New Hampshire’s critical housing shortage has emerged as the No. 1 impediment to state economic growth, and the legislative session could end with no substantial progress on the issue.
In Concord, there is broad agreement that housing is a serious problem. There is little agreement on solutions.
Paralyzed by a widespread reluctance to place legal constraints on local governments, legislators have killed or watered down bills drafted to address the primary cause of the shortage: local planning and zoning ordinances.
Senate Bill 400, intended to be the major housing reform bill of the year, never offered the sort of sweeping changes that would fix the local regulatory problem. But the most significant changes it did offer were removed last week by the House Municipal and County Government Committee.
The committee even added language designed to exempt suburban and rural communities from the state’s current mandate to allow housing for lower-income families.
This follows the Legislature’s rejection of previous bills to prohibit excessive minimum lot sizes and allow small multi-family housing (up to four units) in places served by municipal water and sewer.
Deference to local governments has not been the only obstacle. The House Municipal and County Government Committee removed from SB 400 a state program to reward communities that allow more housing.
In the bill’s proposed New Hampshire Housing Champion Certification program, municipalities that adopt ordinances to promote new housing development would be eligible for increased state infrastructure funding.
An absence of a substantial legislative fix would leave Gov. Chris Sununu’s proposed InvestNH Housing Fund as the only statewide plan. The governor has been a strong and passionate leader on the housing issue. Working within his authority to manage COVID relief money, he’s proposed spending $100 million in federal American Rescue Plan Act (ARPA) funds to create incentives for new housing development.
That effort was stalled in the Executive Council after objections from affordable housing advocates that the money wasn’t reserved for below-market developments.
This obsession with steering the housing market toward lower-priced units via government intervention is yet another factor that has contributed to the state’s critical shortage.
Developers need to make a return on their investment. When government insists that a portion of a development be sold or rented at below-market rates, that discourages new construction. In New Hampshire, town boards even use “workforce housing” quotas to kill projects they don’t want, as they know that these quotas can make projects unprofitable.
The governor’s plan would allocate $60 million to developers to encourage multi-family housing projects, $30 million to municipalities to encourage the issuance of new housing permits, $5 million to municipalities to study improvements to local planning and zoning ordinances, and $5 million for the demolition of vacant or dilapidated buildings.
The money to municipalities is directed at overcoming real obstacles by changing the incentives local boards have. Right now there is very little incentive to approve new projects, largely because of vocal opposition fueled by misinformation about the impacts of new housing on local communities. These municipal-directed dollars would offer incentives to move town boards in the right direction.
The seed money for new development would not work the same way. Developers already have every incentive in the world to build, especially in the current market. Developer financing is not a major obstacle to new housing development. Municipal ordinances are.
The $60 million could cover some lost profits of developments with below-market-rate units. But once that subsidy goes away, those rents will rise to market rate. In any case, subsidizing new development is not necessary, as financing for housing is readily available in the private sector.
Local ordinances are the problem, and so far, legislators have proven reluctant to approve statewide solutions that limit local authority. Creating better incentives for local governments to approve more housing would be a good option. Unless legislators change course in the next three weeks, the governor’s proposal will be the last statewide solution available this year.