Provided by Representative Jeff Zenger, Regulatory Reform Chair
A. Pro-Active Accomplishments
1. Creating Parity in Enforcement Through Associational Standing (Session Law 2026-41)
This provision is housed in the budget, SB 257.
Several local governments are violating clear requirements of state statute, not through ambiguity, but through deliberate non-compliance. Currently, when a local government refuses to follow state law, individual builders face significant legal costs and other barriers to seek redress. Deciding to litigate is not only expensive but also time-consuming, and many builders simply absorb the harm rather than sue, which incentivizes continued bad behavior by local governments.
To address this, the provision, which is narrowly crafted, grants associational standing, allowing NCHBA to bring civil actions on behalf of its members against local governments that violate state statutes or act beyond their legal authority in the building and development process, including unconstitutional, ultra vires, or arbitrary and capricious decisions. When a local government is found to have violated state law or acted beyond its authority, the court shall award reasonable attorneys’ fees and costs to the prevailing party, making compliance the path of least resistance for local governments.
This is good policy because it is narrowly drafted, limited to associations whose members have a direct legal stake in the development decision being challenged, and confined to clear legal violations, not policy disagreements. It is also consistent with existing North Carolina precedent for attorneys’ fees in government overreach cases. Furthermore, it levels the playing field for small builders who lack resources for prolonged litigation against well-funded local governments, and reinforces legislative supremacy, state law should be followed by all local governments. Importantly, it does no harm to good actor local governments who follow the law.
2. Creation of a new Building Codes and Interpretations Division within the NC Department of Labor (Session Law 2026-41)
Our Association (Home Builders) also pursued a budget provision aimed at eliminating conflicts of interest by transferring the Building Code Council and the Residential Code Council to the Department of Labor. Currently, both councils, along with their staff and official code interpretations, reside within the Office of State Fire Marshal, which is a division of the Department of Insurance. This arrangement has drawn criticism because building code development funded, staffed, and housed within the Department of Insurance can appear to prioritize reducing insurance claims rather than protecting life and promoting safety.
To address this, Home Builders asked for and received the creation of a new Building Codes and Interpretations Division within the North Carolina Department of Labor, with both the Building Code Council and the Residential Code Council, along with their staff and code interpretation functions, transferred from the Office of State Fire Marshal to that new division under the Commissioner of Labor. Importantly, this request would maintain the existing Building Code Council structure and membership, since the change is intended as an administrative realignment rather than a restructuring of code adoption authority.
This move is considered good policy for several reasons. It would align building code administration with a department that can focus solely on life and safety without competing pressure to protect insurance industry interests. It would also create a single point of contact for builders seeking code guidance, simplifying an otherwise fragmented process. Financially, the change would require no recurring General Fund appropriation, since the new division would be self-funded through a dedicated State Building Code Regulatory Fee collected at permit issuance, meaning existing Office of State Fire Marshal operations and funding would remain unaffected by the transfer. Finally, the Labor Commissioner and the North Carolina Department of Labor have a natural alignment with the construction workforce and building trades, making the Department of Labor a more fitting and logical home for building code administration going forward.
3. Permit Choice (Session Law 2026-41)
Ambiguity currently exists as to whether prior approvals for conditional zoning and stormwater permits qualify for permit choice. This issue is tied together with Priority One, Associational Standing. The fix amends the statutory definitions of “development permit” and “land development regulation” to expressly include conditional zoning, rezoning, and stormwater permits, thereby eliminating the ambiguity that currently allows local governments to apply changed rules to projects mid-stream. The impact of this fix will prevent local governments from changing ordinances and various requirements midstream of a housing development.
4. Performance Guarantee Choice (Session Law 2026-46)
Currently, the choice of security instrument that a developer may use to satisfy performance guarantee requirements (such as surety bonds, letters of credit, cash, or other equivalent forms) is not applied consistently across NCDOT projects. Local governments already allow developers flexibility in selecting the form of security that best suits their needs, but this same flexibility is not consistently extended under NCDOT driveway and encroachment permit statutes.
This provision amends the relevant NCDOT encroachment permit statutes so that developers can choose their preferred form of security, whether that is a surety bond, letter of credit, cash, or an equivalent instrument, in a manner consistent with what state law already permits for local government permits.
This provision is housed in HB 1094. However, only encroachment infrastructure was included in that bill’s language. Driveway infrastructure was not addressed. We are now seeking to have driveways included in a separate legislative vehicle so that this fix applies fully and consistently across both driveway and encroachment permits.
This change will allow developers and builders to use whatever financial security instrument best fits their business and financial circumstances, rather than being limited to a narrower set of options depending on which government entity is issuing the permit. This promotes consistency, reduces administrative confusion, and gives developers greater flexibility in managing project costs and risk.
5. Parking Reforms and Stormwater Controls (Session Law 2026-39)
HB 162 limits the ability of local governments to regulate certain aspects of off-street parking, effectively shifting decisions about how many parking spaces are required to the private sector. The bill exempts the 20 coastal counties from these parking restrictions.
The bill also makes significant changes to stormwater regulations. It now prevents local stormwater management programs from requiring private property owners to install new or increased stormwater controls for existing built upon area, previously referred to as preexisting development, as well as for other specified redevelopment activities. When development or redevelopment occurs on a site that already has existing built upon area, that area is excluded from density calculations used for additional stormwater control requirements, and it is not subject to additional stormwater control requirements regardless of whether it is demolished, relocated, replaced, or left in place during the development process. In determining the size of the area for which stormwater control measures are required, any built upon area that existed before the development or redevelopment is applied on a square foot for square foot basis to reduce that required area. Stormwater control requirements also cannot be applied retroactively to existing built upon area unless federal law requires it.
Finally, any local government that implements a stormwater management program must amend its ordinance to conform to the act within twelve months of the effective date. Any ordinance that remains inconsistent with the act’s stormwater provisions after that period becomes void. Local governments may adopt, amend, or repeal the incentive provisions described above at any time following the effective date of this section.
6. Be Pro Be Proud (Session Law 2026-41)
The budget also includes $750,000 in one year funding for Be Pro Be Proud, an education initiative launched in 2023 to inspire the next generation of skilled workers. Since its inception, the program has reached tens of thousands of North Carolina students, encouraging interest in careers in the skilled trades.
7. Water and Wastewater Changes (Session Law 2026-32)
HB 376 implements several significant changes related to the regulation of on-site wastewater systems. Among its key provisions, the bill requires individuals certified under Article 5 (Certification of On-Site Wastewater Contractors and Inspectors) to maintain adequate general liability insurance coverage appropriate for the projects they perform, as well as any additional liability coverage required for systems installed under the applicable statutes. This requirement is intended to ensure that certified contractors and inspectors have sufficient financial protection and accountability when performing regulated work.
In addition, HB 376 incorporates the same impervious surface (built-upon area) language that was previously included in HB 162. This language was intentionally duplicated because the parking-related provisions of HB 162 generated considerable controversy, creating concern that the bill might not ultimately be enacted. Since the impervious surface provisions were viewed as essential to addressing local government resistance to earlier legislative changes concerning built-upon area regulations, lawmakers included the language in HB 376 to preserve those policy changes regardless of the outcome of HB 162.
8. Workers Compensation Changes (Session Law 2026-14)
Session Law 2026-14 prohibits third-party financing of litigation and includes targeted updates to North Carolina’s workers’ compensation system. The workers’ compensation provisions were the result of negotiations in July 2026 among representatives of the business and insurance community, defense attorneys, and trial lawyers, with the primary point of contention being the third-party litigation financing provision. The bill makes limited increases to certain workers’ compensation benefits, marking the first such increase since 1987. Specifically, it doubles the maximum award for significant bodily disfigurement from $10,000 to $20,000 when the disfigurement affects wage-earning capacity, consistent with existing North Carolina case law, and increases the maximum award for significant head or facial disfigurement from $20,000 to $40,000. The legislation also raises the minimum weekly compensation rate from $30 to $50, removes all provisions that would have tied future benefit increases to the Consumer Price Index (CPI), and makes no changes to the existing law regarding the stacking of organ awards. The bill becomes effective for claims arising on or after July 1, 2027, with the delayed implementation intended to allow insurance carriers sufficient time to prepare actuarially for any future rate adjustments, which will continue to take effect each April 1 based on recommendations from the North Carolina Rate Bureau.
B. Pro-Active Ongoing Legislation
1. Regulatory Reform
A comprehensive regulatory reform package is still being worked out between the two chambers. A current draft of the bill contains several key provisions for the home building industry.
The first provision addresses shot clocks on planning and zoning decisions. Local governments currently lack mandatory timelines for acting on zoning applications and administrative approvals, allowing projects to languish indefinitely. The fix establishes a statutory shot clock requiring local governments to determine application completeness and issue an approval or denial of a completed application. Extensions would require the applicant’s agreement, and failure to act within the deadline would result in deemed approval, giving builders certainty and accountability. This is expected to dramatically reduce delays in project timelines, lower carrying costs, and increase housing supply. Notably, this applies to both administrative development approvals and legislative rezoning or conditional zoning applications, ensuring shot clocks cover the full permitting pipeline.
The second provision involves favorable permit choice language that would provide greater flexibility in the permitting process. North Carolina’s vested rights statute currently provides only a two-year standard protection period, far too short for the financing timelines, phasing requirements, and market cycles of most modern residential developments. Even the discretionary extended period currently caps at just five years. The fix would extend the standard vesting period from two to five years and raise the discretionary ceiling for larger or more complex developments from five to eight years, aligning vested rights protection with the real-world timelines of project financing, phasing, and construction.
Finally, a provision of the bill permits any type of spray foam (air impermeable) insulation to be used in wall cavities across all three of North Carolina’s climate zones, provided the cavity is filled. The provision does not specify the type of spray foam required, so both open cell and closed cell products would comply with the proposed statute. This provision eliminates the need for additional continuous insulation when spray foam is used per Table N1102.1.2, provided a blower door test demonstrates an air change rate at or below 3 ACH. It also establishes a prescriptive compliance path as an alternative to the Energy Rating Index method. Current code minimums under N1102.1.2 require R 15 or R 13 plus R 2.5 continuous insulation in Climate Zones 3 and 4, and R 19 (2×6 wall), R 13 plus R 5 continuous insulation, or R 15 plus R 3 continuous insulation in Climate Zone 5.
In practical terms, this provision gives builders the option of choosing between traditional R 13 batt insulation or a fully filled 2×4 open cell or closed cell spray foam cavity, both of which would satisfy code requirements, with the sole additional requirement being a blower door test result at or below 3 ACH.
2. Coastal Regulatory Reform Changes to Upland Basins
SB 1001: Coastal Regulatory Reform Act, updates coastal development rules, including changes to “upland basin” marina permitting requirements from two years ago. Developers can now use computer modeling instead of direct site monitoring to show they meet dissolved oxygen standards, but only during project design and only to determine whether aeration or other fixes are needed—and only when pre-project testing already shows oxygen levels above 5.0 mg/L. The bill also makes it easier for DEQ to require aeration or other corrective measures: previously, DEQ had to prove the applicant’s data contained material errors using peer-reviewed methods or site monitoring, but that higher bar is now removed. These changes don’t affect other required permits, such as Clean Water Act certifications, federal permits, or Coastal Area Management Act permits. And even if DEQ accepts a modeling-based compliance demonstration, it still retains the authority to require monitoring, adaptive management, or corrective action later if needed to meet water quality standards.
C.Legislative Opposed/Monitored
1. Annexation of PUV Land/School Capacity
HB 1119 is a local bill applying to Iredell County. It would require that if a planning department determined a residential rezoning would push student population beyond 100% of school capacity, the county board of commissioners must approve any related annexation before the city council may adopt it. If the board of commissioners withholds approval, the city council may not proceed unless it agrees to pay the county the amount necessary to bring school capacity below 100%. HB 1119 would have a chilling effect on development.
2. Authorize Municipal Deannexation
House Bill 199: Authorize Municipal Deannexation passed 2nd reading in the House on July 2. This bill creates a new Article 4B in Chapter 160A of the General Statutes, establishing a formal process for municipalities to shrink their boundaries through deannexation. Before any hearing, a municipality must prepare a map, a financial and service impact statement, and a service transition plan. A municipality may initiate deannexation through a resolution, a thirty-day public notice period, a hearing, and finally an ordinance, or residents may force a referendum by petition from twenty five percent of registered voters, with a failed vote blocking another attempt for twenty-four months. Citizens may also initiate deannexation through a petition signed by all property owners in the affected area, followed by a hearing and municipal decision. Once effective, deannexed areas are released from municipal laws, debts, and taxes, though existing tax liens remain collectible. If service obligations would shift to another government or fire district, consent from that entity is required. Municipalities retain flexibility to continue, transfer, or end services such as utilities, roads, and public safety, with liability protections if those services are discontinued. The mayor must record the deannexation map and ordinance with several state offices, and affected property owners may seek judicial review if proper procedure was not followed or the action was arbitrary or unconstitutional.
Thank you to the NC Home Builders for all your work and dedication.
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