.

Only after that gatekeeping is established could Durham build some inspiring small-scale developments. The city can absolutely do this. But incrementalism is the way. It should start small and then grow. It should prove it can execute and then scale. The foundation comes before the house.  In my view, there are no shortcuts here.

CONCLUSION

All in all, HB 1067 is an exciting and clearly needed bill. Cities, counties, and states have a plethora of surplus land, all with a zero-dollar basis. In development terms, it's "free dirt". If affordable housing is the goal, there is no better starting point.

Chuck Marhon of Strong Towns believes that we should treat public assets as if they are stock shares of the citizenry. If the asset is productive, it will be developed with schools, parks, or housing, where it will exhibit a clear quality of life return on investment. If it lies fallow and costs us money while offering nothing, then it is the equivalent of stuffing cash under the mattress. It's not adding any value, and in a growing economy, it's technically losing value. In other words, it is fiscally prudent for cities to develop their lands.   

Keep an eye on Rep. Alston's (and Woodard's) bill. This is the first step in the process. Counties deserve to reestablish the right to develop their lands. It's not clear if or when that will happen, but it is clear that re-legalization is always the first step. The real work starts the moment the rights are re-established. We will know Durham is serious about teacher housing when dozens of site plans are on the table, proving how serious it is.

Durham, North Carolina recently considered a zoning code reform that is specifically designed to restart the market for small-scale affordable home building.  It is targeted at small builders who average fewer than ten homes per year, a scale that is the exclusive domain of the local practitioner.  

The core affordable housing problem to be solved is two-fold: 1) no local is biting on the current affordable policy carrot, and 2) no one has ever built an unsubsidized home that qualified under the city’s definition of affordability.  Put another way, no one was willing to take on a 30-year commitment without substantial subsidy.  

It isn’t working. 

But why? Durham’s builders identified an objection few advocates or politicians were aware of. They are not participating due to a fear of bureaucratic non-response:  

• What paperwork do I fill out when? Who do I file it with? What does the buyer need to complete? 

• What about when I sell? What burdens do my buyers have when they sell?  

• Most importantly, who in the city can help with this stuff when it doesn’t make sense? Are they tuned to the needs of a two-person building company that has neither lawyers nor compliance officers on staff?

Lacking certainty, builders are unwilling to attempt the journey. Even those fully committed to affordability shy away. That’s why incremental for-sale affordable housing was encouraged in the reforms known as Simplifying Codes for Affordable Development under provisions known as “The Affordable PATH”¹.  

While it sounds great, the journey is gargantuan.  What builders are seeking blessings for is the equivalent of taking not one but two moonshots.

Compliant builders have to:

1. Profitably build & sell a home at a price point no one in Durham has seen in decades and 

2. Find a buyer who exists in a very narrow and limited buyer pool where they are both below an income threshold and ready, willing, and able to qualify through a HUD Rule-5 compliant certifying agency. 

That’s a lot to ask. And potentially impossible to execute.

These dual moonshots must be executed sequentially without failure.  It’s like JFK saying, “We choose to go to the moon in this decade”... (pause for dramatic effect)  “...and while you boys are up there, we’re going to need you to stop by Mars, too.”  

What goes from a 1% chance of success quickly goes to .0001%. 

But there’s more. One reality of nationalizing the affordable housing industry is that politicians and affordable housing advocacy organizations are constantly looking for ways to prove how much they are committed to affordability. In the moonshot metaphor’s case, it’s the equivalent of adding requirements perspicuously unrelated to the primary task at hand: 

• “OK, I get it; we want to go to the moon.  But is the shuttle sustainable? 

• It’s important to me that our astronaut heroes are comfortable, so can we make sure we codify a minimum capsule size? 

• What about engagement? I’d also like for the Cape Canaveral community to be able to conduct a discretionary review of the rocket's aesthetics, just so they can feel like it’s their program, too.”

.0001% quickly goes to .000000000000000000001%. Sure, the monkey at a typewriter will deliver War & Peace, eventually.  But hope is not a strategy.

So, the conversation needs to change.  First we need to recognize that most of the people talking about going to the moon really have not the slightest clue how to get to the moon. They are not wrong or bad people, but sometimes they are not helpful. There is a difference between cheerleading and engineering, and the more we let Sally Ann from Sugarland dictate the flightpath, the less likely that bird gonna fly.  

Second, as we form a clearer dichotomy between the classes of doers and cheerers, we should celebrate both. The engineers need support, particularly our astronaut-builders. They need world-class training, they need flags, they need events, and they need cupcakes. They need supportive families.

Think about it: If a city is not building any homes below $400,000, and a brave young soul commits an attempt to build new homes for half that, then we should treat them like Chuck Yeager.  

They are taking on an extreme risk. They risk bankruptcy. They deserve to be treated like someone who is risking death. They exist in pursuit of a vision greater than themselves.  Offer them godspeed.

Lastly, we just need to recognize how hard this is. It requires politicians, in particular, to not overload the ship with more weight—no more unnecessary, mission-unrelated load. In any ambitious and unprecedented campaign, we have to eliminate absolutely everything that isn’t absolutely necessary.  

Whenever attempting something complex, leaders should seek to eliminate variables. In affordable housing terms, that would be the length of affordability commitment. Until the moon is achieved, discussing anything else is just a distraction. Engineers must obsessively build for efficiency by saying “no” to everything except items essential to the primary task at hand. For any moonshot to work, there is little room for negotiation on this front.

The paradigm shift largely requires depoliticizing housing, which requires more courage from an elected leader than one might think.  It requires politicians to cede back power to private interests willingly, and abdication is something humans in power struggle to do.  It requires acknowledgment of civic failure combined with a confidence in an unknown.  It requires a leap of faith.  When the leaders do get it, it will look like this:

Let's be honest.  We have failed.  We are not building affordable homes. And now we have someone here before us who wants to do exactly that. Someone who is ready, willing, and able to build affordable homes.  I do not know if they will succeed.  I do not know if their business will survive the attempt.  But I support it.  And thank them for it.  And I am inspired by it.  We choose to build an affordable city.  We chose to build an affordable city in this decade. Not because it is easy but because it is hard. 

Those would be the sounds signaling the first human steps into the final frontier, a hope for and communal pursuit of sustainable & affordable cities for all. 

¹ The Affordable PATH was pulled from the amendments prior to passage in November of 2023.

In Durham, North Carolina, they’re rebuilding the old historic neighborhoods frantically. The city has much to offer: a great downtown in the throws of rebirth, a large creative class, an active academic community, and, perhaps most importantly, 15 historic districts with a large stock of unique and affordable historic homes. Decades of downtown decline severely affected these neighborhoods. But now families are moving back to the city, which combines an urban lifestyle with the opportunity to restore a unique home. Those rediscovering residential life in central Durham want historic houses but are often unsure how to tackle a restoration project's specifics.  

The number one question usually is: “Who can afford it?”  

Well, almost anyone, actually. There’s much more to cost than the purchase price or monthly payment. There are financial benefits to owning any home in America and huge financial opportunities and incentives for those restoring historic houses in urban corridors. I‘ll walk through the great secrets to affording historic homes and show how many young couples, with real budgets and real lives, are affording landmark buildings for the same cost (or less) they might spend on a generic tract house in the suburbs. 

Where people get stuck

As a restoration contractor, we’re used to seeing sticker shock. People are amazed at what historic homes with a quality restoration cost, both to rehab and to buy.   Every weekend, buyers and tire-kickers drive around the old neighborhoods saying, “Can you believe what they’re asking for that one?”.   Most never get closer to taking the plunge. But then the houses usually sell, and for their asking price. New owners were probably sold on the social or financial benefits of owning a historic home, probably both.

I’ll use Olivia and Trey Jones as our example couple. Like many, they were determined to buy a historic home but concerned about how to afford it.

Meet Olivia and Trey Jones                                     .

• Annual Income $100,000

• Purchase Price $100,000

• Rehab Costs $300,000

• House Value $400,000

• Mortgage $360,000

There are three major financial incentives open to historic homeowners in Durham: the mortgage interest deduction, historic rehabilitation tax credits, and the attached rental. Everyone gets the 1^st incentive, but few, very few, take advantage of the latter 2. And therein lies the secret to affording a historic home.

mortgage interest deduction

As a federal incentive to encourage homeownership, owners may deduct mortgage interest. Olivia and Trey have a $400,000 house with a 30-year interest-only mortgage for $360,000 at 7% (see note 1). Their monthly mortgage payment is $2,100. With 12 months, the Jones’ spend a whopping $25,200 in interest, 100% of which is deductible. As a deduction, this will lower their taxable income by $25,200 and (multiplied by their tax rate of 35%) create a real dollar savings of $8,820 annually. If we spread that savings out over 12 months, it equals $735 monthly. Thus, a $2100 interest-only mortgage payment is the net out-of-pocket equivalent of a $1365 ($2100-$735) rent payment. 

It’s essential that realtors and homeowners understand this concept.    It is the 1^st great secret to owning any home, particularly a historic one.

historic rehabilitation tax credits

Durham is home to 15 neighborhoods listed on the National Register of Historic Places. At the time of the original publication, there was a 30% tax credit in North Carolina for restoring historic homes in these neighborhoods (see note 2). Essentially, when Olivia and Trey spent $300,000 to restore the dream home, the state gave them back $90,000 in credits to do so.  

That’s a dollar-for-dollar credit, not, as is often wrongly assumed, a deduction. Since the Jones filed jointly and made $100,000 in income, and North Carolina has a 7% income tax, their state tax liability was $7000 ($100,000 x 7%). The tax credit wiped out their entire tax liability for that year. If they have already paid $ 7,000 in state income tax through their employer, they will receive a tax refund for $ 7,000, or $583 per month. The remaining credits carry forward, offsetting their income tax again the following year. It is the single most significant financial incentive available to homeowners and is highly underused.   

Since 2002, 150-200 residential (non-income producing) tax credits have been processed statewide yearly. A disproportionate amount came from Durham, which tied Wake County for most originations in 2006. Historic tax credits are the 2^nd great secret to owning a historic home.

attached rentals

ADUs are often as small as 400-800sf and can cover most of the primary homeowner’s mortgage.

I live and work between Duke’s East Campus and downtown Durham, a hotbed for intelligent grad students, adjunct faculty, and young creative class workers. Durham is not unlike other downtowns in this respect. University or not, downtowns from Denver to Asheville are flooded with good quality renters looking for good quality renting situations. Renters like living in secure homes in nice areas.

Attached dwellings (more technically “accessory dwellings”) come in various forms.   These are not live-in roommates we’re suggesting. As separate housing, they all have private entrances, perhaps a basement apartment or a flat over a detached garage.  

The attached apartment concept isn’t for everyone. I realize some couples dislike the idea of someone living in their house or at least need time to warm to the thought they hadn’t considered.   Others might want all the space their large house offers. Many more might not have a house that allows for it.

The concept is straightforward for those who are open to the opportunity. If you rent a portion of your home, that income can offset your mortgage. Olivia and Trey, a young, childless couple, don’t yet need 3000sf. This allows them to afford a larger home, better quality finishes, or more thorough restoration. They have room to add to their family in the future while generating income from the space they don’t need today. It‘s like an addition-on-hold space that is paying for itself until required.  

Trey and Olivia’s $400,000 house has an attached 2BR basement apartment. It’s the perfect setup for grad students, with a private entrance a few blocks from campus, a small kitchen and bath, excellent finishes, and even a tiny private garden.   Near Duke, it rents easily for $800. And $800 covers nearly half their mortgage, even before considering any tax credits. Attached rentals are the 3^rd great secret to affording a historic home.

the triple play

What happens when one combines all three secrets?

When Olivia and Trey found a project house they loved, they lost sleep over their ability to afford it.   It needed work—a gut job-- with new HVAC, electric, plumbing, kitchens and bathrooms, framing, etc. It had a large unfinished private basement that could be finished into a great rec room or apartment. So they did the math. It would need $100/sf to restore, but it would qualify for tax credits and have a basement apartment to offset their mortgage.

With a payment including taxes and insurance of $2275, their mortgage deduction yields a net payment of $1687. The tax credit offsets their entire tax liability to NC, giving them an extra $583 for a net payment of $1104. Finally, the rented basement gives them an additional $800 for a total all-inclusive payment of $304 per month.

Seriously?

It seems absurd to own such a house for the cost of a month’s groceries. Many say it’s too good to be true and leave it at that. But very real people are taking advantage of these very real mechanisms. In Durham alone, our clients and colleagues own a:

1. 1700sf $250,000 bungalow with detached carriage house, main house owner-occupied, carriage apartment rented to student for $725. This leaves the owner with 1700sf and a $450/mo net payment.

2. 2100sf $270,000 restored Victorian, lower level owner occupied, upper-level apartment rented to Duke Ph.D. for $600. This leaves the owner with 1300 sq ft and a net payment of $600/mo. 

3. 2200sf $300,000 restored bungalow, main house owner-occupied, basement studio rented at $700 leaves owner with 1600sf and a net payment of $600/mo. The contractor took tax credits.

4. 4200sf $400,000 restored townhome, one owner-occupied, the other rented for $1250. Leaves owner with 2100sf and net payment of $700/mo. 

5. 3100sf $430,000 restored Victorian, main house owner-occupied, with attached apartment at $800/mo. Leaves owner with 2300sf and a net payment of $350/mo., 

6. 5500sf $700,000 home, owner-occupied, with three rented units paying $3200/mo. The owner left with 2100sf and a net payment of $500/mo. 

Attractive as these numbers are, few owners took advantage of tax credits. There are many variables that can affect the cost of rehabilitation expenditures and the potential financial benefits of owning a historic house. However, the fact remains that underutilized tools and mechanisms are available to owners (and potential owners) of historic homes.   

conclusions

A common myth of historic homes is that they’re all museums – unattainable and expensive, meant to be looked at but not actually lived in – like your grandmother’s parlor. The fact is, Durham in particular (and the country in general) is blessed with a tremendous stock of historic homes are not museum pieces. They’re unique, offering different sizes and architectural styles, handcrafted by local tradespeople, and make fantastic modern-day homes. And, contrary to belief, they’re affordable. It is undoubtedly much more affordable if you are able to understand the mechanisms behind the true cost of ownership.

A house should, first and foremost, be a home: a place to raise a family. Only after that criterion is met should a house be looked upon as an investment. For years now, young couples have been flocking to the city to take advantage of the unique, high-quality old homes and old communities offer.  

People ultimately buy (or don’t) because of these qualitative factors. Now, they can understand the financial benefits of owning a historic home yields as well. 

ARTICLE NOTES

1 For simplicity’s sake, I’ve used an interest-only loan for our samples. If one chooses a traditional amortizing note, the numbers will change slightly, but the core points of this article do not.   The principal is not deductible because it effectively pays you back by lowering your loan balance. Property taxes and insurance are also deductible and will be included in the overall analysis at the end of the article.  

2 This essay was initially published in 2007. North Carolina’s tax credit incentives have changed since publishing. While still substantial, they are not as helpful as this article implies. Check with your local SHPO for current standards.