Housing affordability, while not always associated with economic development, is critical to a region’s competitiveness. Companies are following talent, while talent is often following affordability. Economic development has long sought to attract businesses with the assumption that people would follow, but the paradigm has now shifted.
Access to talent is frequently the most important driver for businesses making decisions about where to relocate and expand. The importance of talent in site location decisions will only increase as an aging workforce nationwide and decreased labor force participation will put even more pressure on companies looking for talent. Economic development organizations have begun to focus on fostering a community where people would like and can afford to live. The communities which attract and retain talent most effectively will be in the strongest position for growth over the decades to come.
Attracting Talent
One of the Charlotte Region’s most compelling selling points to companies considering relocating or expanding is its population growth. Most of the growth that occurs in the Charlotte Region is through in-migration as the region has benefited from a broader trend of population shifts away from large metros in the Northeast and Midwest to Sunbelt metros. While there are many reasons why the South has become an attractive destination, including weather and lower taxes, affordability is one of the most important. The graph below shows net domestic migration by region and highlights the accelerated growth of the South over the past two years.
Accelerated out-migration from the Northeast towards the Southeast aligns with data from Freddie Mac. This was occurring prior to COVID-19, but it accelerated over the past two years, particularly in more rural locations and smaller metros as movers sought out more affordable locations.
The weakening of the tether between work and place also seems to have impacted why and how far people are moving. For the first time since 2005, long-distance moves were driven more by housing than employment and an analysis from Brookings found that long-distance moves ticked up modestly in 2022. The National Association of Realtors similarly found that the median move went from a historic average of 15 miles to 50. People seem more willing or able to relocate and they are prioritizing places with relative housing affordability. If these trends continue, the Charlotte Region will need to accelerate building to keep up with demand and remain an attractive destination for those relocating.
Retaining Talent
Housing affordability not only affects the CLT Region’s ability to attract talent but also to retain the talent that is already here. People are feeling the squeeze of higher housing costs. UNC Charlotte’s 2022 State of Housing Report estimates that to afford a median priced home, a family would need to earn $136,000 annually, a 73% increase from what was required only two years prior. The report estimates that more than 80% of households do not earn enough to afford a median-priced house, and 50% do not earn enough for a house priced at the 10th percentile. This makes the goal of purchasing a house out of reach for many in our community.
Of course, about one-third of households do not own their home in the Charlotte MSA. This segment of the market has also seen sharp increases in costs with the average monthly effective rents increasing by 27% since 2019, with larger increases occurring at the lower-price points. If the region does not address housing affordability, it risks losing talent to more affordable areas in the Carolinas and Southeast. In a historically tight labor market with the lowest unemployment rate in more than 50 years, that trend would put additional stress on regional businesses.
Moving Forward
Proactive action which helps foster housing options for people across the economic spectrum will be crucial to the region’s continued prosperity. This will allow our region to continue to attract residents as well as allow existing workers to thrive. While there is no silver bullet for solving housing affordability challenges, part of the solution will include building more housing. The aforementioned 2022 State of Housing Report highlights that the Charlotte MSA underbuilt by around 20,000 housing units over the past eight years. While underbuilding is not a Charlotte-specific problem, the National Association of Realtors estimates that the nation underbuilt between 5.5 – 6.8 million units since 2001, it will need to be addressed for the Charlotte Region to increase housing affordability.
