High-Rent District

I sat on the stoop of my 1940 Cape Cod and surveyed the view — one-bedroom brick-ranch duplexes and frumpy 1930s bungalows, SUVs spilling off gravel driveways onto lawns of hard-packed red clay tufted with weeds — and thought, “Wow, I’ve made it. I now live in the high-rent section of town.”

According to a report on the Rent Café blog, ZIP code 27516 is one of the top 5 priciest places to rent in North Carolina. The area comprises a large swath west of N.C. 86 (MLK Jr. Boulevard and South Columbia Street).

Yes, that area includes the $3,300-a-month three-bedrooms in Carolina Square and the $1,200-a-month 477-square-foot studio in Southern Village. But the vast majority of rentals are the aging small houses leased to students who want to be within walking distance of campus. The going rate for those houses ranges from $1.35 to $2.15 a square foot.

UNC Kenan-Flagler Business School professor Michael Jacobs wrote an editorial, published in the July 12 edition of The N&O, essentially blaming high housing costs on the rural buffer and the town’s lengthy approval process for new construction (which has not stopped the builders of more than 6,000 residential units in recent years).

Jacobs left out two important factors that interact to produce a negative feedback loop that drives up real estate prices, according to a local economic policy analyst: the monopoly nature of land that allows for owners to extract unearned rents without doing anything productive and the emergence of a financial system that prefers financing housing/land purchases to most any type of productive investment.

To put that in practical terms, a landlord who rents houses close to campus told me some years back that Shortbread Lofts was the best thing that had happened to his business. He was able to raise all of his rents by $100 a month without making any improvements because even at that rate, his properties looked affordable compared to luxury apartment competitors.

From a policy perspective, we on Town Council could do more to promote affordable housing. We could encourage UNC to provide more apartment-style housing on campus, which would reduce the demand from students to move off-campus. We could adhere to the town’s Inclusionary Zoning Ordinance, which would increase the supply of for-sale affordable housing and take some pressure off rentals. We could ditch the use of form-based code unless it includes a sizable chunk of affordable units. We could prioritize approving commercial projects and put luxury apartment proposals on the back burner. Perhaps we could do more to enforce the “no more than four” ordinance.

What we can’t do is temper greed. Landlords know the town can’t interfere with rents and we can’t do much to enforce the “no more than four” law, and they know that student tenants are often naïve and vulnerable to being taken advantage of. No amount of building in the rural buffer or expediting development approval will change the behavior of a landlord whose only concern is how much profit he or she can squeeze out of tenants.
— Nancy Oates