What happens when a town writes affordability into its zoning code, then also gives developers a payment-in-lieu option?
That is one question sitting underneath Davidson's housing market, and it is not one you will find answered on a portal listing page. Buyers cross-shopping Davidson against Cornelius or Mooresville usually land on the same explanation for the price gap: it's the college, it's the walkable Main Street, it's the schools. All three are real. None of them is the whole story. The fuller discussion involves a piece of local law that is twenty-five years old this year, a payment-in-lieu option for developers, and a growth-management rule.
Davidson's Inclusionary Zoning Ordinance
As Groundwork's case study of Davidson recounts, in 2001, Davidson adopted North Carolina's first inclusionary zoning ordinance, requiring that a share of new for-sale housing be set aside as affordable. According to the town's Affordable Housing Fast Facts, residential developments of seven or more units must set aside 12.5 percent of those units as affordable housing based on area median income.
It sounds like the kind of policy that should keep a fast-growing town from pricing out its own workforce. It also immediately ran into a problem that has nothing to do with housing and everything to do with North Carolina law. According to Mecklenburg Housing Data, North Carolina is not a home-rule state, meaning local governments can only enact the types of rules the General Assembly has explicitly authorized, and inclusionary zoning was never explicitly authorized. Davidson's ordinance, along with similar efforts in Chapel Hill and Manteo, landed in a legal gray zone almost immediately, and multiple lawsuits followed over whether the town had the authority to require it at all.
The town's response shaped how the requirement could be met.
The Payment-in-Lieu Option
To address the legal challenges, the town introduced an option allowing developers to meet the requirement by paying a fee into the town's housing fund, currently set at $50,000, rather than building the affordable units.
That fee funds real programs. It flows into critical home repair, down payment assistance, rental subsidies, and other partnerships the town runs under its affordable housing framework. But it also changes the incentive facing every developer who pencils out a project in Davidson. Land near a college town with a nationally known walkable downtown is expensive. Building a genuinely affordable unit on that land, at a loss relative to market rate, is expensive in a different and more permanent way. Writing a $50,000 check is a known, bounded cost. For a builder doing the math on a multi-unit project where market-rate homes are clearing well into the six figures apiece, the fee is often the cheaper option, and cheaper options tend to win.
Davidson's fast-facts summary, last updated in mid-2024, reported that 93 homes townwide meet its affordability criteria across the 50 to 120 percent AMI range, including 9 rental units. For comparison, 75 homes changed hands in the town's resale market in May 2026. The first figure is a count of qualifying affordable homes; the second is a month of resale transactions, so these figures do not show how often developers used the payment-in-lieu option.
Here is the timeline in short form:
| Year | What happened |
|---|---|
| 2001 | Davidson adopts NC's first inclusionary zoning ordinance, requiring affordable units in qualifying new developments |
| Following years | Multiple lawsuits challenge the town's authority to mandate this under state law |
| Ongoing | Town adds a payment-in-lieu option, currently $50,000 per unit, allowing developers to meet the requirement with a payment |
| Mid-2024 | Town's own count shows 93 homes meeting its affordability criteria |
A Second Policy: Growth Management
The inclusionary rule is only half of what makes Davidson's supply behave differently than its neighbors. The other half is a growth-management tool called the Utility Service and Annexation Criteria, or USAC, a scorecard developers must submit before the town will extend water and sewer to a new project. Score above 60 percent of the eligible points, based on criteria the town has decided matter to its comprehensive plan, and the utility decision becomes an administrative approval rather than a legislative one requiring a board vote. Score below it, and a developer is negotiating with elected officials, not staff.
That scorecard includes credit for building affordable housing, which means the two policies reinforce each other. More broadly, new subdivisions must also go through Davidson's growth-management review, in addition to the town's long-standing form-based code governing what new buildings are allowed to look like and how they connect to the street grid. You can see the results in the town's own planning history. In 1998, developers proposed a project that would become the St. Albans neighborhood using a conventional suburban layout, then let residents compare it against a form-based alternative designed by Dover Kohl. The public chose the walkable version, with townhomes and multiple connections into the existing street network, and that preference has shaped how Davidson has approved projects since. Davidson Bay, started the following year and still being built out today, mixed affordable units with missing-middle housing, commercial space, and preserved natural land under the same form-based approach. More recently, the Circles @ 30 project extended that downtown character right up against the interstate, keeping the same walkable, mixed-use standard in a location next to the interstate.
None of that is bad planning. It is deliberate, and it has produced a downtown worth walking. Davidson's growth-management policies and affordability requirements shape how and what the town builds. The college and the lake are real amenities, and they help explain why people want to live in Davidson. The zoning code is one part of the town's approach to development and housing supply.
What This Means If You're Comparing Davidson to Cornelius or Mooresville
If you're shopping Davidson against its neighbors on price alone, the practical takeaway is this: new construction is only one part of the affordability picture. Over the three months ending May 2026, Davidson's median sale price ran about $685,000, down 2.2 percent from the same period a year earlier, while the typical home took 63 days to sell, up from 48 days the year before. Transaction volume is another number to watch. Only 75 homes sold in May 2026, down from 101 in May 2025. That combination shows a slightly softer price paired with fewer homes actually closing; it does not by itself tell us whether fewer sellers are listing or fewer buyers are finding something to bid on.
In its most recent published comparison, Bankrate's analysis of sale-price data put Davidson's home values at roughly 24 percent above nearby Cornelius, a gap that has more to do with how much gets built and where than with any single amenity. If your budget is the deciding factor, the better move is usually to look at Davidson's existing housing stock closer to the historic core, where established cottages and smaller homes have been on the tax rolls for decades, rather than betting on a future subdivision to bring the entry point down. Newer planned communities on the east side of I-77 do exist and offer more contemporary floor plans, but they are competing against a growth-management framework that keeps volume modest by design.
FAQ
If I buy new construction in Davidson, could my neighbor's home be one of the affordable set-asides? It's possible in developments large enough to trigger the ordinance. The town's reported count does not show how often developers used the payment option, so check the terms of a specific development.
Will this policy ever make Davidson more affordable overall? The ordinance and the USAC scorecard address housing programs and growth management. The town's reported count of 93 qualifying homes is one measure of its affordable housing; it does not by itself establish the policies' effect on overall affordability.
If you're weighing Davidson against Cornelius, Mooresville, or another Lake Norman town and want a read on what your specific budget actually buys in each, Good Fortune Homes can walk you through the comparison in plain terms, in English or Spanish. Request your free home valuation and let's figure out where your money goes furthest.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
