Executive Summary
The Chapel Hill housing market features a diverse array of options, such as manufactured homes, townhouses, apartments, and single-family residences, catering to various budgets from modest to luxurious This analysis specifically addresses the critical demand for affordable housing targeted at low-income households within this market.
In Chapel Hill, the sale price of single-family homes has surged significantly in recent years, outpacing the median income growth of local families This disparity has raised concerns about housing affordability in the area, as the rising property values continue to challenge the financial stability of residents.
Since 2006, the number of homes sold for under $200,000 in Chapel Hill has declined, while the median sale price of single-family homes has risen at an average annual rate of 5.4 percent In contrast, median household and family incomes have only increased by 1.4 and 3.0 percent annually, respectively Consequently, housing has become increasingly unaffordable for most families in Chapel Hill.
The growing demand for affordable housing in Chapel Hill is largely driven by new residential construction, which relies on low-wage workers for building homes This influx of new houses not only increases the need for low-wage labor in construction and landscaping supply companies but also creates a higher demand for real estate brokers and their support staff to sell these properties As new residents move into Chapel Hill, they bring with them a need for expanded health care services, municipal resources, and additional schools for their children Consequently, the influx of low-wage workers, essential for supporting this residential growth, highlights the urgent need for affordable housing options in the area.
Based on calculations that consider average household size, area median income, and employment sector wages, new residential construction generates a need for over 18 affordable housing units for every 100 new units After adjusting for residential preferences, which acknowledge that not all low-wage workers may wish to reside in Chapel Hill, the estimated need is refined to 15 affordable units per 100 new constructions This figure is derived from conservative assumptions, suggesting it represents the lower bound of the demand for affordable housing resulting from new residential development.
Organization of the Report
This report is structured into four key sections, beginning with an executive summary and introduction The second section outlines the problem, highlighting the disparity between rising housing prices and stagnant family incomes in Chapel Hill, leading to increased unaffordability for many families The third section details the methodology used to estimate the affordable housing needs arising from new residential construction in the area, focusing on specific employment categories for the calculations.
Building material and garden equipment and supplies dealers;
Town of Chapel Hill government including transit; and
Chapel Hill-Carrboro city schools.
The employment categories significantly affected by housing construction, maintenance, and services for new residents are examined The article concludes with a summary of findings, highlighting how the residential preferences of low-wage workers influence the demand for affordable housing It discusses the assumptions made in estimating this need and emphasizes that the calculated estimate may represent a lower bound of the actual demand for affordable housing.
The Sales Price of Single-Family Homes Has Increased Rapidly
Housing costs in Chapel Hill have consistently outpaced those in Orange and Durham counties, with the gap widening significantly over the years In 2001, the average home price in Chapel Hill was 11.5% ($32,700) higher than in Orange County and 70.6% ($131,000) more than in Durham County By 2006, these disparities increased to 21.5% ($68,600) and 104.7% ($198,100), respectively Consequently, the escalating housing prices in Chapel Hill pose a more urgent challenge compared to its neighboring communities.
Exhibit 1: Average Sale Price of Single-family Homes, 2001 - 2006 1
Year Chapel Hill 2 Orange County 3 Durham County
1 Based on single-family detached, townhouse, and condominium units for new and resale properties listed with the Triangle Multiple Listing Services Source: 2007 Chapel Hill Data Book, Housing, Table 3.
2 Chapel Hill data are for sales of properties in zip codes 27514, 27516, and 27517, which include parts of Orange and Durham counties.
3 Orange County data are for Orange County including Chapel Hill.
The Chapel Hill housing market has experienced significant price disparities, with the average sale price of single-family homes rising at an annual rate of 6.9 percent from 2001 to 2006 During this period, prices in Chapel Hill surged by 39.4 percent, outpacing increases of 28.0 percent in Orange County and 16.2 percent in Durham County.
The median sale price of single-family homes in Chapel Hill significantly surpasses that of Orange and Durham Counties In 2002, Chapel Hill's median sale price was 30% higher than Orange County and 84.9% higher than Durham County, amounting to a difference of $60,900 and $121,700, respectively By 2006, this trend continued, with Chapel Hill's median sale prices remaining above those of both neighboring counties.
Counties by 41.2 percent ($96,800) and 107.3 percent ($171,700), respectively Both the
1 Single-family units may be detached homes, townhouses, or condominiums.
2 The median sales price is 50 th percentile of sales prices, the price at which half of all units sold for more and half sold for less.
May 20, 2009 Page 3 average sale price and median sale price in Chapel Hill were more than double those in Durham County as of 2006
Exhibit 2: Median Sale Price of Single-family Homes, 2002 – 2006 1
Year Chapel Hill 2 Orange County 3 Durham County
The Triangle Multiple Listing Services provides data on new and resale properties, including single-family detached homes, townhouses, and condominiums For Chapel Hill, the information is sourced from the 2007 Chapel Hill Data Book, while data for Orange and Durham Counties can be found on the Triangle MLS website under Residential Real Estate Trends The statistics were last downloaded on November 19, 2008.
2 Chapel Hill data are for sales of properties in zip codes 27514, 27516, and 27517, which include parts of Orange and Durham counties.
3 Orange County data are for Orange County including Chapel Hill.
Between 2002 and 2006, Chapel Hill experienced a significant increase in the median sale price of single-family homes, rising by 25.2 percent ($66,000), which was notably higher than the increases in Orange County (15.1 percent or $30,800) and Durham County (11.6 percent or $16,700) During this period, Chapel Hill's median sale price grew at an average annual rate of 5.4 percent, outpacing Orange County's 3.6 percent and Durham County's 2.8 percent.
Between 2001 and 2006, Chapel Hill experienced a significant increase in the average and median sale prices of single-family homes, outpacing surrounding communities During this period, the percentage of homes sold for less than $200,000 in Chapel Hill dropped by 23.8%, from 33.8% to 25.7%, while the number of such sales rose in both Orange County and Durham County This trend indicates that as home prices surged in Chapel Hill, the availability of affordable housing for lower-income families diminished.
Exhibit 3: Number of Sales Under $200,000, 2001 – 2006 1
Year Chapel Hill 2 Orange County 3 Durham County
1 Based on single-family detached, townhouse, and condominium units for new and resale properties listed with the Triangle Multiple Listing Services Sources: 2002 Chapel Hill Data Book, Housing, Table 2, 2003, 2004,
2005, and 2007 Chapel Hill Data Books, Housing, Table 4.
2 Chapel Hill data are for sales of properties in zip codes 27514, 27516, and 27517, which include parts of Orange and Durham counties.
3 Orange County data are for Orange County excluding Chapel Hill.
4 Data not available for Chapel Hill and Orange County excluding Chapel Hill.
Chart 1: Existing Home Sales Price as a Percent of All Sales, 2002 – 2006
1 Data Source: Chapel Hill Data Books for 2002 to 2007
2 Data for Orange County are for sales outside of Chapel Hill.
Household Income Is Increasing Moderately
The rapid increase in single-family home prices in Chapel Hill is accompanied by a decline in both the percentage and number of homes sold for under $200,000 Meanwhile, incomes in the area have seen only modest growth from 2000 to 2006.
Between 2000 and 2006, the median household income in Orange County rose from $42,372 to $46,114, reflecting an average annual growth rate of approximately 1.4% In contrast, housing prices surged at a significantly higher rate of 5.4% to 6.9% annually Notably, Chapel Hill reported a lower median household income and a greater proportion of households earning below $30,000 compared to Orange County.
2000, as shown in Chart 2 Thus, while homes in Chapel Hill have become increasingly expensive from 2000 to 2006, residents have also become increasingly unable to afford them.
Chart 2: Household Income, Chapel Hill and Orange County, 2000
Data source: 2000 Census, SF3, Table P52.
3 Median household income is the 50 th percentile of income for all households, the income at which half of all households have a higher income and half have a lower income.
Housing Is Becoming Increasingly Unaffordable
Housing affordability is assessed through two main indicators: the ratio of income to housing costs and the ratio of income to local housing prices A widely accepted standard suggests that homeowners should spend no more than 30 percent of their income on housing costs; those who exceed this threshold are considered housing cost burdened Additionally, at the community level, affordability is evaluated by determining if a household earning the median income can purchase a median-priced home, with the affordability limit generally set at 300 percent of the median household income.
In 2000, a significant portion of low-income homeowners faced housing cost burdens, with 53.3% of Chapel Hill households earning under $50,000 spending over 30% of their income on housing, affecting more than 1,500 families Similarly, in Orange County, 47.6% of low-income homeowners, totaling over 2,800 households, experienced the same financial strain In contrast, the state of North Carolina reported that 41.1% of households in this income bracket were also spending more than 30% of their income on housing costs.
In 2006, 52.9% of households in Orange County with incomes below $50,000, totaling over 4,900 families, spent more than 30% of their income on housing Given the significant differences in housing prices between Chapel Hill and Orange County, these figures likely underestimate the housing affordability challenges faced by residents in Chapel Hill.
Consistent data for median household income is not available for either Chapel Hill or Orange County for 2001 to 2004, and so median household income for the Raleigh-
The Durham-Chapel Hill Metropolitan Statistical Area (MSA) serves as a key framework for analyzing affordability trends over the years Notably, the median household income in Chapel Hill has consistently been lower than that of the broader Raleigh-Durham-Chapel Hill MSA, which may create a misleading perception of affordability when viewed in isolation In 2005 and 2006, the Census Bureau revised the MSA definition, distinguishing Raleigh and establishing a separate Durham MSA that encompasses Chapel Hill Consequently, median household income data from the Durham MSA is utilized for affordability analysis during these years.
Exhibit 4 illustrates the median household income, affordability limits, median sales prices in Chapel Hill, and the significant affordability gap, which represents the disparity between what a median-income household can afford and the actual median sales price From 2001 to 2006, this affordability gap widened dramatically, rising by more than $89,000, from approximately $103,000 to over $192,000.
Exhibit 4: Median Household Income, Affordability Limit, and Median Sales Price in Chapel Hill,
4 For example, median Household Income in Chapel Hill in 2000 was $40,852; in Orange County it was $42,372, and in the Raleigh-Durham-Chapel Hill Metropolitan Statistical Area it was $48,845.
Median Sales Price in Chapel Hill Affordability Gap
1 Median household for the Raleigh-Durham-Chapel Hill MSA was not reported The median used in this
Exhibit is the average of the median income for 2000 and the estimate for 2002.
2 Median sales price is estimated from the 2002 Chapel Hill Data Book, Housing, Table 4.
Using household income to assess affordability in the Chapel Hill community includes single-person student households, while family income data from the Raleigh-Durham-Chapel Hill MSA (2001-2004) and Durham MSA (2005-2006) provides a more conservative estimate by excluding these households This analysis highlights a significant and widening affordability gap, as evidenced by the median sale prices of homes in Chapel Hill, which have surged by over $86,000 from 2001 to 2006, compared to the affordability standard set at 300 percent of income.
Exhibit 5: Median Family Income, Affordability Limit, and Median Sales Price in Chapel Hill,
Median Sales Price in Chapel Hill Affordability Gap
1 Median household for the Raleigh-Durham-Chapel Hill MSA was not reported The median used in this
Exhibit is the average of the median income for 2000 and the estimate for 2002.
2 Median sales price is estimated from the 2002 Chapel Hill Data Book, Housing, Table 4.
Chart 3 illustrates the growing affordability gap for median income households, highlighting a significant increase in both dollar amounts and percentage terms Since 2006, the median sales price has surpassed 1.8 times the affordability threshold for these families, indicating a rapid escalation in housing costs relative to their income.
According to the Census Bureau, a household is defined as all individuals residing in a housing unit as their usual place of residence In contrast, a family household consists of a householder and one or more individuals living together Consequently, a family cannot be classified as a single-person household.
May 20, 2009 Page 8 based on the conservative median family income calculation, and over 2.3 times the level of affordability based on median household income.
Chart 3: Affordability, Median Household and Family Income, and Median Sales Prices,
Affordable: Household Income Affordable: Family Income Median Sales Price
III ESTIMATING THE AFFORDABLE HOUSING NEED GENERATED BY NEW
New residential developments create a significant demand for affordable housing in three key ways Firstly, they require housing for low-wage workers involved in the construction process, including contractors, construction laborers, and material suppliers Secondly, there is a need for affordable housing for maintenance and operational service workers, such as landscapers, painters, HVAC technicians, plumbers, and electricians Lastly, the influx of new residents generates a demand for housing for low-wage employees in local businesses and services, including grocery store staff, pharmacists, teachers, police officers, and nurses.
Figure 1: Contributing Components of Housing Need Generated
This analysis quantifies the demand for affordable housing resulting from new residential construction between 2001 and 2005, utilizing the most recent data available Despite Chapel Hill's economy supporting thousands of workers, the study specifically examines the affordable housing needs generated by employment in targeted sectors and industries.
A sector refers to a broad category of economic activity, encompassing areas such as construction and health care Within these sectors, there are specific industries that represent more focused segments; for instance, the real estate industry falls under the larger real estate sector.
May 20, 2009 Page 10 driven by housing growth; and 2) by employment by municipal government and the public schools The workers included in this analysis are employed in the following fields:
Building material and garden equipment and supplies dealers;
Town of Chapel Hill government including transit, and
Chapel Hill-Carrboro city schools.
This analysis focuses on specific employment sectors and excludes low-wage industries like food services and bars, as their job growth is less directly linked to the construction of new units or the services provided to residents Additionally, while regional growth influences employment increases in sectors like UNC Hospitals, these have also been omitted from the analysis, despite some growth being tied to the expansion in Chapel Hill.
When assessing the demand for affordable housing driven by employment growth, a common factor across all sectors is the income threshold that identifies low-wage workers eligible for affordable housing estimates For instance, low-wage employees in both the healthcare and social services sector and those in the Chapel Hill public schools exhibit similar demands for affordable housing However, significant differences exist among various employment fields regarding available data and the specific impact of employment growth on affordable housing demand To effectively address these variations, the employment fields can be categorized into four distinct groups, each employing a unique methodology to evaluate its influence on the demand for affordable housing.
Building material and garden equipment and supplies dealers, Food and beverage stores, Ambulatory health care, and Real estate;
Town of Chapel Hill government including transit; and
Chapel Hill-Carrboro city schools. and Rental and Leasing sector.
The methodology for calculating demand across various employment groups starts with a common factor applicable to all groups Following this, each group's specific methodology is discussed in the predetermined order Throughout the calculations, conservative estimates are employed to account for employee counts, wage estimations, and adjustments for additional factors.
A Methodology for Common Element of All Calculations
Income threshold for including a worker in the demand for affordable housing
All calculations for the demand for affordable housing from new residential construction hinge on the maximum income level for households Typically, the threshold for eligibility in most subsidized housing programs is set at 80 percent of the Area Median Income (AMI), as defined by the U.S Department of Housing and Urban Development.
Development (HUD), adjusted for household size That is the standard for the household income threshold applied to all employment groups in this analysis
The Need for Affordable Housing Generated by Employment in Construction
The construction sector represents the primary employment group analyzed for affordable housing demand in Chapel Hill To assess this demand stemming from new residential construction, several steps are necessary due to the aggregation of available data Consistent employment and wage data from the North Carolina Employment Security Commission is only available at the county level, with wage information categorized by occupation and employment data grouped by sector or industry.
To analyze the construction sector workforce, it is essential to identify the distribution of workers across various occupations, such as architects, engineers, and carpenters, each with distinct wage data This study utilizes the National Employment Matrices from 2002 and 2004 to categorize workers into different occupations, applying the 2002 matrix for the years 2001-2003 and the 2004 matrix for 2004-2005 For instance, according to the 2002 matrix, 1.17 percent of construction workers were employed in architecture and engineering roles, indicating that out of every 1,000 workers in the sector, approximately 12 are engaged in these professions.
To assess the distribution of construction sector workers by occupation in Orange County, the total employment figure must be multiplied by the respective percentage for each occupation For instance, in 2002, the average annual employment in Orange County's construction sector was 1,832, which indicates that around 21 workers were engaged in architecture and engineering roles, calculated as 1,832 multiplied by 0.0117.
The U.S Bureau of Labor Statistics provides detailed employment projections that categorize jobs by sector and industry, illustrating the distribution of various occupations as a percentage of total employment For instance, the data reveals the proportion of workers in the construction sector who hold positions as architects or carpenters.
11 For purposes of this analysis, the number of workers is based on full-time equivalents For example, the 12 workers could actually be 10 full-time and 4 half-time positions.
The next step involves calculating the percentage of each occupation that earns below the specified threshold income level, as illustrated in Exhibit 9 According to data from the North Carolina Employment Security Commission, wages are categorized by occupation into three distinct levels: entry-level, mid-level, and high-level.
The entry-level wage is calculated as the average of the lowest third of reported wages, while the median wage represents the 50th percentile In contrast, the experienced wage is determined by averaging the top two-thirds of reported wages for the occupation.
To estimate the percentage of workers earning below a specified income threshold, the analysis begins by comparing the threshold with the entry-level income If the threshold is lower than the entry-level income, no workers are counted Conversely, if the threshold exceeds the average entry-level income, the guidelines outlined in Exhibit 10 are applied to calculate the percentage of workers within that occupation who fall below the threshold.
For example, the wages for architecture and engineering occupations in Orange County in
Using the decision rules in Exhibit 10, the first determination is where the income threshold is relative to the wage levels The income threshold for 2002, as shown in Exhibit
In Orange County, the average salary for architecture and engineering occupations is $45,913, which is situated between the median and experienced level wages Given that this figure is nearer to the experienced level mean, the guidelines indicate that two-thirds of the total employment in this field is classified as low-wage workers.
Exhibit 10 Determination of Maximum Employment Discount Rate
If the income threshold is less than the entry level mean Use 0 percent of the employment total
If the income threshold is between the entry level and median
Use 1/4 of employment total if the threshold is closer to the median than to the entry level mean.
Use 1/6 of employment total if the threshold is closer to the entry-level mean than to the median.
If the income threshold is between the median and the experienced mean
Use 1/2 of employment total if the threshold is closer to the median than to the experienced mean.
Use 2/3 of the employment total if the threshold is closer to the experienced mean than to the median.
In Orange County's construction sector, if the income threshold exceeds the average experienced level, it is advisable to consider three-quarters of the total employment figures In 2002, out of approximately 21.4 architects and engineers employed, over 14 were classified as low-wage workers, earning below the threshold income of $45,913.
The fourth step involves calculating the total number of low-wage workers across different occupations within the construction sector By summing all workers earning below the designated income threshold in various construction roles, we can estimate the total number of low-wage workers in the construction industry in Orange County The findings are presented in Exhibit 11.
Exhibit 11 Low-Wage Construction Workers in Orange County
Earning less than Threshold Income 1,406 1,301 1,310 1,313 1,459 Source: Author’s calculations, as specified
The fifth step involves estimating the number of low-wage workers employed in Chapel Hill This estimation can be derived by analyzing the ratio of construction costs permitted in Orange County compared to those in Chapel Hill, as illustrated in the accompanying exhibit.
12 For example, in 2002, the cost of construction permitted in all of Orange County was
$249.3 million and in Chapel Hill it was $112.6 million Therefore, 45.2 percent of the cost of construction permitted in Orange County was attributable to construction permitted in Chapel Hill.
Exhibit 12 Ratio of Cost of Permitted Construction (cost figures in $millions)
Sources: Orange county Economic Development Commission, Chapel Hill Inspections Department
To estimate the number of low-wage construction workers in Chapel Hill, multiply the total number of low-wage workers in Orange County by the ratio of construction costs permitted in Chapel Hill compared to those in Orange County For instance, in 2002, there were 1,301 low-wage construction workers in Orange County, with Chapel Hill accounting for 45.2% of the construction costs, leading to an estimated 588 low-wage construction workers in Chapel Hill (1,301 x 0.452 = 587.7).
Exhibit 13 Low-Wage Construction Workers in Chapel Hill
Low-Wage Construction Workers in Orange
Low-Wage Construction Workers in Chapel Hill 616.6 587.7 537.0 633.1 664.5
The seventh step involves determining the proportion of low-wage construction workers engaged in residential building projects compared to non-residential ones This can be estimated by calculating the percentage of residential construction permits relative to the total value of all construction permits, and then applying this percentage to the total number of low-wage construction workers in Chapel Hill, as illustrated in Exhibit 14.
Exhibit 14 Low-Wage Construction Workers on Residential Projects
Value of Residential Construction ($ millions) $92.4 $86.3 $59.7 $77.7 $6.4 Value of All Construction ($ millions) $110.6 $112.6 $6.6 $12.6 $45.2
Ratio of Residential to All Construction 0.836 0.766 0.900 0.861 0.555
Low-Wage Construction Workers in Chapel Hill 616.6 587.7 537.0 633.1 664.5
Low-wage Residential Construction Workers in
Source: 2007 Chapel Hill Data Book, Land Use and Development Trends, Table 5; Author’s calculations
This analysis aims to assess the demand for affordable housing generated by new residential developments A key step involves calculating the number of full-time equivalent construction workers earning below the threshold income necessary to construct each new residential unit This figure is estimated by dividing the total number of low-wage construction workers engaged in residential projects, as detailed in Exhibit 14, by the number of units permitted during the specified timeframe.
Exhibit 15 Low-Wage Construction Workers per Unit Permitted
Low-Wage Construction Workers in Chapel Hill 515.3 450.2 483.2 545.0 369.0 2,362.7
Number of Units Permitted in
Source: 2007 Chapel Hill Data Book, Land Use and Development Trends, Table 4; Author’s calculations
The analysis in Exhibit 15 reveals that each new residential unit permitted in Chapel Hill generates an average of 1.11 full-time equivalent jobs in the construction sector, with these positions typically offering wages below the threshold income However, these low-wage construction workers only create demand for a small portion of a housing unit due to their temporary involvement in the building process In contrast, workers in sectors such as health care, social services, and municipal services engage with residents throughout the entire lifespan of the housing unit, highlighting the unique dynamics between construction employment and housing demand.
The Need for Affordable Housing Generated in Other Fields of Employment
This section outlines the methodology used to assess the demand for affordable housing among employees in four key sectors closely linked to the goods and services required by residents of newly constructed housing units The analysis focuses on data generated from 2001 to 2005, highlighting the relationship between new residential construction and the employment needs in these sectors.
Building material and garden equipment and supplies dealers (NAICS Code 444);
Food and beverage stores (NAICS Code 445);
Ambulatory health care 13 (NAICS Code 621); and
In order to estimate the increase in low-wage workers earning below the threshold income in various sectors from 2001 to 2005, calculations were conducted to analyze the number of workers in each occupation within the four sectors of Orange County This analysis utilized data from the National Employment Matrices for 2002 to assess the workforce changes, including those in the construction sector.
2004to allocate workers in each sector to different occupations.
In this report, employment data categorized by NAICS Codes will be simplified by using the term "sector" to refer to the four subsectors, while recognizing that the two-digit level is a sector, the three-digit level is a subsector, and the four-digit level is an industry.
13 Ambulatory health care does not include hospitals, which means that the growth in employment at UNC hospitals is not included in the analysis.
The next step involves calculating the number of workers in each occupation across the four sectors who earn below the threshold income This calculation follows the same decision rules for determining the percentage of workers in each occupation, as demonstrated in Exhibit 10 for construction workers The data utilized for this analysis includes total employment and wage rates from 2001 and 2005, sourced from the North Carolina Employment Security.
The third step involves calculating the difference between the total number of low-wage workers in each sector for 2001 and 2005 The findings reveal a notable increase in low-wage employment across all four sectors in Orange County, as illustrated in Exhibit 17.
Exhibit 17 Change in Low-Wage Workers, 2001 - 2005
Change in Low-Wage Workers in Orange County, by sector, 2001-2005 1
Sources: NC Employment Security Commission, Bureau of Labor Statistics, Author’s calculations
1 Differences may not total exactly due to rounding errors
The fourth step involves estimating the number of low-wage workers in Orange County who are employed in Chapel Hill Similar to the construction sector analysis, this requires calculating the employment ratio in Chapel Hill compared to the overall employment in Orange County, utilizing data from 2002.
Economic Census, as shown in Exhibit 18.
Exhibit 18 Chapel Hill to Orange County Ratio, by sector
Chapel Hill to Orange County Ratio 0.48 0.66 0.72 0.76
Sources: Bureau of Labor Statistics, Author’s calculations
To determine the change in the number of low-wage workers in Chapel Hill, the fifth step involves multiplying the change in low-wage workers across various sectors in Orange County by the relevant ratio The findings are presented in Exhibit 19.
Exhibit 19 Change in Low-Wage Workers in Chapel Hill, by sector, 2001 - 2005
Change in Low-Wage Workers in Orange County, by sector, 2001-2005 57 178 87 64
Chapel Hill to Orange County Ratio 0.48 0.66 0.72 0.76
Change in Low-Wage Workers in Chapel Hill, by sector, 2001-2005 27 117 63 49
The demand for affordable housing units for low-wage workers resulting from new residential construction can be determined by dividing the number of additional low-wage workers by the number of permitted units Unlike construction workers, whose contributions are temporary, workers in other sectors provide essential goods and services to residents throughout the entire lifespan of the new units Consequently, the need for affordable housing is not limited by the duration of involvement or the expected useful life of the buildings The findings of these calculations are illustrated in Exhibit 20.
The data for both jurisdictions were not accessible at the three-digit level; therefore, more detailed available data was aggregated to calculate the ratio.
Data at the three-digit level was unavailable for both jurisdictions; therefore, more detailed available data was aggregated to calculate the ratio.
Exhibit 20 Need Generated for Housing Low-Wage Workers per New Residential Unit
Change in Low-Wage Workers in Chapel Hill, by sector, 2001-2005 27 117 63 49
Need for Affordable Units Generated by New
The analysis reveals a significant demand for affordable housing stemming from new residential construction across various sectors Specifically, for every 100 new residential units permitted in Chapel Hill, there is a corresponding need for 5.5 affordable units to accommodate low-wage workers in the food and beverage sector Overall, the combined need for affordable housing across the four sectors amounts to 12.06 percent.
Town of Chapel Hill and Chapel Hill Transit Employment
Town of Chapel Hill Employees, Excluding Chapel Hill Transit
To assess the demand for affordable housing resulting from new residential developments, it is essential to analyze the change in the number of town employees earning below the threshold income between 2001 and 2005 This process begins by determining the total number of full-time equivalent employees, utilizing data from the town budgets for those years Each budget provides a detailed account of full-time equivalent employees across all departments, and by summing this departmental data, we can establish the total full-time equivalent employment for the town in both 2001 and 2005.
To assess employee earnings over specific years, the second step involves analyzing salary data from the Chapel Hill Human Resources Department, focusing on those earning above the threshold income The Town provided data for FY2008-2009, which was then adjusted for cost of living changes to estimate wages for Fiscal Years 2001-02 and 2005-06, aligning with the study years of 2001 and 2005 This analysis aims to identify the number of employees surpassing the income threshold during those periods.
To determine the number of low-wage town employees for the years 2001 and 2005, subtract the count of employees earning above the specified income threshold from the total employee count, as illustrated in Exhibit 22.
Exhibit 22 Town of Chapel Hill Employees Earning less than Threshold Income
Number of Full-Time Equivalent Town Employees 451 462
Number of Town Employees Earning more than Threshold Income 104 133
Number of Town Employees Earning less than Threshold Income 347 329
Sources: Chapel Hill Budgets, FY 2001-02 and 2005-06; Chapel Hill Human Resources Data, FY 2008-09 16
Between FY 2001-02 and FY 2005-06, the number of low-wage town employees decreased by 18, leading to a reduced demand for affordable housing resulting from new residential developments This demand is assessed by calculating the change in the number of low-wage workers in relation to the number of permitted housing units, as illustrated in Exhibit 23.
Exhibit 23 Need Generated for Housing Low-Wage Town of Chapel Hill Employees per New
Change in Number of Low-Wage Workers -18
Number of Residential Units Permitted 2,124
Need for Affordable Units Generated -0.85%
Recent calculations for the Town of Chapel Hill reveal that the demand for affordable housing, driven by new residential development, is projected to be -0.85% of residential units This figure reflects the impact of fluctuations in employment levels and employee wages within the Town of Chapel Hill.
2001 and 2005 This number is negative as a result of two pay increases in 2004 and 2005 which raised the wages of some town employees to levels above the threshold income.
Chapel Hill Transit
The methodology for calculating the change in the number of low-wage Chapel Hill Transit employees aligns with the approach used for town employees overall, with the key distinction being the adjustment for the transit system's broader service area This adjustment is made by applying the ratio of Chapel Hill's population to the combined population of Chapel Hill and Carrboro Detailed calculations for Chapel Hill Transit employees are presented in Exhibit 24.
16 Documents Page, Town of Chapel Hill Website, http://www.townofchapelhill.org/documentcenterii.asp,
Accessed: October 17, 2008; Salary Data per Employee and Historical Cost of Living Increase Data, Town of Chapel Hill Human Resources, provided by Kelly Stokes, Human Resources Specialist on November 4, 2008
17 Although some Town of Chapel Hill employees still earn wages below the threshold, pay increases in 2004 and
2005 for town workers resulted in a net decrease in the total number of full-time equivalent employees earning below the threshold
Exhibit 24 Low-Wage Chapel Hill Transit Employees and the Need for Affordable Housing
Number of FTE Transit Employees 141 164
Number of Transit Employees Earning more than Threshold Income 7 8
Number of Low-Wage Transit Employees 134 156
Chapel Hill to Combined Service Area Ratio 0.74 0.74
Chapel Hill Share of Low-Wage Transit Employees 99 115
Sources: Chapel Hill Budgets, FY 2001-02 and 2005-06; Chapel Hill Human Resources Data, FY 2008-09
The final step for town employees involves calculating the change in the number of low-wage workers by dividing it by the number of permitted units, as illustrated in Exhibit 25.
Exhibit 25 Need Generated for Housing Low-Wage Chapel Hill Transit Employees per New
Change in Number of Low-Wage Workers 16
Number of Residential Units Permitted 2,124
Need for Affordable Units Generated 0.75%
Between 2001 and 2005, changes in Chapel Hill Transit employment and wages led to a calculated demand for affordable housing in the Town of Chapel Hill, amounting to 0.75% of new residential units generated by recent development.
Public Education: Chapel Hill-Carrboro City Schools
Teachers
Employee earnings in this group are determined by the North Carolina State Salary Schedule, which accounts for experience and advanced degrees Teachers with three or more years of experience receive an additional supplement if they hold national certification According to the Education First/Schools Report Card, experience is categorized into three levels: less than three years, four to ten years, and more than ten years.
10 years The Report Card also has data on the number of teachers who are certified and the percentage of teachers at the school who have an advanced degree.
To assess the change in the number of low-wage teachers, the initial step involves categorizing teachers at each school according to a salary level matrix, utilizing data from the school's report cards An example of this process is demonstrated through the allocation of teachers at Carrboro Elementary School for the 2001-02 academic year.
The report card lacks details on the experience levels of certified teachers with advanced degrees, prompting the need to allocate advanced degrees based on the overall percentage of teachers holding them With 43 percent of teachers possessing advanced degrees, this analysis considers 1.29 certified teachers (calculated as 0.43 x 3) as having advanced degrees Consequently, this results in 1.71 certified teachers without an advanced degree (3.00 – 1.29 = 1.71).
The data also show that 18 teachers have advanced degrees (0.43 x 42 = 18) That means 16.71 teachers have advanced degrees but are not certified (18 – 1.29 = 16.71).
To identify the number of teachers who lack certification and an advanced degree, subtract the total of other categories from the overall number of teachers at the school This calculation reveals that there are 22.29 teachers in this specific category.
The next step involves assigning teachers to the correct salary levels according to their years of service The report card for the 2001-2002 academic year indicates specific percentages for Carrboro Elementary School.
Percent with 0 to 3 Years of Experience: 19
19 The calculations are shown with 2 significant figures to avoid the confusion that rounding to integers might cause.
Percent with 4 to 10 Years of Experience: 29
Percent with more than 10 Years of Experience: 52
Those data make it possible to calculate the number of teachers in each of the ranges of experience in the report card Of the 42 teachers at Carrboro Elementary:
7.98 had between 0 and 3 years of experience (0.19 x 42 = 7.98);
12.18 have between 4 and 10 years of experience (0.29 x 42 = 12.18); and
21.84 have more than 10 years of experience (0.52 x 42 = 21.84).
Combining the two sets of calculations, then, apportions the teachers by experience, degree, and certification, into a matrix shown as Exhibit 26.
Exhibit 26 Allocation of Carrboro Elementary School Teachers by Degree, Certification, and Longevity, 2001-02
0 to 3 Years 4 to 10 Years 10+ Years Total
Source: www.ncreportcards.org/src for Carrboro Elementary School for 2001-02, Author’s calculations
The third step involved updating the state salary scale to incorporate the Chapel Hill-Carrboro public school system's local supplements of 12% and 15%, based on the salary scale and length of service For instance, during the 2001-02 academic year, a teacher without an advanced degree or certification and with five years of experience had a base salary of $30,360 With a local supplement of 12%, the total salary for such a teacher at Carrboro Elementary would amount to $34,003.
The fourth step involved the equitable allocation of teachers within each matrix cell, based on their experience levels corresponding to various salary scales: Bachelor’s Degree only, Advanced Degree only, National Board Certified only, and Advanced Degree and Certified For instance, the distribution of 4.85 teachers holding an advanced degree with 4 to 10 years of experience was evenly spread across the 7-year interval, resulting in approximately 0.69 teachers per year (4.85 divided by 7) This systematic approach also applied to teachers with over 10 years of experience.
May 20, 2009 Page 27 allocation was over 19 intervals because the scales stop increasing salary after 29 years of service.
The four-step process was systematically applied to each school in the system to determine the total number of teachers across various salary ranges for the academic years 2001-02 and 2005-06 By aggregating the number of teachers earning below the threshold income, the total count of low-wage teachers in the system was established Exhibit 27 presents the salary scale totals for Carrboro Elementary and the overall system for the 2001-02 academic year, while Exhibit 28 displays the corresponding figures for the 2005-06 academic year.
Exhibit 27 Low-Wage Teachers, 2001-02 Academic Year
Carrboro Elementary Chapel Hill-Carrboro System
Source: www.ncreportcards.org/src for Carrboro Elementary School for 2001-02, Author’s calculations.
1 Numbers may not add exactly due to rounding.
Exhibit 28 Low-Wage Teachers, 2005-06 Academic Year
Carrboro Elementary Chapel Hill-Carrboro System
Source: www.ncreportcards.org/src for Carrboro Elementary School for 2005-06, Author’s calculations
1 Numbers may not add exactly due to rounding.
Other School System Employees
Data from the district on full-time equivalent employees in various job classifications, excluding teachers and administrators, was utilized to assess the need for affordable housing for Chapel Hill-Carrboro school system employees This analysis focused on job classifications from the 2001-02 and 2005-06 academic years, as outlined in the Comprehensive Annual Report.
The second step involved allocating workers to various salary levels to assess the change in the number of low-wage employees within the school system Salaries are determined by state salary schedules, which include incremental supplements for length of service, capped at 8 percent after 19 years Despite these supplements, full-time employees in positions classified as salary grade 64 or lower did not exceed the threshold income during the 2001-02 and 2005-06 academic years Consequently, all workers in grade 64 or lower were classified as low-wage employees for the analysis.
In 2001-02, pay grades 79 and above, as well as pay grades 80 and higher in 2005-06, exceeded the threshold income, even at their lowest levels Consequently, individuals in positions classified above these grades cannot be classified as low-wage employees.
To optimize worker allocation between minimum and maximum salary thresholds, the salary range for each job grade was determined Workers are classified as low-wage based on the percentage of their salary range falling below the established income threshold For instance, a school nurse in grade 68 earned between $27,987 and $52,586 in 2001, with an income threshold set at $44,328 for that year.
8 Therefore, 66.48 percent of the possible compensation in the range is below the income threshold, and so that percentage of the 7.66 full-time equivalent nurses employed by the schools for that year would be considered low-wage workers This same technique was applied to positions that could have multiple pay grades, such as technology technician, using the lowest and highest possible salary ranges for the calculation.
The third step involved assigning employees to job classifications according to the state salary schedule Certain roles, like teacher assistants and occupational therapists, were directly associated with specific job classifications In contrast, positions such as custodians were categorized under job classifications grade 64 or lower, indicating that these workers could be considered low-wage without requiring a more in-depth analysis.
20 Full Time Equivalent Employees, Last Ten Years 1998 – 2007 2007 Comprehensive Annual Financial Report for the Chapel Hill – Carrboro City Board of Education Pp 60-61.
Positions that could not be assigned through previous criteria were matched to the salary schedule of the closest job classifications, with compensation determined by the range of grades within that schedule For instance, the status of 13.5 full-time equivalent employees in the support group was derived from the pay grade distribution in the Office Support Personnel schedule, which includes 13 grades: 9 below grade 64 and 4 at grades 68, 72, 74, and 76 The average inclusion rate for these positions is 80.2 percent, indicating that the 13.5 employees in the support group equate to 10.8 low-wage workers (0.802 x 13.5 = 10.8).
Exhibit 29 Illustrative Inclusion Ratio Calculations, Office Support Personnel, 2001-02
Classification Grade Percent below Threshold
Student Information Data Manager II 63 100.00%
Source: North Carolina State Salary Schedules 2001-02, Author’s calculations
The results of those calculations for all other school employees are shown in Exhibit 30.
Exhibit 30 Other Low-Wage School Employees
Source: North Carolina State Salary Schedules, Comprehensive Annual Report, Author’s calculations
Combined Public Schools Low-Wage Employees
Combining the data in Exhibits 26, 27, and 29 shows the estimate of the change in the number of low-wage school system employees from academic year 2001-02 to 2005-06
As Exhibit 31 shows, the estimated number of low-wage employees in the school system increased by a total of 79.7 employees.
Exhibit 31 Change in Low Wage School Employees, 2001-02 to 2005-06
To accurately assess the increase in low-wage school employees, it's essential to isolate the portion attributed to students living in Chapel Hill, rather than Carrboro According to the 2000 census data, school-age children in Chapel Hill comprise approximately 71.0 percent of the combined total with Carrboro By applying this percentage, the estimated increase in low-wage school employees in Chapel Hill is 57, calculated by multiplying the total increase by the proportion of school-age children residing in Chapel Hill.
Exhibit 32 Need Generated for Housing Low-Wage Chapel Hill-Carrboro City Schools Employees per New Residential Unit
Change in Number of Workers 57
Divide by: Total Residential Units Permitted, Chapel Hill 2,124
Need for Affordable Units Generated by Public Education 2.68%
Summary
The analysis in this report shows that new residential construction in Chapel Hill between
Between 2001 and 2005, the demand for affordable housing significantly increased Conservative estimates indicate that for every 100 new residential units approved, there is a corresponding need for approximately 18.4 additional affordable housing units.
Exhibit 33 Total Percentage of Affordable Housing Need Generated
Employment Sector, Industry, or Classification Percentage
To effectively support low-wage workers in Chapel Hill, it is essential to create 18.4 affordable housing units for every 100 new residential units developed While some workers opt not to live in their workplace community for various personal reasons, many low-wage workers are unable to afford housing in Chapel Hill due to its significantly higher prices compared to neighboring areas This disparity highlights the urgent need for affordable housing solutions to ensure that all workers can reside within the community they serve.
To accurately assess the 18.4 percent need for affordable housing generated by new residential construction in Chapel Hill, it is essential to consider the preferences of low-wage workers This involves estimating the proportion of these workers who would opt not to reside in Chapel Hill, even if affordable housing options were available For instance, if 20 percent of low-wage workers chose to live outside the area, new residential construction would still create a demand for 14.7 affordable units for every 100 new units built.
Discussion
The previous estimate of the demand for affordable housing resulting from new residential development in Chapel Hill is considered conservative This estimate specifically focuses on employment growth linked directly to the new development sectors.
On May 20, 2009, it was reported that growth calculations are derived from a conservative estimate of the income threshold applicable to low-wage workers across various occupations.
The income threshold for including workers is established at 80 percent of the area median income for a family of 2.19 persons, aligning with federal housing subsidy programs like Housing Choice Vouchers and Section 8 While local programs can target households with incomes above this federal limit, setting the threshold to median income would significantly increase the demand for affordable housing due to new residential construction For instance, if median income were used as the initial threshold, the combined housing need in sectors such as building supplies, food and beverage stores, ambulatory health care, and real estate would show notable changes.
The number of low-wage workers in Orange County in those four sectors increases from a total of 2,388, as shown in Exhibit 17, to 2,683 for 2001, and from a total of 2,774 to 3,200 for 2005.
The change in the number of low-wage workers in those four sectors in Orange
The analysis reveals that, by applying the Chapel Hill to Orange County ratio outlined in Exhibit 19 to the change in the number of low-wage workers across various sectors, the total number of low-wage workers in Chapel Hill rises from 256 to 349.
The increase in low-wage workers across various sectors has raised the demand for affordable housing, with the percentage of need rising from 12.06% to 16.44% for the four sectors analyzed Additionally, the overall demand has escalated from 18.36% to 22.74%.
Using conservative assumptions in workforce calculations can significantly skew results, particularly when decision rules exclude a quarter of workers from each occupation For instance, in the food and beverage store sector, this means that at least 25% of employees are not classified as low-wage workers Such exclusions can greatly affect the overall analysis and understanding of wage distributions within various sectors.
Recent data reveals that more than 85% of employees in the food and beverage store sector are concentrated in four key occupations: food preparation and service, sales, office and administration, and transportation These roles are typically associated with low wages.