Legislative Action: Cities Halt Harmful Development Bills

Local governments across the state, with their knowledge of regional context and tailored strategies for managed growth, are a vital part of North Carolina’s residential quality.

A successful defense of that played out in the 2025 General Assembly. Citing challenges in the state’s housing supply and affordability, some in the development industry this year pushed sweeping legislative proposals that, unfortunately, sought to upend common local government authorities and safeguards without addressing marketplace factors behind the costs.

These bills, representing continued pressure from the development industry, amounted to one-size-fits-all preemptions on local land-use and building regulations, despite the nuance that different cities and towns across the state consider with planning and development.

“As the front line of the state’s housing challenges, municipalities are best equipped to develop policies that reflect the unique needs of their residents,” the League’s Government Affairs team noted over the summer as the proposals circulated in the legislature.

Fortunately, the League’s response and that of municipal officials across the state, highlighting the harm posed to community growth, staved off the bills. But it all made for substantial work this year among proponents and detractors, with intense debate around proposals like House Bill 765, titled “Save the American Dream Act.”

Filed in April, it sought to weaken or eliminate large portions of municipal planning and development authority, with provisions that included requirements for minimum residential densities, mandates to allow accessory dwelling units (commonly referred to as “ADUs,” with examples including “tiny houses” added to developed lots) in all residential zones, prohibitions on parking minimums, and new state imposed procedures that would override locally tailored development rules. The bill also included unprecedented conflict of interest provisions and potential legal penalties for local officials making routine land-use decisions, raising significant concerns about municipal liability.

That specific bill died in the House, but several of its components found new life in amendments to another proposal from across the hall: Senate Bill 205 (originally filed to clarify law with swimming pools). Although the amended proposal would have further constrained local flexibilities, as city officials continued to spotlight concerns, it did not move to the House floor.

The development industry and advocates, in putting these preemption bills forward, suggested they would help in the fight for a better and more affordable housing picture. But local government leaders and other opponents of the bills brought important context to the supply-and-cost conversation.

While the bills would have displaced carefully calibrated growth management strategies, they wouldn’t have addressed primary cost drivers like construction prices, workforce shortages, and high interest rates.

Over the past several years, nationwide, just about every major type of building material has jumped in price, in some cases without signs of relief, adding to the costs people face when shopping for or hoping to build property, according to media outlets and trade groups. “In other words, these costs directly shape, in part, how, when and whether homes get built,” Fox Business reported in September. The outlet cited the National Association of Homebuilders (NAHB) and Associated General Contractors of America in listing factors like tariffs on materials.

Another player is a shortage in the housing industry of skilled labor, according to a study released in June by the Home Builders Institute in collaboration with NAHB. They said it prevented the creation of thousands of homes each year and was a “multibilliondollar challenge.”

In North Carolina, proponents of the bills to preempt local decisionmaking cited a statewide housing shortage of 765,000 units.

But the National Association of Realtors in a report this summer pointed to possible turnarounds, noting housing inventory was recovering, even rebounding, across the country. “There is no doubt that this is very good news,” the group said. “More inventory typically means more options, and more options can help ease price pressures.”

The issue, with myriad contributors, remains complex; observers are closely following these affordability factors and the potential softening of other effective parts, like interest rates.

While none of the sweeping proposals against local decisionmaking this year passed, the issue is likely to resurface in future legislative sessions, and municipal officials will continue to share with lawmakers the consequences of local planning preemption: damage in the ability to attract residents and businesses, and potential damage to existing home values. 

Scott Mooneyham contributed to this article.