S.C. has too many people, too few homes – Statehouse

Two issues increasingly dominate the South Carolina headlines: massive population growth and a lack of affordable housing.

In the  moderate-sized Upstate town of Fort Mill, for instance — which has seen its population explode by almost 80% since 2018 — concerns over growth led its town council in June to impose a moratorium on new annexations and rezonings through the end of the year.

Meanwhile in the Lowcountry, where the average value of a house now sits at almost $600,000, Charleston Mayor William Cogswell presented an ambitious, 3,500-unit affordable housing plan to city council on Aug. 21 — a plan his administration has estimated will cost $800 million between now and 2031.

“I believe very strongly that the lack of affordable housing in our community is the biggest social, cultural and economic issue we face,” Cogswell told council members, in a city with long-term flooding problems that make national news on a regular basis.

In interviews this week, policy experts told Statehouse Report that those two issues — growth and affordability — are deeply intertwined. And that the way we resolve them will ultimately determine whether either gets any better.

How we got here

Concerned about the state’s growing housing crisis, the S.C. General Assembly in 2022 directed state housing officials to work with the University of South Carolina’s Darla Moore School of Business to get to the bottom of the problem.

USC economist Joseph Von Nessen, a nationally recognized expert in housing economics and residential real estate markets, led the team that produced a study in June 2023.

“What we found was a supply and demand imbalance that’s been growing over the past 15 years,” Von Nessen told Statehouse Report on Aug. 20. “Basically, we’ve been underbuilding since 2008, and we’ve accumulated a supply debt going all the way back to the Great Recession.”

According to Von Nessen, the numbers tell the story. From 2000 to 2007, new housing in S.C. was growing at 5.3% a year, keeping prices stable. But after the national economic collapse forced builders to cut back, the rate of growth from 2008 to 2021 fell to 3.1% — even as the state’s population surged by 650,000 between 2010 and 2022.

Or put simply, there weren’t enough houses and apartments for all the people who wanted one.

“What we saw over the period was very low levels of supply compared to the demand that was being generated by our strong population growth,” Von Nessen said, noting that the problem has actually accelerated since the pandemic. “We’ve been in the top five among all U.S. states for population growth since 2020.”

Further complicating that picture, he said, is the fact that all of those new residents have settled in just half the state’s counties, with the other half seeing population declines over the same period. That localized demand pressure is why the average price of a home in a hot market like the Charleston area essentially doubled in less than a decade, from about $300,000 to almost $600,000.

“The cumulative effect in these areas is that demand remains high relative to the available supply,” he said. “And that’s continued to put upward pressure on prices, creating affordability challenges for many  South Carolinians.”

The result? According to the study, more than half of all S.C. renters and a quarter of all home mortgage holders are “cost-burdened” — or what your grandparents would probably have simply called “house-poor.” 

Are state and local rules part of the problem?

In an Aug. 21 interview, S.C. Home Builders Association Executive Director Mark Nix called the state’s housing deficit a “sore subject” as he’s watched his adult children struggle over the past few years to find housing they can afford.

“I’m a true believer and I’m proud of what our members do,” he said. “The thing is, I want the people who serve and work in a community to be able to live in that community as well, and right now most of them can’t.”

And from his members’ perspective, he said, that affordability problem starts with state and local laws that drive up the price of new houses and slow new construction to a crawl.

“In South Carolina, about 10% of the price of a new house is just government permitting fees,” he said. “And up to a third is regulatory costs — more inspections, more studies, more zoning requirements that just add to the price.”

Further contributing to the problem, he said, is a failure of basic planning by local governments, which leaves residents furious when new housing is proposed in areas that are already dealing with traffic headaches and overburdened water and sewer systems.

“What we’ve seen is poor planning,” he said. “People are against new housing mostly because of congestion, but then we just end up adding to the congestion because people have to move further and further out.”

Next year, state lawmakers are expected to take up legislation that supporters say will bring those two competing priorities — new housing construction and resident quality of life — into better balance. 

The idea is to create what the bill’s sponsors call “concurrency” — that is, a system in which needed infrastructure is in place before development moves forward. And while everyone agrees it makes sense in principle, opponents worry it would give local governments the power to impose dramatically higher costs on home builders — or in response to resident pressure, just shut down new construction completely.

The concurrency debate

James Island Democratic Rep. Spencer Wetmore, one of the concurrency bill’s bipartisan sponsors in the S.C. House, told Statehouse Report the logic behind the legislation is just common sense.

“This bill stands for the simple proposition that infrastructure has to come first,” she said. “Because if we’re not careful, the entire state is going to be in a traffic jam like Charleston.”

To ensure that doesn’t happen, she explained, the bill would empower local governments to deny building permits when it determined that services in the area — police, fire, roads, stormwater and the rest — couldn’t handle the influx of new residents.

That way, state, county and municipal officials would have to get on the same page regarding minimum service levels, rather than blaming other levels of government for the problems.

“Everyone points fingers,” she said. “And the citizens get left holding the bag, when all they’re trying to do is live here and be able to flush their toilets.”

But opponents like the Home Builders Association’s Nix argue that municipal governments, which are notoriously sensitive to neighborhood-level complaints, can’t be trusted with that much power. 

In fact, he said he’d favor specific impact fees on developers to cover improvements such as new fire systems or sewer lines over the concurrency bill. At least then, he argued, home builders wouldn’t be forced to go to every city department head for a sign-off, with the fees adding up every step of the way.

“With the impact fees you have to do a study to prove it’s a real need,” he said. “But under this concurrency bill, it’s just a push for [legal] graft.”

In response, Wetmore noted she’s reached out to home builders to get their feedback on the bill’s language. What’s more, she said, based on their concerns she’s already offered an amendment to require local governments to approve a plan to address infrastructure shortcomings before they stop a development from moving forward.

She added that she’s not opposed to further changes as the bill moves forward, as long as the “infrastructure first” principle is protected.

“It’s not that people hate new housing,” she said. “It’s that they get upset about the overcrowding that comes with it when we don’t control the timing.”

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