Despite funding, Chapel Hill sees stall in affordable housing preservation, development

The development and preservation of the Town of Chapel Hill's new affordable housing units struggles to keep up with demand, despite increases in funding.

This fiscal year, the Town plans to preserve 350 affordable units and develop 30 affordable units. Last fiscal year, the Town funded the preservation of 509 affordable units and the development of 11 affordable units.

Emily Holt, the Town’s affordable housing development officer, said preservation helps to keep existing units affordable.

“Whether that is because we are keeping somebody else from buying it or we’re putting money in to rehab it, that helps someone continue to live in it,” Holt said. “Or, sometimes it is because we have provided some sort of rental subsidy or Home Buyer Assistance that helps somebody.”

In contrast to preservation, development is the construction of a new unit, Holt said. 

She added that development depends on funding, and there is a delay between when a project is financed and when it is finished.

“It’s less expensive to fix what’s there than to start from scratch," she said. "But that being said, you need substantial money to do either.” 

Holt said the Town can only preserve affordable units if it has the funds to compete with other buyers in the market.

“So, even though it is probably less expensive to preserve, you have to be able to keep it in your inventory and have the money to fight people off,” she said.

In the first quarter of the fiscal year 2023, the Town allocated $8.45 million to support affordable housing projects, the "most funding ever released to date."

The total budget for affordable housing this fiscal year is nearly $16 million. 

Sarah Viñas, director of affordable housing and community connections for the Town of Chapel Hill, said the costs of developing affordable housing have increased greatly. 

“So, we are at a place where we really need to look at what additional resources can we identify to be responsive to the council’s commitment to affordable housing and to realize this pipeline that we have developed,” Viñas said.

Roberto Quercia, a professor in the UNC Department of City and Regional Planning, said there is no “silver bullet” to make housing affordable.

“What we do is marginally increase the number of affordable units, as we should, but it is never in the number enough to basically address the issue,” he said.

To meet the demands for housing, the Town will need to develop an additional 5,000 affordable units, according to Chapel Hill Affordable Housing’s most recent report. 

The Town plans to develop 537 affordable units from 2024 to 2027 to address this gap. However, the Town will need an additional $13.2 million in funding to support the affordable housing development.

Quercia said development in Chapel Hill is challenging: the land is expensive, the development approval process is slow and the cost of construction is high.

“The challenge is that beyond a certain price point, the market cannot provide housing without subsidy,” he said.

Increasing the Town’s annual allocation to affordable housing or approving a new Affordable Housing Bond can provide additional funding and help address the gap, she said. 

“There is also real opportunity to explore private sector investment, which is something that we are exploring with UNC and UNC Health,” Viñas said.

Holt said the Town's Department of Affordable Housing and Community Connections is looking for more options to fund affordable housing and will present policy recommendations to the Town Council in the coming months. 

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