Mortgage gimmicks won’t solve NC’s real housing problem

North Carolina has become the nation’s top relocation destination, drawing nearly 400,000 new residents since 2020. People are arriving in record numbers, but the housing supply hasn’t come close to keeping up. State analysts estimate that North Carolina will need close to 750,000 additional homes by the end of the decade just to meet demand.

Instead of catching up, the market has tightened. Home prices have surged nearly 60% over the past five years. Rents are up about 30%. And with mortgage rates sitting near 7%, monthly payments have climbed to levels many families simply can’t absorb. The result is a widening affordability gap, where the typical first-time buyer is now in their early 40s — a sign of how far out of reach homeownership has drifted.

The administration’s latest housing proposal — a new 50-year mortgage, along with “portable” and “assumable” mortgages — sounds innovative at first glance. Longer amortization will lower monthly payments, portability will ease mobility, and assumability will create flexibility. On the surface, these ideas poll well because they appear to offer relief in an era of record home prices and higher interest rates.

Consider the impact a longer mortgage actually makes on a typical buyer. Assuming a $400,000 loan at a 7% interest rate, the standard 30-year mortgage will require a monthly payment of $2,661 and the borrower will pay about $558,000 in interest over the life of the loan. Amortizing that same debt over 50 years lowers the payment only modestly — to around $2,397 — but the total interest accrued jumps to more than $1 million.

In other words, a borrower saves just over $250 a month but ends up paying almost twice as much in interest. The monthly relief is helpful, but the long-term borrowing cost is enormous. Instead of making housing more attainable, a 50-year mortgage risks locking families into decades of extra debt while slowing the pace at which they build equity.

Portable and assumable mortgages sound more appealing, but they introduce their own set of problems. When a mortgage becomes more valuable than the house itself, markets get distorted. Sellers begin charging premiums because their loan carries a favorable rate. Buyers start chasing loans instead of evaluating properties. 

First-time buyers — who already face structural disadvantages — get completely priced out of homes that should be within reach. And homeowners become financially anchored not by the quality of their house or neighborhood but by the interest rate attached to it. Flexibility turns into a trap.

All of this also ignores the complexity and risk embedded in these products. Most consumers don’t read or fully understand standard mortgage terms today. Layering on portability and assumability increases the potential for misunderstanding, predatory practices, and unintended consequences that hit working families hardest.

The real challenge isn’t complicated: North Carolina simply doesn’t have enough homes. Local land-use ordinances often limit density or delay approvals, and neighborhood opposition frequently stops the very multifamily and mixed-use projects that would accommodate our growing population. 

At the same time, building materials has become far more expensive — construction costs are up more than 35% since 2019 — and higher interest rates have made it more difficult for developers to finance new projects. Add in wage growth that hasn’t kept pace with inflation, and it becomes clear why so many residents are being squeezed out of the market.

A 50-year mortgage doesn’t change zoning codes in Charlotte or Raleigh. A portable mortgage won’t lower construction costs in Greensboro. An assumable mortgage won’t help a schoolteacher in Winston-Salem compete with out-of-state cash buyers. These proposals will generate attention, but they do little to make a dent in the fundamental issue: North Carolina simply doesn’t have enough housing to meet demand.

The solutions that will lead to sustainable progress are well known. Implement modern local zoning rules and permitting processes so projects can move more efficiently. Expand missing-middle options that sit between single-family homes and large apartment complexes. Build up infrastructure such as water and sewer in the state’s fastest-growing regions. Scrap bureaucratic regulatory hurdles that slow construction. Strengthen the labor market through wages that keep pace with rising costs. And increase collaboration opportunities between the public and private sectors that will improve access to new housing where it’s needed most.

Our state is growing faster than our capacity to house the people arriving here. But North Carolina must remain an affordable and thriving destination over the next decade, so that we don’t become another high-cost state where the people who grew up here are pushed out. Lawmakers have to root public policy in economic reality, not political gimmicks.

“Mortgage gimmicks won’t solve NC’s real housing problem” was originally published on www.carolinajournal.com.