The Sterling Bay Withdrawal and Durham’s Development Trap
- Durham Dispatch
- Aug 27, 2025
- 7 min read
Updated: Sep 1, 2025
The Sterling Bay development company has withdrawn its request to rezone the Heritage Square site for a luxury high-rise with lab space, apartments, and retail. The project was opposed by many Hayti residents who demanded more input and feared a repeat of devastating 'urban renewal' policies in the 1960s. The site at 606 Fayetteville Street, also 401 East Lakewood Avenue, is currently a vacant shopping mall. Durham’s development options for Heritage Square and other sites are restricted by state laws, including Umstead Act, a ban on rent control, and various limits on zoning policy.
On Aug. 5, the advocacy group Hayti Reborn said in a statement, “We’ve said it before, and we’ll keep saying it: Hayti is not opposed to development. We’re opposed to any development that excludes, exploits, or erases us” [1]. In an interview with ABC11, Rev. Julian Pridgen, pastor at St. Mark AME Zion Church, sounded a similar note. He said, "It is just difficult for me to accept rezoning this property for more luxury apartments when we have homeless people sleeping on our front porch" [2].
Sterling Bay initially wanted a ‘by-right’ project, which would not need council approval. Plans for building taller than 175 feet led to the need for a rezoning request [3]. The council would have likely approved the request had the company had not withdrawn it. Annexation and rezoning requests by developers often result in a 4-3 split. Javiera Caballero, mayor pro tempore Mark-Antony Middleton, Carl Rist, and mayor Leonardo Williams almost always vote yes. Nate Baker, Chelsea Cook, and DeDreana Freeman are less favorable to developer requests, but still vote in favor around two-thirds of the time [4].
Durham city council annexation and rezoning votes in 2024
From the viewpoint of the council majority, approving requests ensures that developers invest millions in new housing. They sometimes acknowledge the projects can promote sprawl, displace low-income residents, and degrade the environment, but feel compelled to approve them. Their reasoning is that if denied, developers can build less desirable by-right projects anyway. This position is often reinforced by campaign donations from real estate and construction interests. For politicians who oppose the requests, like former councilwoman Dr. Monique Holsey-Hyman, developers can prove to be formidable enemies [5].
The council minority is less resigned to a future of unaffordable, unsustainable sprawl. Baker, Cook, and Freeman vote to reject about one-third of developer requests. Their ‘no’ votes are a strategic tool to pressure developers into volunteering benefits such as affordable housing. If developers don't offer enough, the council minority can withhold votes. Since the three-member group does not currently have the votes to block requests, Durham approves almost all annexations and rezonings.
Several North Carolina towns like Chapel Hill, Davidson, and Manteo use a tool called inclusionary zoning to require affordable housing on new development projects. Chapel Hill’s ordinance requires new projects with five or more housing units for sale (not for rent) to make 10 to 15 percent of them affordable at 65 to 80 percent AMI.
Durham has not enacted inclusionary zoning, so the council negotiates benefits through annexation and rezoning hearings. The city cannot formally demand anything but developers can volunteer benefits like affordable housing to win a vote [6]. From the perspective of the council minority, their job is to create an environment where developers voluntarily offer as much as possible. This is precisely why Baker, Cook, and Freeman don’t automatically approve all requests. If approvals are guaranteed, developers have no incentive to offer anything. On the other hand, developers retain the right to withdraw annexation and rezoning requests, which limits the council's leverage. Sterling Bay may have withdrawn to wait for the new Universal Development Ordinance (UDO) to come into effect. Under the new upzoning rules, the company would get almost everything it wants without the need for political approval.
In 2022, Sterling Bay paid $62 million for the 10-acre Heritage Square site. Since the company owns the land, it's intuitive that Durham has only limited control over the land's usage. Yet, even when the city owns the land for a project, the council still finds itself pressured to rely on the private sector.
In August 2024, the city council selected the Peebles Corporation to redevelop the former police headquarters at 505 West Chapel Hill Street. Since the city owns the land, it was able to bypass the state’s rent control ban (GS 42‑14.1). Durham negotiated with Peebles to require the company to choose between more affordable units or a six percent cap on annual rent increases. The project proposed 380 apartments, with about 90 affordable units. Caballero and Rist joined the council minority in the effort to secure this form of rent control [7]. Months later, due to changes in market conditions, Peebles increased its request for public subsidies to $78 million. In June 2025, the city was forced to end talks with the developer and start from scratch [8].
Could Durham cut out the developer, construct new housing, own the building, and charge below-market rents without a means test? For now, such a project would be legal, so long as no funding came from the state or federal level. If money were no object, Durham could buy Heritage Square, build a high-rise with hundreds of apartment units, and charge $750 per month rent to anyone willing to pay with a preference for Hayti residents.
Legal barriers appear when state or federal funding is involved. Since 2017, the Durham Board of Education has sought to build affordable housing for its teachers and staff. The project requires an exemption from the Umstead Act (GS 66-58), a 1939 law that prohibits the state government from operating businesses that compete with the private sector. The Durham Board of Education is part of local government, but they appear to need the Umstead waiver due to state funding for public schools. For eight years, the Republican-led General Assembly has repeatedly denied the request. The GOP position is that a waiver would erode the law [9]. They are right. If the school board built housing and rented to cafeteria workers at below-market rents, it would be ‘stealing’ a customer from private landlords (if the cafeteria worker was able to pay market rent).
While the Umstead Act blocks state funding for many kinds of public housing, North Carolina's 1987 rent control ban safeguards the profits gained from private rental housing. The law was introduced by Democratic state senator Dan Blue, who remains in office. If GS 42‑14.1 were repealed, Durham could have explicitly conditioned the Heritage Square rezoning on rent control for 20 percent of the units at 60 percent area median income. In 2023, Democratic state senator Lisa Grafstein introduced Senate Bill 225 to legalize rent control. The proposal didn’t make it out of a Republican-led committee [10].
Sterling Bay’s withdrawal of its rezoning petition is Durham's latest divisive episode over development policy. The city council remains divided 4-3 on the use of annexation and rezoning powers to plan the city’s future. The local disagreements are bounded by state laws such as the Umstead Act and the rent control ban that hamper efforts by local government to solve the housing affordability crisis. However, cities and counties in North Carolina do have the legal right to build rent controlled housing on city-owned land. There would be political and financial obstacles in the way of those projects, but not legal ones.
The Hayti district of Durham was founded after the Civil War by freed slaves working in the tobacco industry. Residents named their community after Haiti, the Black republic born from history’s only successful slave revolt. The choice must have unsettled the tobacco company owners.
By the early 20th century, Hayti had developed a robust, self-sufficient economy. The district was home hundreds of businesses, including the NC Mutual Life Insurance Company, which was once the richest Black-owned business in the world. The names of the company’s founders, Merrick, Moore, and Spaulding, are common around Durham as the names for streets, schools, and other landmarks. The major institutions of Hayti included North Carolina Central University, Lincoln Hospital, Mechanics and Farmers Bank, Warren Library, Tubman YWCA, St. Joseph AME Church, and White Rock Baptist Church.
In 1935, the federal government ‘redlined’ Hayti. This decision by the Home Owners’ Loan Corporation led banks to systematically deny mortgages and loans to Black homeowners and businesspeople in Hayti. The lack of credit contributed to poverty that was then used to justify the community's destruction.
Durham labelled Hayti as “blighted” in 1958. Federal laws and funding were then used to demolish about 4,000 houses and 500 businesses. Across a 200-acre area, about 95 percent of buildings were destroyed. Over the course of a 14 year period, the Black population in the area was reduced by half. By 1974, the NC-147 was routed through the heart of Hayti, physically carving it in two.
The Heritage Square shopping mall was built in 1985. The vacant shops look out at Lakewood Street. Behind the mall is the Durham Freeway.
Work Cited
Hayti Reborn. (2025, August 5). “Last Night at the Durham City Council meeting. . .” Facebook. https://www.facebook.com/share/p/1CAJHRfSfm/
Developer pulls request to rezone, build major project in Durham’s Hayti district. (2025, August 4). ABC11. https://abc11.com/post/hayti-district-durham-city-council-vote-rezoning-request-historic-area/17429773/
Developer pulls controversial Heritage Square rezoning. (2025, August 5). Indyweek. https://indyweek.com/news/durham/durham-heritage-square-hayti-withdrawn/
How Durham City Council voted on development in 2024. (2024, December 17). Bull City Public Investigators. https://bcpi.substack.com/p/how-durham-city-council-voted-on
How to destroy a councilwoman: The attack on Dr. Monique Holsey-Hyman. (2024, June 22). Durham Dispatch. https://www.durhamdispatch.com/post/how-to-destroy-a-councilwoman-the-attack-on-dr-holsey-hyman
What conditions can be included in conditional zoning? (2021, November 11). Coates’ Canons NC Local Government Law. https://canons.sog.unc.edu/2021/11/what-conditions-can-be-included-in-conditional-zoning/
Durham City Council seeks rent control as old Police HQ redeveloped. (2024, September 1). Durham Dispatch. https://www.durhamdispatch.com/post/durham-city-council-seeks-rent-control-as-old-police-hq-redeveloped
Durham drops developer but remains undecided about future of police building. (2025, June 6). News and Observer. https://www.newsobserver.com/news/local/counties/durham-county/article307657741.html
Durham leaders hope 2024 will be different for local workforce housing legislation. (2024, May 15). NC Newsline. https://ncnewsline.com/2024/05/15/durham-leaders-hope-2024-will-be-different-for-local-workforce-housing-legislation/
Raleigh City Council members throw support behind rent control bill. (2023, May 17). Indyweek. https://indyweek.com/news/wake/raleigh-city-council-members-throw-support-behind-rent-control-bill/