AGENDA ITEM EXECUTIVE SUMMARY
ITEM TITLE*
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Housing and Community Development Affordable Housing Annual Report and Department Update
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RESPONSIBLE STAFF, TITLE, DEPARTMENT*
Alicia Arnold, Director, Housing and Community Development
Emily Holt, Assistant Director, Housing and Community Development
STAFF RECOMMENDATION*
Council is asked to receive the Fiscal Year 2026 Affordable Housing Annual Report and Department Update.
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BACKGROUND AND CONTEXT*
The Housing and Community Development Department periodically provides updates to Council on affordable and public housing activities.
Affordable Housing Annual Report
The FY26 Affordable Housing Report (attached) shows that Chapel Hill continues to face rising pressure on housing affordability, with sharp increases in both median home values and rents contributing to a growing share of cost-burdened households across all income levels. Despite steady growth and diversification in the housing supply and strong local investment, affordability challenges exist.
The Town has expanded its inventory of income-restricted units, approved and supported unprecedented numbers of affordable units, and advanced most recommendations in the Affordable Housing Plan. But while the Town has achieved substantial gains in unit preservation, development remains stubbornly slow. Overall, the trends indicate a community investing heavily and making measurable progress yet still contending with structural affordability gaps and market forces that continue to challenge local interventions.
HUD Recovery Status
In 2026, HUD improved the City’s Public Housing designation from Troubled to Substandard Management. Staff met with HUD in September 2026 to finalize the new Substandard Management Recovery Plan. Formal HUD approval is expected in the coming weeks.
Tropical Storm Chantal Recovery
Storm Chantal caused significant damage across two Public Housing neighborhoods affecting 41 units and displacing 30 families (105 residents). At South Estes, 19 units experienced major flooding and extensive water damage. Comprehensive repairs are ongoing with downstairs renovations expected to be complete this fall. A fallen tree at Airport Gardens severely damaged one building (4 units). Additional units in the community had water intrusion with 22 units damaged in total. All units except the tree damaged building have been repaired.
Town staff provided around-the-clock assistance, coordinating hotels, transportation, food, housing supplies, and more. Costs were covered through donations and support from the Town, Orange County, and partner organizations. We have also sought reimbursement from FEMA and the State of North Carolina. As of today, all but 3 families have returned to housing. Some are back in their original units; others moved to different Public Housing units, Trinity Court Apartments, or transitional housing. The team is working diligently to have all families home before the end of October.
Town’s Affordable Housing Strategy and Plan
At this time, we do not anticipate recommending any changes to the plan’s broad goals which are Reducing Barriers to Building Homes, Expanding and Preserving Affordable Homeownership and Rental Housing, and Increasing Staff and Funding Capacity. Those goals remain well-aligned with our long-term affordability objectives and continue to reflect best practices.
That said, we recognize that the housing landscape is dynamic, shaped by shifting market conditions, evolving community needs, and emerging innovations. To ensure our strategy remains effective and forward-looking, the Department will continue to regularly assess and look for opportunities to strengthen or refine the recommendations. This may include expanding existing strategies, integrating additional best practices, or adjusting implementation approaches to maximize impact. Some ideas staff are assessing:
Streamlining Regulations, Permitting, and Land Use Requirements
• Building upon permitting and zoning process improvements specifically for affordable housing developments
• Educating developers on the LUMO Draft regulations which include incentives for affordable housing and other housing growth strategies
• Enhancing overall regulatory processes for speed, equity, sustainability, and long-term affordability
Further Maximizing Creation and Preservation Tools
• Growing rental preservation through enhanced acquisition strategies
• Increasing 4% LIHTC/Bond developments through developer recruitment
• Furthering partnerships with local/community Development Finance Institutions (CDFI) lenders and private sector businesses to create innovative funding models
• Thinking holistically about Affordable Housing and Public Housing programs to increase impact
• Ensuring efficient homelessness to housing pipeline with coordinated services to fill critical gaps.
Comprehensive Funding & Regulatory Strategies
• Maximize federal/state reforms to open doors to new funding or regulations (e.g. 21st Century ROAD to Housing Act)
• Explore opportunities for modular or manufactured housing, shared-housing models, and innovative urban infill
While we do not expect to bring the plan back to Council for formal confirmation of the recommendations at this time, we remain committed to transparency and collaboration. If new ideas, innovative opportunities, or significant external changes arise that could meaningfully enhance our affordable housing outcomes, we will bring those forward. The Department is always open to exploring creative approaches that support our shared goals.
COMPLETE COMMUNITY CONNECTION
Affordable Housing is one of the Town’s Strategic Focus Areas.
ATTACHMENTS
Fiscal Year 2026 Affordable Housing Annual Report
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