This study investigates the effect of phase change materials (PCM) on the properties of modified potato starch binders and hemp shive-based bio-composites, emphasizing their potential for sustainable construction applications. PCM-modified binders have shown reduced viscosity during gelatinization, enhancing their workability and uniformity during processing. A microstructural analysis reveals that PCM addition results in a denser and more cohesive binder network, leading to improved adhesion and reduced porosity. A thermal analysis demonstrates a shift to higher decomposition temperatures and a linear increase in specific heat capacity within the PCM phase-change range (20–30 °C), significantly enhancing the thermal storage capacity of the bio-composites. PCM addition improves compressive strength by up to twice, with optimal performance achieved at 8% PCM additive content. The prolonged cooling time, up to three times longer in bio-composites with PCM additive, highlights their effectiveness in thermal regulation. Additionally, bio-composites with a PCM additive exhibits increased bulk density and reduced water swelling, improving dimensional stability. These findings underline the dual benefits of enhanced thermal and mechanical performance in bio-composites with a PCM additive, making them a viable alternative to conventional building materials.