New legislation in North Carolina impact on real estate???
Investor · Erie, CO · Member since 2016 · 9 posts · 2 votes
Hello,
I am in the process of setting up to conduct business in North Carolina (specifically in Raleigh and the Triangle area). As far as I have discerned, the area I am interested in has a high emphasis on knowledge worker type jobs (tech, software, engineering, financial, etc). Recently passed legislation in North Carolina doesn't sit well with many of the types of companies which are based in the Raleigh area (source cnn money "...Cooper spoke as more than 80 CEOs and executives co-signed a letter to North Carolina's governor pushing for a repeal of a "deeply discriminatory" bathroom law...").
Does anyone have any opinions on how this may play out? Usually companies move for taxes and cost savings - not sure if I am familiar with a company moving their operations due solely to laws they find discriminatory. I feel this definitely has a material impact on whether or not I continue to pursue the Raleigh market.
Patrick, no business is going to leave. The exact same scenario happened with Amendment One (2012 - banning gay marriage). Most big businesses did not approve, but none left, laws like it got overturned by the Supreme Court, and now gay marriage is legal in North Carolina, and nationwide. All that happened is we had a pointless cultural war for a year and wasted 100 million dollars of taxpayer money fighting over it.
This will get overturned or adjusted and then it will be on to the next stupid cultural war to steal headlines and accomplish nothing.
Hey Patrick - this is purely opinion but I would wager that the HB2 will be at a minimum altered due to pressure not only from the public but other states & federal government and business executives. Having moved a business here back in 2000 I understand the draw areas like the RTP has for its high-tech infrastructure and convenient location. But a larger impact for us was made by the level of talent we were able to acquire by moving here. If HB2 where to stand as is the concern from business - other the content of the law - is the that very talent that drew us here will leave for locations more inclusive then HB2 provides. That migration effect will eventually cause those businesses to have to relocate as well, leaving us with more supply then demand in real estate.
Hard to quantify the impact. But here's the background:
The issue started in Charlotte with Ordinance No 7056, (reference 1). That bill added "sexual orientation, gender identity, gender expression" to the list of protected classes (after race, color, religion, sex, marital status, national origin, familial status...) with Charlotte obviously requiring that establishments there make accommodations for the "full and equal enjoyment of the good, services, facilities, privileges, advantages, and accommodations of a place of public accommodation..." What I find facinating is that Section 12.59 entitled "Prohibited sex discrimination" was already on the books, with some exclusions. The exclusions in 12.59 are "restrooms, shower rooms, bathhouses and similar facilities which are in their nature distinctly private", "YMCA, YWCA...", and "A private club or other establishment not, in fact, open to the public." Section 12.59, with this ordinance, was removed from Charlotte code.
So indeed, Charlotte requires businesses to accomodate "restrooms, shower rooms, bathhouses and similar facilities" regardless of sex, sexual orientation, gender identity, gender expression.
HB2, at the state level, adds the term "Biological sex. – The physical condition of being male or female, which is stated on a person's birth certificate." The state mandates that Local boards of education and Public agencies shall require every multiple occupancy bathroom or changing facility to be designated for and only used by persons based on their biological sex. The bill does not prohibit "local boards of education from providing accommodations such as single occupancy bathroom or changing facilities or controlled use of faculty facilities upon a request due to special circumstances, but in no event shall that accommodation result in the local boards of education allowing a student to use a multiple occupancy bathroom or changing facility designated under subsection (b) of this section for a sex other than the student's biological sex." Underlining emphasis above is mine.
The state also defines (redefines or refines?) the protected class in SECTION 3.1 of NCGS 143-422.2 "It is the public policy of this State to protect and safeguard the right and opportunity of all persons to seek, obtain and hold employment without discrimination or abridgement on account of race, religion, color, national origin, age, biological sex or handicap by employers which regularly employ 15 or more employees." The word emphasized above was added to the state law definition by HB2.
And, yes, the state says that the state regulations regarding disciminatory practices "supersede and preempt any ordinance, regulation, resolution, or policy adopted or imposed by a unit of local government..." effectively invalidating Charlotte's ordinance.
Sources:
1) Ordinance #7056 Book 59, Page 743: AN ORDINANCE AMENDING CHAPTER 2 OF THE CHARLOTTE CITY CODE ENTITLED "ADMINISTRATION", CHAPTER 12 ENTITLED "HUMAN RELATIONS", AND CHAPTER 22 ENTITLED "VEIDCLES FOR IDRE"
available through:
2) HB2 Short Title: Public Facilities Privacy & Security Act
AN ACT TO PROVIDE FOR SINGLE-SEX MULTIPLE OCCUPANCY BATHROOM AND CHANGING FACILITIES IN SCHOOLS AND PUBLIC AGENCIES AND TO CREATE STATEWIDE CONSISTENCY IN REGULATION OF EMPLOYMENT AND PUBLIC ACCOMMODATIONS.
I'm thinking it might actually help me out. The Raleigh market is so hot right now, maybe the stupidity coming from the state government will drive some people away making housing cheaper to acquire.
Maybe?
Got to think about the positives.
Patrick, no business is going to leave. The exact same scenario happened with Amendment One (2012 - banning gay marriage). Most big businesses did not approve, but none left, laws like it got overturned by the Supreme Court, and now gay marriage is legal in North Carolina, and nationwide. All that happened is we had a pointless cultural war for a year and wasted 100 million dollars of taxpayer money fighting over it.
This will get overturned or adjusted and then it will be on to the next stupid cultural war to steal headlines and accomplish nothing.
You may want to caution your "stupid" comments as folks have deep seated beliefs in how they want things to be on both sides. There's plenty of stupidity to go around on ALL sides.
There's a reason many folks are fleeing other states and moving here & the southeast in general (plus Tx). Unfortunately a side effect is many seem to bring their politics with them which eventually turns the area into something similar to what they fled behind. Jobs and a great lifestyle are created by governing bodies/tax codes/weather/business climate/educated workforce...many variables. Where are the businesses gonna leave to? Texas? Check out the population & jobs trends. However a great thing about this country is state boundaries are freely open to come & go as you wish.
@Patrick H. s post got deleted?
@Charles Williams thanks for noticing.
@Charles Williams I express no opinion on the beliefs, it is the cultural war itself that I consider stupid. Stupid might have been a bad word as it generally is in any situation and I should have used something else. I do not want to engage in any political debate involving actual beliefs so I will leave it at that.
Less than 4 years ago this exact same thread could have been made about our new gay marriage law. Imagine if you stayed away from investing in Raleigh because of that! When was the last time you even heard that issue mentioned? It is done and settled. My main point is this will pass, no business is going to leave North Carolina, and I would not make any real estate decisions based on this law passing, unless perhaps Patrick does not want to invest here because of his own personal beliefs.
Four years ago, imagine if SAS decided they were going to move all their operations to another state because Amendment One passed, banning gay marriage and civil unions. By the time they made the decision, figured out target areas to move, and found office space the laws would have been overturned.
edit
Has any major company ever actually moved out of a state because a law similar to this passed? I am sure many have moved because of tax laws or labor laws but I am not sure any company has ever actually moved because a law along these lines passed. Does anyone know of one?
@Charles Williams - Due to work constraints I need to engage as a passive investor and therefore, if I can find an excellent team in a great market, that is more important to me than being local and I believe I've found that in Raleigh. Furthermore, I have family moving to Ft. Bragg this summer.
I analyzed several markets across the US and the factors seemed to line up correctly for my desired investment plan in Raleigh especially with the family situation at Ft Bragg. On the other hand, after talking to locals in the Denver area, the only types of deals I could get involved in was providing private money on flips, which I really don't have any desire to do (I already own shares in REITs, hard money lenders and private investment groups and want to diversify away from further investing my money in these types of vehicles).
I moved to Fayetteville, NC a couple years ago and i'm going to be buying, rehabbing and selling properties here in the immediate future. Any advice you care to pass on about the area or deals would be greatly appreciated. I plan on starting with Bank/Va owned homes.
@Patrick H., I think Eric is right. This will probably be overturned (hopefully) sooner rather than later. The law also doesn't allow for you to bring a child of the opposite sex who is seven or older into a restroom with you. So, if my husband is out shopping with my girls, he will have to leave them outside, in public, unsupervised if he has to use the restroom. They are four now, so hopefully it doesn't take three years to get this worked out. I can't even leave them in the car unsupervised while I check my PO box (even though I'm gone for 20 seconds and can see the car the whole time). How well will leaving unattended seven year olds go over?
I wouldn't worry too much about it. First of all, no business currently based in NC is going to pull out over this despite their objections to it. Corporations always put the bottom line above everything else, and no corporation is going to spend millions of dollars to move out of the state over a principle. It might, however, cause a corporation considering moving or expanding in NC to rethink that.
Personally I think HB2 will be overturned when challenged in the courts. It is almost identical to the Colorado constitutional amendment that was overturned 6-3 by the Supreme Court in Romer v Evans.
From what I have seen the single biggest factor in Fayetteville is schools. It is easy to find cheap houses in the bad districts, but much more difficult to get good people in them. The life blood of Fayetteville is the military and most of the more discerning from this group care about the schools, those that don't are probably not the best tenants.
If you want cheap, the house next door to one I own is abandoned and has been for more than a year.
From what I have seen the single biggest factor in Fayetteville is schools. It is easy to find cheap houses in the bad districts, but much more difficult to get good people in them. The life blood of Fayetteville is the military and most of the more discerning from this group care about the schools, those that don't are probably not the best tenants.
If you want cheap, the house next door to one I own is abandoned and has been for more than a year.
There are no good schools in Fayetteville (save for maybe Jack Britt) so implying that people who don't care are bad tenants is implying that pretty much all of Fayetteville are bad tenants.
That said, I have a few rentals in Fayetteville and have fantastic tenants even though they live near bad schools. The military is pretty much the lifeblood of this town, even though it only accounts for about 10% of the population, which causes me great stress about the sustainability of the future here.
Back on topic, I think Dawn is right, this legislature will be overturned and I don't believe it will take long. There has been overwhelming negative critique from both the business sector and other states. The attorney general said he will not defend this law at the state level court either. I believe the worst impact that will be seen from this law will be felt by mr. Mcrory himself.
This law is tricky because, buried in it are new rules about local govts. ability to pass other laws based on sexual orientation and set minimum wages. It also essentially allows employment discrimination based on sexual orientation and allows discrimination based on sexual orientation in places of public accommodation aka: any business open to the public. So really sweeping stuff.
It will not hold up, and there is a lot of pressure building. It seems to be the last flailing efforts of the hyper-conservatives in the current state govt. to bring NC back to 1950. Note to all: I am just expressing my opinion and will not engage in a debate on this topic.
Businesses won't move, there's too much momentum currently. Raleigh is a tough market to find "killer" deals, but its growing so appreciation is a real possibility and there are surrounding areas with potential.
@Alexander Felice You are right about the schools in Fayetteville. They are all pretty bad. I have to keep reminding myself that the worst school in Raleigh is still probably better than the best school in Fayetteville, so even if my kids don't get into a top elementary magnet school here, it will be ok . My husband and I turned out (mostly) fine, even after attending school in Fayetteville. Our kids will be fine too :)
Jack Britt is one of the top school districts in the state. There are a couple others that are good and I doubt the worst schools in Raliegh are better than the best in Fayetteville.
As long as the numbers work, we can make money on the deal irregardless of the school's ratings.
Looks like Paypal decided to pull out of Charlotte over HB2. Hope this gets the reversal going.
@Fred Heller I hope you are correct. The capitol city and elsewhere is already feeling the impact in a peripheral way. Not that I would go, but this event has apparently been impacted. Political perception is stronger in an election year... if it isn't obvious.
From a residential rental real estate perspective, there is no impact. But long term migration growth rates... maybe a different story. The bill stays until the Republican legislature changes, IMO.
Is the direct impact up to $1B yet? Probably.
This issue only has an indirect impact on NC real estate. Kiss some of your AirBNB revenue good by for basketball. The all star game moved. The (championships) from NC yesterday including college basketball opening rounds.
Regarding "Has any major company ever actually moved out of a state because a law similar to this passed?" I am not aware of any, but I also do not know if PayPal already had operations here or if their involved existing employees.
Hey, look at that. The decided to move games out of NC. This is not good.
Observation follows, not political commentary.
The economic impact of losing college and professional sports revenue in NC is a very serious concern. I think some sports venues, like the PGA, may not see impact... but if conventions continue to pull out and businesses continue to raise the 'yellow flag', the decisions of law makers will eventually impact population growth. That could have a significant impact on Real Estate in Metro cities in NC.
From WRAL:
"For the sports event industry in North Carolina, this week has been unprecedented and historically bad, probably the worst ever in terms of lost business and damage to our brand," said Scott Dupree, executive director of the Greater Raleigh Sports Alliance.
"Once the NCAA made its announcement on Monday, this ACC decision was inevitable. Looking ahead, I am very concerned about other sports organizations that may be next in line."
Read more at http://www.wralsportsfan.com/acc-pulls-championshi...
The law has had a huge impact economically, $100 million lost in just sports related tourism. Thats not including the companies that decided not to relocate or set up a new location, not including the conventions and such. When I lived in Charlotte, Pat was a great a mayor, which is why he served 18 years I think it was. He is elected governor and now he makes bad decision after bad decision, messing with the film industry so his Chic-Fil-A buddy can benefit from more film in GA.
Here is a Forbes article about the sports side of this: