The case for taxpayer-subsidized commuter rail from Manchester to Boston has grown weaker, not stronger, in the seven years since the state released its major study of the proposed Capitol Corridor project. 

The New Hampshire Department of Transportation’s December, 2014, report on the Capitol Corridor project projected that a commuter rail line from Manchester to Boston would attract 3,120 riders per weekday. It predicted also that demand for commuter rail would grow as highway traffic increased in the coming years. 

In November of 2021, the department released an updated analysis of the Capitol Corridor project. It projects a peak ridership of 2,866 passengers per weekday, which is an 8% decline from the 2014 report.

That 8% decline in ridership occurs even as the number of trips per day to Manchester doubled, going from 16 in the original report to 32 in the 2021 update.

Making matters worse, as ridership falls, costs rise. 

The 2021 presentation noted that the price tag for the rail line would be higher than originally estimated due to inflation and the need for additional infrastructure beyond what was originally planned.  

The 2014 report estimated $246.5 million in capital costs, plus $10.8 million in annual operating costs. Both of those costs are expected to be significantly higher. 

Adjusted for inflation alone, the 2014 cost projections would come to $292.7 million for capital expenditures and $12.8 million for annual operating expenses.

In sum, if the Capitol Corridor project were to proceed, New Hampshire taxpayers would pay millions more dollars to transport thousands fewer people. 

Where would the money come from? The DOT’s 2021 analysis includes a breakdown of non-federal funding sources for other U.S. commuter rail operations. The largest sources of revenue are sales taxes.

The DOT projects that, if New Hampshire’s commuter rail were funded in the same way other similar operations are funded, the largest source of non-federal revenue would be a “transit sales tax” at 33%, followed by a “city/local sales tax” at 18%, a “state transportation tax” at 12%, “state other” contribution at 11%, and state “GO bonds” at 8%.

Without a sales tax, it is unclear how New Hampshire could possibly fund the construction and operation of a commuter rail line. 

As the math for the Capitol Corridor project grows worse, viable alternatives to commuter rail are expected to enter the market within just a few years, possibly before any rail project could even break ground: 

  • At the Consumer Electronics Show in Las Vegas last week, automakers announced aggressive timelines for the release of autonomous vehicles. General Motors announced it planned to make an autonomous vehicle available for the consumer market by the middle of this decade. Volvo announced that its autonomous driving system would be made available as soon as it clears safety reviews in California. 
  • Mobileye, an autonomous vehicle company owned by Intel, announced that it has teamed with China’s largest automaker to put an autonomous vehicle on the market in that country by 2024.   
  • And, to demonstrate advancements in self-driving technology, companies are already showing off autonomous race cars that compete at speeds up to 175 miles per hour.

The automobile industry is at the beginning of an autonomous vehicle revolution. It’s a safe bet that by the time any Manchester-Boston commuter rail line is completed and operational, autonomous vehicles will be available on the consumer market. 

Once the technology becomes advanced enough to allow large-scale consumer adoption, Granite Staters will have the option of taking a self-driving vehicle from their front door directly to the front door of a Boston office, restaurant, theater, ballpark or medical facility. This represents a tremendous advancement over rail, which requires obtaining transportation to a train station, taking the train along a fixed route to another station, then catching another form of transportation to one’s final destination. 

Perhaps the ultimate advantage of autonomous vehicles is that they will be made available to consumers (including as taxis and ride share vehicles, and eventually vans and buses) without the expenditure of hundreds of millions of dollars to build a new transportation system and the annual expenditure of millions more to run it.

Self-driving vehicles offer all the commuting benefits of a passenger train — the ability to work, read, or relax on the trip, rather than drive — without the taxpayer expense. Once they become widely available, the already shrinking demand for commuter rail is likely to collapse.

From an investment standpoint, it makes no sense at this moment in history to spend hundreds of millions of dollars to build and operate an increasingly obsolete, 19th-century mode of passenger transport.  

New Hampshire’s booming economy continues to fill state coffers with excess cash drawn from business taxation, with impressive numbers posted each month. But a longer look back illustrates the stunning sums businesses have contributed to the state budget in the past decade. 

From Fiscal Year 2012 through Fiscal Year 2021, business tax revenues exceeded budget projections by $649.6 million — or 100.1 percentage points. 

That is, over that time businesses gave legislators an additional $649.6 million to spend beyond what lawmakers had budgeted. 

State Fiscal Year 2022 began last July, and so far the trend continues.    

Since the start of the fiscal year in July, business tax revenues are $109.5 million (27.9%) above the prior fiscal year and $72.7 million (16.9%) above budget.

Add this to the total from FY 2012-2021, and business tax revenues have come in over budget by $722.3 million since FY 2012. 

To get an idea of just how much larger state business tax revenues are today, consider that in FY 2012, Business Profits Tax revenue from July-December totaled $140.5 million. 

Adjusted for inflation, that $140.5 million would be approximately $166 million in 2021.

Actual BPT revenues for July-December of 2021, however, were a record $381.2 million — 240.7 million (171%) higher than in 2012.

Combined BPT and BET revenues in the first six months of FY 2012 were $231.7 million. 

In the first six months of FY 2022, they were $501.8 million, a 216.5% increase.

The historical context shows that state is playing with house money, so to speak, when it comes to business tax revenues. It shows further that additional small reductions to business tax rates are not only affordable, but fully justified. 

The state has taken in nearly 3/4 of a billion dollars in unanticipated business tax revenue since 2012. Claims that tiny rate reductions will bankrupt the state or devastate essential services are laughably unfounded. 

Business tax rate reductions that began in the 2016 fiscal year did not cause business tax revenue to fall below previous levels, as critics had predicted. Then-Gov. Maggie Hassan said the rate cuts would reduce business tax revenue by $90 million. Instead, business tax revenues were $132.8 million (23.4%) above plan in FY 2016. 

From FY 2012-2021, business tax revenues came in below budget for the year only twice: in 2014 (before the start of the business tax cuts) and in 2020 (when businesses were hit by the pandemic). The huge gains in other years more than made up for those relatively small declines (2% and 13%, respectively). 

Businesses in New Hampshire have fed the state budget astonishing sums over the last decade. Yet every time anyone suggests slight reductions in corporate tax rates, advocates of higher taxes attack businesses as greedy, selfish, avaricious, even unpatriotic. 

In truth, New Hampshire employers have enabled the state’s ever growing social welfare spending, and most have remained in New Hampshire despite the lure of lower corporate tax rates in other states. They should be thanked for their contributions, not vilified. Adjusting their rates to let them keep a little more of their income would be a reasonable way to say thank you.

 

 

New Hampshire is scrambling to find enough staffed hospital beds to handle the current surge in COVID-19 patients. Suddenly, politicians on the left and the right are deeply concerned about the low number of hospital beds in the state. Which is kind of maddening because they’re the ones who created the shortage in the first place.

For decades, state laws have severely restricted the state’s hospital capacity. They still do. 

Before 2016, New Hampshire was one of many states with a Certificate of Need (CON) law that essentially required businesses to prove that a large medical equipment or facility investment was needed before it could be approved by the state. That law suppressed investment in new facilities and services. 

In 2016, the CON law was repealed, but it was replaced with laws that created additional restrictions on hospital capacity. Senate Bill 481, passed that year, added three major requirements into state law that restrict hospital competition. 

  1. RSA 151:2-g mandates that every hospital “shall operate an emergency department offering emergency services to all individuals regardless of ability to pay 24 hours every day, 7 days a week.” This law prohibits the creation of any competing hospital services that don’t also include a 24/7 emergency room. Conveniently, this law “shall not apply to any hospital licensed and operating prior to July 1, 2016, which does not operate an emergency department.” Incumbent hospitals are protected from this anti-competitive law. 
  2. RSA 151:4-a prohibits the establishment of any “ambulatory surgical center, emergency medical care center, hospital, birthing center, drop-in or walk-in care center, dialysis center, or special health care service” within 15 miles of an existing critical access hospital if the new facility “will have a material adverse impact” on the incumbent hospital. That is, if it would hurt the hospital’s business, it is prohibited from state licensure. A 15-mile radius might sound small, but it equals 706.9 square miles. 
  3. RSA 151:2-f mandates that every hospital, infirmary, “outpatient rehabilitation clinic, ambulatory surgical center, hospice, emergency medical care center, drop-in or walk-in care center, dialysis center, birthing center, or other entity where health care associated with illness, injury, deformity, infirmity, or other physical disability is provided” accept all forms of payment. This law mandates that medical facilities accept Medicare, Medicaid and private insurance — which means that it bans any facility designed to cut costs by accepting only cash payment. This inflates the cost of services and eliminates competition. 

In addition, RSA 151:2 VI (a.) imposes a moratorium on new beds for nursing and rehab facilities. It states that “there shall be no increase in licensed capacity of, any nursing home, skilled nursing facility, intermediate care facility, or rehabilitation facility, including rehabilitation hospitals and facilities offering comprehensive rehabilitation services.”

State laws ensure that it is much easier for incumbent hospitals and other medical facilities to expand than for new competitors to enter the New Hampshire market. The results are exactly what one would expect. 

Since 1980, New Hampshire’s population has increased by 49.6%. But in that time, only one new acute care hospital, Parkland Medical Center in Derry, has been built, Greg Moore, state director of Americans for Prosperity-NH has pointed out.

The current COVID-induced crunch on hospital capacity has many causes. The media have reported, accurately, that a surge in patients combined with a staffing shortage has put severe strain on the system. 

But that system entered the COVID-19 pandemic with a capacity already artificially constrained by anti-competitive state laws. Going forward, politicians who insist that New Hampshire needs to improve its hospital bed capacity can start by removing unnecessary barriers that make it extremely difficult for new competitors to enter the New Hampshire market. 

A week after New Hampshire placed first in the Fraser Institute’s Economic Freedom in North America report, the state scored a first place finish in another prestigious freedom ranking, the Cato Institute’s 2021 Freedom in the 50 States report. 

In Cato’s report (written by Will Ruger and Jason Sorens), New Hampshire ranked third in economic freedom, second in personal freedom, and first in overall freedom. 

In economic freedom, New Hampshire ranked in the top five in state tax burden, government consumption and lawsuit freedom, but was far behind in numerous other metrics, including local tax burden (43), land use freedom (40), labor market freedom (27), health insurance freedom (19), cable and telecommunications freedom (20), and state and local assets (43).

In overall regulatory freedom, New Hampshire placed near the middle of the states at 23rd, showing that the “Live free or die” state has areas where government imposes significant economic constraints on citizens. 

In personal freedom, New Hampshire performed better than in economic freedom, ranking second in gun rights, fifth in education freedom, and fourth in asset forfeiture. The state finished in the top ten in travel freedom, mala prohibita (acts that are crimes in statute but not common law, such as firework and raw milk bans), and incarcerations and arrests for victimless crimes. 

Low rankings in personal freedom included gambling freedom (41), tobacco freedom (21), alcohol freedom (38), and campaign finance (45). 

As in the Fraser Institute’s Economic Freedom in North America, New Hampshire holds its top ranking by a narrow margin. 

The top five states for overall freedom:

  1. New Hampshire
  2. Florida
  3. Nevada
  4. Tennessee
  5. South Dakota

The difference between New Hampshire’s and Florida’s scores was just four hundredths of a percentage point (0.592 vs 0.552). 

In the Fraser Institute report, New Hampshire held its top place by one one-hundredth of a point (7.83 vs. 7.82). 

The top fives states for economic freedom in Fraser’s rankings:

  1. New Hampshire
  2. Tennessee
  3. Florida
  4. Texas
  5. Virginia

The Cato report shows how rapidly other states have been gaining on New Hampshire. Since Cato’s last ranking for 2018-19, New Hampshire ranked No. 8 for growth in overall freedom, but many of the states with which it now competes for population growth and business location posted similar or larger gains. 

Tennessee and North Carolina ranked 11th and 13th in overall freedom growth since the last report, while Kentucky ranked sixth, Connecticut fifth, Michigan fourth, Florida second and South Dakota first. 

The data are more concerning for New Hampshire when looking back at the last 20 years. Since 2000, the top fives states for freedom growth were:

  1. Florida
  2. Michigan
  3. Wisconsin
  4. Oklahoma
  5. Georgia

New Hampshire ranked 29th, well behind states that have been aggressively cutting taxes and deregulating, such as North Carolina, West Virginia, Tennessee, Texas and Arizona. 

As a state that already ranked high on overall freedom, New Hampshire has set an example with policies that have been copied by other states. But as both reports show, there are areas where New Hampshire can make significant improvements to increase personal and economic freedom. 

Making those improvements would accomplish the primary goal of maximizing individual autonomy for Granite Staters, thus living up to New Hampshire’s promise of being the “Live free or die” state. It also would improve the conditions for economic growth, which would gradually raise New Hampshire’s standard of living. 

While these back-to-back reports give Granite Staters cause to boast about our relatively high level of economic and personal freedom, they also offer a warning that this position is threatened and will not be maintained without a continued effort to remove barriers to freedom that exist at the state and local levels. 

School districts that offered less in-person instruction last year saw fewer students pass end-of-year standardized tests, a new academic study of student performance in 12 states has found. 

Pass rates declined across the board compared to prior years, but “these declines were larger in districts with less in-person instruction,” conclude researchers from Brown University, M.I.T., and the University of Nebraska at Lincoln. 

During the 2020-21 school year, passing rates in math declined by 14.2 percentage points on average, and passing rates in English Language Arts declined by 6.3 percentage points on average, in the 12 studied states (which included Massachusetts, but not New Hampshire).

However, “offering full in-person instruction rather than fully hybrid or virtual instruction reduces test score losses in math by 10.1 percentage points (on the base of 14.2 percentage points). In ELA, the loss is reduced in fully in-person settings by 3.2 percentage points.”

Moreover, academic losses in English Language Arts were more pronounced in districts with larger populations of minority students.

“Specifically, among districts with a larger share of Black and Hispanic students, districts with less in-person schooling saw a greater decline in ELA test scores than those with more in-person schooling. Although the impact of schooling mode on ELA is fairly small for districts which are majority white, it is large for those districts with a majority of students of color. Meanwhile, the impact of access to in-person learning had a similar effect on math scores for all districts, regardless of their racial composition.”

The results support the conclusion that in-person instruction produces larger learning gains, on average, than hybrid and remote instruction, the authors write.

“…our analyses demonstrate that virtual or distanced schooling modes cannot support student learning in the same way as in-person schooling. As such, educational impacts of schooling mode on students’ learning outcomes should be a critical factor in policy responses to future pandemics or other large-scale schooling disruptions,” they conclude.

The authors are Emily Oster and Clare Halloran of Brown University, James Okun of M.I.T., and Rebecca jack of the University of Nebraska at Lincoln.

The study is not the first to find that remote and hybrid instruction produced large drops in academic performance. 

One from the Netherlands in April found that “students made little or no progress while learning from home.”

A meta-analysis this fall of 11 studies of COVID-related school closures on student performance found “a negative effect of school closures on student achievement, specifically in younger students and students from families with low socioeconomic status.”

These findings suggest that school closures probably were a significant factor in the drop in student test scores in New Hampshire last year. New Hampshire scores in math and reading dropped by percentages similar to those in other states. 

New Hampshire has once again retained its status as the most economically-free state in North America in this year’s Economic Freedom in North America report published by the Fraser Institute, an independent, non-partisan Canadian public policy think tank.

In both the continental and in-country rankings, New Hampshire finished first. Within the United States, Tennessee leapt past Florida to pull within a fraction of a point of the Granite State, showing how vulnerable New Hampshire’s position has become.

New Hampshire scored 7.83 out of 10 in this year’s report (down from 7.84 last year), beating out second-place Tennessee (7.82).

Economic freedom — the ability of individuals to make their own economic decisions about what to buy, where to work and whether to start a business — is fundamental to prosperity.

“When governments allow markets to decide what’s produced, how it’s produced and how much is produced, citizens enjoy greater levels of economic freedom,” said Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute and co-author of this year’s Economic Freedom of North America report, which measures government spending, taxation and labor market restrictions using data from 2019, the latest year of available comparable data.

“New Hampshire ranks as the freest state in the union again this year, but just barely,” Josiah Bartlett Center for Public Policy President Andrew Cline said. “As other states aggressively liberalize their economies, New Hampshire risks falling behind.”

Tennessee, ranked the 5th most economically free U.S. state in last year’s report, shot to within one one-hundredth of a point of tying New Hampshire for first place this year, Cline pointed out. The rankings are based on 2019 data. Tennessee’s interest and dividends tax was eliminated on Jan. 1 of this year, which will give it an advantage over New Hampshire in upcoming rankings, as our I&D tax lingers for five years until fully phased out.

Though New Hampshire leads all of its New England neighbors in economic freedom, Southern states are catching up by cutting taxes, spending and regulations. Rounding out the top five freest states are Florida (3rd), Texas (4th) and Virginia (5th).

At the other end of the index, New York (50th) is once again the least-free state followed by California (49th), Vermont (48th), West Virginia (47th) and New Mexico (46th). New York ranked last in the report for the seventh year in a row.

The other New England states are ranked as follows: Massachusetts (19th), Connecticut (21st), Rhode Island (41st), Maine (43rd), and Vermont (48th).

Across North America, the least-free quartile of jurisdictions had an average per- capita income 1.0 percent below the national average compared to 7.5 percent above the national average for the most-free quartile.

“Hundreds of independent studies have produced overwhelming evidence that higher levels of economic freedom are associated with more opportunity, more prosperity, greater economic growth, more investment and more jobs,” said Dean Stansel, report co-author and economist at Southern Methodist University.

The report measures the ability of individuals to act in the economic sphere free of undue restrictions by ranking states on 10 variables in three areas: 1. Government Spending; 2. Taxes; and 3. Labor Market Regulation.

The Economic Freedom of North America report (also co-authored by José Torra, the head of research at the Mexico City-based Caminos de la Libertad) is an offshoot of the Fraser Institute’s Economic Freedom of the World index, the result of more than a quarter century of work by more than 60 scholars, including three Nobel laureates.

Detailed tables for each country and subnational jurisdiction can be found at www.fraserinstitute.org.

Or you can read the full report here: EFNA-2021-US-POST

On September 28, Virginia gubernatorial candidate Terry McAuliffe said in a debate, “I’m not going to let parents come into schools and actually take books out and make their own decision. I don’t think parents should be telling schools what they should teach.”

Before that debate, McAuliffe had led Republican opponent Glenn Youngkin in every poll but one. The day after the debate, the Youngkin campaign released its first ad featuring McAuliffe’s quote. A month later, Youngkin was leading in all polls. He won, with parental authority in education being a defining issue of the race. 

The issue wasn’t new for Virginians. In his term as governor, McAuliffe had vetoed a bill to alert parents when sexually explicit material was being taught to their children. This year, he supported COVID-19 vaccination and mask mandates for all schools. 

The issue wasn’t primarily about books or education theory. It was about the nature of public school governance. 

Broadly speaking, some people believe public schools should be more democratic than bureaucratic in nature. That is, they largely should reflect the views of local families and taxpayers and be responsive to parents. Another camp generally views public schools as “government schools.” That is, they exist as a sort of government bureaucracy, the purpose of which is to disseminate whatever content the experts in the field determine is best. 

McAuliffe expressed the latter view, and he paid for it. 

In practice, public schools tend to be a mix of both views, and the question is how far do they tip to one side or the other. McAuliffe refused to acknowledge that a balance exists, and he picked the wrong side of the scale.

A huge amount of trust is necessary for public education to work. When parents put their kids on the bus or drop them at the school door, they are exercising tremendous trust, built in part on the understanding that they have some say in what happens inside the building. If they are told otherwise, trust immediately breaks down. 

A USA Today/Suffolk poll in October found that 50% of voters said parents should have more of an influence over school curricula, while 39% said school boards should. Independents (57%) and Republicans (79%) favored parents, but Democrats favored school boards 70%-16%.

According to exit polls, Youngkin won parents of school-aged children 52%-48%. Just the year before, Joe Biden won that same group of Virginians by 10 points. (Biden also won non-parents by 15 points, and Youngkin won them by 50%-49%.)

Polls before the election showed education surging to become a top 3 issue for voters in the final month. It wasn’t the only reason Youngkin won. But education probably tipped the election to Youngkin — because he expressed the view that the “public” in “public schools” meant citizens, not government. 

Youngkin’s victory was not just a revolt of parents. Americans who don’t have children in public schools have developed a sense of dissatisfaction with public education too. There’s a broad sense of powerlessness that comes through in public polling going back decades. 

In Gallup polling, the public hasn’t reported having a “great deal” or “quite a lot” of confidence in public schools since 1987. Confidence in public schools has hovered in the mid-to-low 30s since 2010. Most Americans (54%) this year say they’re dissatisfied with what’s taught in K-12 public schools. 

A FOX News poll last month found that 73% of Americans said they were very concerned about what was being taught in public schools. Again, that’s not new. The figure was 85% in a FOX poll in 2013.

The sense of powerlessness against the bureaucracy was reflected in polling about school closures during COVID, when parents were given limited options. In March, when roughly a third of students had no access to in-person schooling, 79% of parents said they wanted school to be in person. 

That feeling of powerlessness is a big reason why school choice polls so well. Parents educational want options, and the general public agrees they should have options. 

In October, already broad support for school choice rose as parents’ role in education became a national political issue. The national tracking poll by EdChoice found that 70% of Americans support Education Savings Accounts, and 80% of parents do. 

Current controversies such as COVID-19 closures, mask mandates and Critical Race Theory did not create the demand that public schools be more responsive to parental and community concerns. That demand was already there. They made it stronger and broader.

The harder politicians work to keep parents (and citizens) on the outside of the system, the less parents and citizens will trust the system. Lower trust fuels greater demands for alternatives. Politicians who think they’re defending public schools by building walls to keep parents and citizens out are really undermining them by alienating the people they are intended to serve — and who have the power of the vote. 

Energy prices are spiking as 2021 comes to a close and winter creeps in. Rising prices for gasoline, natural gas, home heating oil and propane are going to make this an expensive winter in New Hampshire. 

The U.S. Energy Information Administration (EIA) has predicted that natural gas prices will be 27% higher this winter, home heating oil 33% higher, and propane 49% higher. 

The Consumer Energy Alliance projects that these higher prices will cause Americans to spend $13.6 billion more for energy this year. 

Why? Demand for energy is rising faster than the supply of fuel. The economic slowdown caused by the pandemic prompted oil and gas companies to scale back production. The surprising speed of the economic recovery has sent demand surging. 

“A lot less product is available to meet this now rapid growth we’re seeing,” Exxon Mobil Corp. Chief Executive Darren Woods said last month, The Wall Street Journal reported. 

The International Energy Agency reported in its World Energy Outlook last month that the world is underinvesting in energy production.

It reiterated that point in its October Oil Market Report, writing that “the world is not investing enough to meet its future energy needs. Transition-related spending is gradually picking up, but remains far short of what is required to meet the rising demand for energy services in a sustainable way. At the same time, the amount being spent on oil appears to be geared towards a world of stagnant or falling demand.”

In addition, reduced natural gas production has sent natural gas prices so high that industries around the world are switching to dirtier-burning oil and coal, the IEA reported. 

Every environmental activist group that successfully blocked a fracking project or a new natural gas pipeline, or successfully pressured a company or government to reduce natural gas production, can take partial credit for increased oil and coal emissions this year. Well done.

President Biden’s changing positions on energy production offer a nice illustration of how environmental rhetoric collides with economic reality. 

Caving to pressure from radical environmental groups, candidate Biden promised to ban new oil and gas drilling on federal land and to focus on rapidly transitioning away from fossil fuels. But the Biden Administration is actually approving new leases. And the president has responded to surging fossil fuel prices by urging G20 countries to boost production and calling on OPEC and Russia to produce more oil. 

This is in direct conflict with climate pledges. The IEA calculates that global oil and gas investment is down roughly 26% this year — and will need to stay there for years, before dropping further, to reach the goals of the Paris Accord, which Biden in January committed the United States to rejoining.

Major investments are being made in renewable energy production, which is great. But that sector still accounts for only 12% of U.S. energy production, according to the EIA. Petroleum accounts for 32% and natural gas for 36%. 

If energy demand were shrinking, then investments in additional oil, gas or nuclear production would be of questionable value. But demand is growing and is projected to continue growing both domestically and globally. Since neither renewable nor nuclear power is ready to fill the country’s immediate and short-term energy needs, it falls to fossil fuels to plug the gap.

Nuclear should be a bigger part of this mix. Again, we can thank environmental activists for playing a large role in limiting the growth of the nuclear power industry.

One day, humans might fill all of their energy needs without burning things. But it is not this day. And it won’t be a day that arrives anytime soon. 

As humans strive to achieve that laudable goal, civilization will continue to require power. Generating that power will require fuel that can be converted to reliable, affordable energy now, not 50 years from now. 

Pretending that this isn’t true will not help anyone. It will only hurt people as it causes either ongoing price increases or energy shortages, or both.  

The Josiah Bartlett Center’s new study of local residential land use regulations provides a first-ever ranking of N.H. municipalities’ local housing restrictions.

The study ranks N.H. municipalities by the inelasticity of their housing supply, that is, by how much local conditions, especially land-use regulations, restrict the ability of the private sector to provide new housing in response to rising demand. 

Excessive residential land use restrictions have sharply restricted New Hampshire’s housing supply, our study finds. That supply shortage has led to dramatically higher housing prices, increased income segregation, larger gaps in educational performance, slower economic growth, and slower population growth.

The ten municipalities where housing is most restricted are:

 

1.     New Castle

2.     Rye

3.     Portsmouth

4.     Newington

5.     New London

6.     Hanover

7.     North Hampton

8.     Moultonboro

9.     Hampton Falls

10.  Waterville Valley

 

The ten municipalities where housing is least restricted are:

  1. Ellsworth
  2. Hart’s Location
  3. Hale’s Location
  4. Stratford
  5. Northumberland
  6. Berlin
  7. Colebrook
  8. Stewartstown
  9. Warren
  10. Clarksville

Why have house prices and rents increased so much in New Hampshire? A new Josiah Bartlett Center for Public Policy study finds that residential land use regulations, mostly at the local level, are a major cause.

Examples of local regulations that prevent people from building homes include: minimum lot sizes, frontages and setbacks, single-family-only requirements, bureaucratic requirements for accessory dwelling units, maximum heights and densities, minimum parking requirements, historic and village district requirements, municipal land ownership, subdivision regulations, impact fees, and simply the unwillingness of zoning boards to issue variances.

Widely available measures show that New Hampshire is one of the most restrictive states in the country for residential development. By suppressing building, land-use regulations drive up the price of housing as demand rises. Removing or relaxing these regulations would allow prices to rise more gradually.

Consequences

The consequences of housing scarcity for our state are significant. This study finds that residential land use regulations are associated with growing socioeconomic segregation and slowing population growth.

As housing becomes more expensive, fewer people are moving to New Hampshire, especially to those towns that are most expensive. Those who stay are disproportionately wealthy and college-educated, while middle- and lower-income families leave because they cannot find affordable housing.

Costly housing in towns with better schools also limits families’ access to educational opportunity. Finally, the sprawl caused by anti-density policies such as minimum lot sizes increases drive times and road maintenance costs and worsens air and water quality.

Causes

New Hampshire municipalities have enacted these restrictions on growth for several reasons. First, there is a widespread perception that allowing home-building would increase the number of children in local schools. However, the other side of the home-building equation is that new home construction leads to substantial growth in the tax base, relieving the tax burden on the rest of the town. Moreover, school populations are falling across most of the state, and so adding more children would not necessarily require more spending. So the “fiscal” motivation for restricting home-building does not make much sense today.

Rent-seeking

The main reason for growing development restrictions seems to be “rent-seeking.” In other words, some homeowners in the towns with the biggest housing demand see zoning as a way of boosting their wealth by artificially limiting the supply of housing.

This process may have gotten out of hand now, though, as pandemic-driven housing demand has well outstripped supply. Many Granite Staters have seen their homes rise in value, but this rise may be merely notional, because it is now so difficult to find a new house after selling the old one. The rapid aging of the New Hampshire population makes reform to relax local planning and zoning regulations all the more crucial.

As the rent-seeking explanation would predict, the places with the most stringent rules on building new homes tend to be the ones that historically saw big growth in housing demand. Portsmouth, Hanover, and some of their surrounding towns are among the most regulated towns in the state, along with a few Lakes Region and White Mountains locations. Some of the wealthier suburbs of Manchester and Nashua – Hollis, Windham, and Bedford – are also near the top of the list.

By contrast, the inland Appalachian belt of New Hampshire, running from western Cheshire County to the North Country, is the least regulated part of the state. There’s a definite trend in the historical data, whereby towns that saw large growth in the 1960s and 1970s enacted restrictions that then choked off growth in the later 1980s and 1990s. By contrast, population density does not seem to correlate with increases in regulatory stringency, even though it may have been a motivation for towns to adopt zoning to begin with. Some of the towns with the strictest rules have low densities and very little industrial activity, like Hanover and Lyme.

Another correlation observed in the data finds that towns that lie nearby other towns that increased their restrictions on housing were themselves more likely to enact new restrictions on housing. In other words, municipal land-use regulation in New Hampshire looks like a kind of “arms race.” When one town tightens, others are also provoked to tighten so that they don’t get a disproportionate share of new housing construction. As a result, all towns end up with less construction and stricter regulations than they really want.

Policy solutions

To get out of the arms race and make decent homes affordable to Granite Staters of all ages and walks of life, policymakers and citizens have to understand how local land use regulations affect the supply and price of housing. Better policies will come from a better understanding of the downstream effects of these regulations.

In addition to showing how land use regulations affect housing supply and prices, this study suggests several state- and local-level policy changes that could provide relief.

At the local level, zoning ordinances could be revised to allow homes to be built on smaller lot sizes, with smaller frontages, and with smaller setbacks. Building permit caps could be removed. Multi-family housing options, such as duplexes and triplexes, could be allowed in additional locations. In urban areas, minimum parking and maximum height restrictions could be eased.

At the state level, the state could enact a regulatory takings compensation law, so that municipal governments would have to compensate landowners for new regulations that substantially take away the value of their property. The state could directly preempt the most egregious forms of exclusionary zoning, such as minimum lot sizes above a certain level and building permit caps. The state could also authorize towns to decentralize planning authority to neighborhood or even block levels. At such a small level, residents are unlikely to adopt rent-seeking forms of zoning, because builders and home-buyers could easily go elsewhere. State government could authorize municipal land-use compacts that would allow neighboring municipalities to offer multi-community planning, where the impacts of regulation on the whole commuting area could be considered. Finally, an open-enrollment law for public school choice would at least ameliorate one of the negative consequences of exclusionary zoning for middle- and low-income families: being locked out of good schools.

Top Ten Municipalities Where Housing Is Most Restricted

The study ranks N.H. municipalities by the inelasticity of their housing supply, that is, by how much local conditions, especially building and land-use regulations, restrict the ability to build new housing in response to rising demand. The ten most inelastic, regulated municipalities are:

  1. New Castle
  2. Rye
  3. Portsmouth
  4. Newington
  5. New London
  6. Hanover
  7. North Hampton
  8. Moultonboro
  9. Hampton Falls
  10. Waterville Valley

Download a copy of the full study here: Residential Land Use Regulations in New Hampshire Report

If you missed the event, the full video is posted on our YouTube channel here.

NOTE:

The Center for Ethics in Society and the Josiah Bartlett Center for Public Policy have been gratified by the overwhelmingly positive response to the study, “Residential Land Use Regulations in New Hampshire: Causes and Consequences,” authored by Center for Ethics Director Jason Sorens and published by the Josiah Bartlett Center for Public Policy. However, in referring to this study in some contexts, we created some confusion by using the term “building regulations” instead of “land-use regulations.” In using the terminology of “building regulations” we did not intend to designate “building codes,” but rather regulations governing where and how housing is to be built on land in a given community. We do apologize for any confusion we may have caused.
 
To clarify, the overwhelming majority of the costs of developing new housing are due to land-use regulations found in zoning ordinances and the decisions of planning and zoning boards to approve or not approve projects. All the research suggests that life safety codes add only a small amount, in percentage terms, to the overall cost of housing. Accordingly, we have revised the title of the study to refer to “land use” rather than “building” regulations. Land use regulations are restricting what can be built where, and driving up the cost of housing.