There are two sides of the affordable housing equation: incomes and housing prices. While the market pushes New Hampshire incomes higher, the government prevents it from lowering home prices.
Casual news readers can get only one side of this picture because reports on wages and housing costs often focus on the wage side and ignore or downplay the home supply side.
For example, a recent report by the New Hampshire Low Income Housing Coalition cites the state’s minimum wage and shows various wage rates that would be needed to afford various types of apartments in the state.
But as we pointed out in May, it’s almost certain that no one in New Hampshire earns the $7.25 minimum wage. Market competition has driven wages much higher.
With labor scarce (the state tabulated more than 34,500 job openings in the state in May and June), the market has been pushing up compensation for years. The average weekly wage of workers covered by unemployment insurance in New Hampshire rose by 18.5% from the fourth quarter of 2019 to the fourth quarter of 2020, state data show.
The average weekly wage in the Manchester-Nashua metropolitan area was $1,565 in the fourth quarter of 2020, up $255 from the same quarter the year before.
In short, a highly competitive labor market is taking care of the income side of the housing equation. But the opposite is happening on the home price side.
As we noted last week, a severe shortage of housing is sending rents and home prices to record highs.
Rents for a two-bedroom apartment have risen 24% in the last five years, reaching a median of $1,498 this year. The median home price statewide passed $400,000 this spring. In Rockingham County, it passed $500,000.
In a free market, developers would quickly build more supply to meet the huge demand. After all, there are huge profits to be made right now selling homes. But local governments have prevented the housing market from functioning properly.
Record price increases are not a post-pandemic phenomenon. Prices have been surging for years because local government regulations have prevented developers from meeting the housing market’s sky-high demand.
Developers aren’t refusing to build. Towns and cities are refusing to let them.
Local planning and zoning restrictions have made the construction of new units both difficult and expensive. That’s true of both single-family homes and multi-family housing.
Estimates vary, but the state’s housing shortage generally is pegged at approximately 20,000 housing units. The newly formed New Hampshire Council on Housing Affordability identified a critical need for 13,500 housing units by 2024.
Eliminating this shortage will be extremely difficult, if not impossible, until local governments remove some of the unnecessary obstacles that are causing it.
Local elected officials would be more likely to remove housing obstacles if they understood that vocal anti-housing activists are not representative of most residents.
Our poll in June found that a majority of New Hampshire voters (51%-29%) supported relaxing some local government regulations to allow more rental housing, and a plurality (45%-34%) supported relaxing some local regulations to allow for more single-family housing.
Allowing the construction of much-needed housing is not unpopular. In fact, opponents of new construction are in the minority in New Hampshire. Unfortunately, they make up majorities of many local boards and of the crowds who turn up to their meetings.
That’s a major reason why the market solution we’ve seen on the income side of the housing equation has not happened on the supply side.