Median home price hitting $500k signals urgent need for land-use reform

, , ,

New Hampshire’s median home price hit an unprecedented half-million dollars in March, just two years after passing $400,000 for the first time, underscoring the urgency of making changes to local land-use regulations. 

The change represents “a 16 percent drop in affordability from a year ago,” according to the New Hampshire Association of Realtors (NHAR) report.

For context, the state housing affordability index was 59 in March. In other words, the median household income in New Hampshire ($90,845) is a mere 59% of what one needs to qualify for the median-priced home at current interest rates.

Such poor affordability prospects haven’t always plagued Granite Staters. According to NHAR, the affordability index hit upwards of 150 in March 2017 and even reached a high of 200 in 2013. 

The culprit, as the NHAR concluded (and many Granite Staters know by now), is a “lack of New Hampshire housing inventory….” 

NHAR President Joanie McIntire emphasized the point. 

“The problem remains the shortage of available housing that is continuing to make homeownership more difficult than ever for those workers needed to help an economy thrive,” she said.

There is no doubt that New Hampshire’s supply of homes is nowhere close to meeting residents’ demand for homes. In a functioning market, when prices signal such huge demand builders would be expected to increase supply rapidly.

New Hampshire unfortunately doesn’t have a functioning market thanks to a thick layer of local government regulations. 

Exclusionary zoning—the use of zoning ordinances to exclude certain types of land uses from zoning districts—has run rampant in New Hampshire municipalities for decades, choking the supply of housing throughout the state.

Since our 2021 study identifying zoning as a major cause of the state’s housing shortage, there’s been a growing consensus that the current land-use landscape in the Granite State has to change. 

As if to emphasize our analysis of the New Hampshire market, the Fall/Winter 2023 edition of the Journal of Housing and Community Development last December published this summary of the link between restrictive zoning and housing affordability: 

Restrictive zoning codes contribute to socioeconomic divisions, worsen the housing affordability crisis, and artificially inflate housing prices. The insufficient housing supply further emphasizes the importance of exploring opportunities for increasing housing stock through land use reform.

The correlation between states’ median home prices and their land-use freedom is particularly damning. Among the 25 states with the lowest median home prices, according to Redfin and Bankrate 2023 data, 20 of them also rank in the top 25 for most land-use freedom, according to the Cato Institute’s Freedom in the 50 States 2023. 

Conversely, of the 25 states with the highest median home prices, 20 of them are found in the bottom 25 for the least amount of land-use freedom. 

In these rankings, New Hampshire has the 14th-highest median home price and is the 12th-most restrictive state when it comes to land-use freedom.

The relationship, reflected in numerous studies, is clear: Less land-use freedom shrinks the supply of housing, which leads to inflated home prices.

Another way to look at the problem is through building permits. New Hampshire publishes building permit approvals collected by the U.S. Census Bureau. These data show a sharp and sustained reduction in building permit approvals since the early 1980s, showing that the housing supply problem long predates the pandemic or the 2007–08 recession. 

From 1984–1988, more than 10,000 residential building permits (single-family and multifamily) were issued per year in the state, with the peak being 18,015 in 1986. The last time more than 5,000 residential building permits were issued in a single year was 2006—18 years ago.  

The median home price in New Hampshire cracked $200,000 for the first time in 2002. For the next two decades, home construction did not come close to meeting demand. By 2021, the median home price had doubled to $400,000. Now it’s $500,000. Despite astronomical demand for new homes, the number of residential building permits issued in 2023 was just 4,512, a decline of 271 from the year before. 

Builders make money by building and selling homes and apartments. They want to meet this demand. Too many local governments have made it too costly or difficult for them to do so. 

At this point it’s clear that relaxing local restrictions on land-use freedom in New Hampshire is critical to opening the market forces that will allow supply to meet demand. The more urgently policymakers act to lift regulatory obstacles to home construction, the more quickly builders will be able to respond to these flashing-red market signals and provide Granite Staters the housing they so desperately want. 

 

/by

How the big “HOMEnibus” housing bill would do more harm than good

, , ,

By Jason Sorens

The New Hampshire House of Representatives recently passed a couple of bills to make certain types of housing easier to build: single-family conversions to duplexes on lots with adequate sewer capacity, and detached accessory dwelling units. A more ambitious Senate bill comes up for a vote of the full chamber this Thursday, but unlike the cleaner, smaller House bills, this one has both pro-housing and anti-housing elements. 

As amended, this bill, dubbed the “HOMEnibus Act,” would do the following:

  1. Extend the existing Community Revitalization Tax Relief Incentive to cover conversions of office, industrial, and commercial uses to residential use. This is an optional program municipalities can choose to adopt. It makes it so that rehabilitation or conversion won’t incur additional property tax as a result of improvements that raise the value of a property. This incentive could result in more residential conversions, but it also reduces the property tax benefit a town receives from such conversions, which may make planning and zoning boards less likely to want to approve such developments in the first place. It’s hard to imagine that the incentive would make the housing shortage worse, but it also might not make it any better.
  2. Allow local governments that currently operate under direct democracy (towns without charters and village districts) plus Coos County to let their governing body–typically, the select board–adopt and amend zoning ordinances without a vote of the people. A vote of the people would be necessary to give the select board this power. The assumption seems to be that the people who show up on town election day are less pro-housing than select boards are. I’m unaware of direct evidence on this point. Based on evidence from Texas, Nolan Gray thinks voters are less pro-zoning than officials are. But my experience in New England suggests that the reverse might be true here, though it probably varies by town. Certainly, in places like Canaan and Dalton, the public vote requirement has stopped zoning from being adopted at all.
  3. Require planning boards to consider “alternative parking solutions” proposed by residential developers to meet on-site minimum parking requirements, and if the developer can demonstrate that these alternative solutions would meet parking demand, planning boards must accept them. Alternative solutions could include nearby off-site parking lots, agreements with ride-share companies, public transportation availability, or walkable infrastructure as designated in a master plan or zoning ordinance. This is a straightforwardly pro-housing, pro-property rights measure. It is also rather tepid, given that other states like Minnesota are proposing to abolish all on-site parking minimums statewide for all uses, but it’s better than nothing.
  4. Authorize mandatory inclusionary zoning (IZ) that would require up to 15 percent of new dwelling units be deed-restricted below-market housing provided the developer is granted a density bonus of at least 25% more units than what the base zoning allows. Unfortunately, this is an anti-housing measure, creating a type of rent control tax on new development, as Yale law professor Robert Ellickson pointed out  more than 40 years ago. Research in the Baltimore-Washington area finds that mandatory inclusionary zoning increases the cost of market-rate housing. Other peer-reviewed studies have consistently found a similar result: adopting mandatory IZ increases housing costs and distorts the market away from single-family development toward multifamily development. (However, one non-peer-reviewed study finds that moving away from mandatory to voluntary IZ does not reduce housing costs.)

The original version of the bill also had a major reform to minimum lot sizes that would have been pro-housing, but that was amended out. There is good reason to believe that the net effect of the current version of this bill would be to make housing less abundant and more costly.

Jason Sorens of Amherst is a senior research fellow at the American Institute for Economic Research.



/by

Manchester considers first housing-friendly zoning changes to come from major zoning review

, ,

Despite being the main metropolitan area in the state, the City of Manchester’s zoning ordinances are surprisingly hostile to the construction of new multifamily housing. As a review of the city’s zoning ordinances championed by former Mayor Joyce Craig continues, aldermen are considering three relatively small changes unanimously approved by the Planning Board and brought forward by new Mayor Jay Ruais. 

These proposed amendments to the city’s zoning ordinances would represent a small but important step in the long-term effort to make the city’s zoning rules more friendly to new housing development. 

“Specifically, these amendments would help to make the construction of a few types of housing easier in the city by reducing regulatory barriers and by speeding up the permitting process,” Jeff Belanger, director of Planning and Community Development, told aldermen at a recent public hearing. 

The first change would allow four-unit housing to be built on lots currently permitting three-unit housing.

“The ordinance today establishes minimum lot sizes for developing multifamily or townhouse buildings with three dwelling units and then requires additional lot area for each additional dwelling unit,” Belanger explained. “The proposed amendments would change the minimum number of units that could be built on a lot from three to four, meaning that there could be an additional dwelling unit built on the minimum size lot.”

But for these changes to have any meaningful effect, the amendments also address parking requirements, reducing the required number of parking spaces for multifamily housing from 1.5 spaces per unit to one space per unit. 

“The proposed amendments for housing units would not be at all effective really if we didn’t also make adjustments to parking requirements,” Belanger said. “Parking requirements can really limit housing construction because parking takes up land area and adds costs. That’s especially true when it comes to three-family and four-family dwelling units because of the current parking requirements in the zoning ordinance.” 

In zoning districts that require 1.5 parking spaces per unit, the result is that three-family buildings need to set aside five parking spaces and four-family buildings need six parking spaces. And having that fifth parking space triggers an additional regulatory burden. According to Belanger, lots with at least five parking spaces must have a landscaped buffer around them, which costs time, money, and land area. 

Dropping the required number of parking spaces to one per unit would allow four-unit housing to be built on what is now the minimum lot size for three-unit housing, as three-unit and four-unit buildings would only need three and four parking spaces, respectively, keeping them below the five-space threshold. 

The third change would eliminate the need for property owners to receive a conditional use permit from the city’s Planning Board before building accessory dwelling units (ADUs) on their property, bolstering a property owner’s right to build an ADU.

“The benefit of exempting ADUs from Planning Board review is that it makes them faster and cheaper to permit,” Belanger told the aldermen. “Planning Board review usually takes about a month for an ADU application and there are fees associated with it. Both the delay and the fees would be eliminated with this proposal.”

Removing this red tape would help accelerate the construction of ADUs in Manchester, increasing the supply of units in the city and putting more people in homes. 

Interestingly, the Manchester Planning Board unanimously supports all three amendments, though they would take power away from the Planning Board itself. That is a sure sign of how pressing the need is for these types of reforms in the city. 

According to the New Hampshire Zoning Atlas, Manchester permits two-family housing on 23% of its buildable land and three-family, four-family, and five+-family housing on 21% of its buildable land as of 2023. 

That puts Manchester behind seven other cities in the state with respect to duplexes and six other cities with respect to larger multifamilies. (See our breakdown from last year of Manchester’s hostility to duplexes and other multifamilies here.)

“Manchester’s proposed zoning amendment is a modest but meaningful change that will probably result in a few dozen more apartments being built in scattered locations,” said Jason Sorens, senior research fellow at the American Institute for Economic Research and the principal investigator of the zoning atlas. “The city could go even further, especially since some of the changes merely bring the zoning in line with existing densities, but this change would start to chip away at the housing shortage in the city without causing noticeable changes in density at the neighborhood scale.”

There’s more the city can do to free up the supply of housing, such as further rolling back parking minimums, addressing minimum lot sizes, streamlining the permitting process for all types of construction, and opening up more buildable land for duplexes, just to name a few. But these proposed changes before the city now would start the much-needed process of reducing development costs and protecting residents’ property rights. 

“The proposed zoning amendments are not going to fix every housing problem in the city, but they are intended to at least help get at the cause of the housing crisis, which is a lack of supply,” Belanger explained. “They are intended to reduce regulatory barriers to housing production, while respecting the character of neighborhoods.”

State lawmakers are considering a slate of housing bills that would effectively override many municipalities’ zoning codes. And while some view such actions as constituting threats to local control—which New Hampshire rightfully cherishes—inaction on the part of local governments to loosen their own regulations may leave the state with no other choice. 

That is, unless cities like Manchester act first on these kinds of zoning amendments. 

 

/by

How building more luxury apartments helps the poor

, , , ,

As pressure builds for local and state policymakers to address New Hampshire’s severe housing shortage, some activists and lawmakers are again blaming developers rather than regulators for the state’s high rents. 

Developers are building “too many” apartments for higher-income renters, some claim. This raises rents, hurting the poor, so government must intervene to make builders reserve a certain percentage of new construction for lower-income households, the argument goes. Some also want the state to give subsidies to low-income renters. 

The idea that building more apartments raises rents has achieved the status of conventional wisdom in some activist circles. It’s done so despite it being untrue, and confirmed untrue by growing stacks of economic evidence. 

Even academics repeat the claim. A California political science professor, in a February opinion column for New Hampshire Bulletin, wrote that “construction in the high-end ‘luxury’ rental market, which drives up rents for everyone else, remains in an upward trend.”

In fact, building more market-rate apartments reduces rents for middle-and lower-income households. This has been well established in academic research for years. And recent studies have provided more detailed confirmation of the effect.

A review of recent research on the subject finds:

  • Researchers at the Upjohn Institute and Federal Reserve Bank of Philadelphia found in 2019 that new market-rate apartment buildings “decrease nearby rents by 5 to 7 percent relative to locations slightly farther away or developed later.” They made a point of stating that the evidence ran against common complaints about market-rate apartment construction. “Contrary to common concerns, new buildings slow local rent increases rather than initiate or accelerate them,” they wrote.
  • A 2020 study by the National Multifamily Housing Council Research Foundation found that a “substantial flow of new construction apartments, largely targeted to middle- and higher-income groups, has enabled the ‘filtering’ process to create affordable housing opportunities for low-income households,” as a summary of the report put it. 
  • NYU researchers in a 2018 paper sought to answer claims that building market-rate apartments raised rents. “We ultimately conclude, from both theory and empirical evidence, that adding new homes moderates price increases and therefore makes housing more affordable to low- and moderate-income families.” They also noted that housing shortages are caused by regulations, not new construction. “Despite the arguments raised by supply skeptics, there is a considerable body of empirical research showing that less restrictive land use regulation is associated with lower prices. The evidence takes many forms. A large number of cross-sectional studies show that stricter (less strict) local land use regulations are associated with less (more) new construction and higher (lower) prices.
  • A 2021 UCLA review of recent studies on the effects of building market-rate apartments found overwhelming evidence that new construction of market-rate units lowers rents. Referencing the NYU paper cited above, the authors wrote: “Since that article came out two years ago, at least six working papers have been released that examine the connections between market-rate housing production and affordability at the neighborhood level. Four of the papers conclude that market-rate development makes nearby housing more, not less, affordable. The fifth paper looks at rents across entire cities rather than at the  neighborhood level, but finds that new development causes rents to fall for units across the income distribution. Findings in the sixth paper are mixed, and offer some reason to think new development makes nearby housing more expensive. Although the papers await peer review, and readers should bear that in mind, the importance and near-unanimity of their findings makes discussing them worthwhile.”

Building luxury or higher-end apartments draws higher-income renters out of yesterday’s luxury apartments and into the new luxury apartments. Increased vacancies in yesterday’s luxury apartments attract higher-income residents who’ve been living in mid-level apartments. As new construction creates more vacancies, rents come down. That effect filters throughout the housing supply, lowering rents all the way down. Economists call this “filtering,” and it’s an effect thoroughly established in academic and industry studies of rental housing markets. 

There’s no doubt that filtering occurs when enough new apartments are built. It can’t occur, though, if government prevents developers from creating those new high-end apartments. The problem in recent years has not been the creation of too many high-end apartments, but too few.

Harvard’s Joint Center for Housing Studies pointed this out in 2020: 

“What is different about the recent dynamic is that new construction is accommodating a growing number of high-income households, but just barely. Indeed, despite the relatively high rents, the number of new apartment units being added each month is scarcely keeping up with growth in units rented out, or ‘absorbed’ by new renters. When new construction is only just meeting demand from new high-income renters, it means that, in effect, new high-end units are being rented out by new, high-income renters, rather than by current high-income renters trading up to a newer unit, and therefore fewer old units are left to ‘filter down’ to a lower-income renters.”

In other words, when developers are allowed to build more market-rate apartments, rents come down for everyone. When they aren’t, rents stay high. 

/by

New Hampshire can’t address homelessness without addressing housing regulations

, ,

The NH Coalition to End Homelessness (NHCEH) recently released The State of Homelessness in New Hampshire Annual Report 2022, and the results are understandably concerning. 

According to annual Point-in-Time (PIT) counts, statewide homelessness grew from 1,382 people in 2019 to 1,605 in 2022, a 16% increase. 

While sheltered homelessness (people living in shelters) increased by about 3% over those four years, both chronic and unsheltered homelessness increased by a whopping 71% and 125%, respectively. 

According to data collected throughout the year using the state’s Homeless Management Information System (HMIS), the numbers are equally startling. The state’s homeless population grew by about 32% from 4,554 people in 2020 to 6,031 in 2022. 

“The rate of homelessness in New Hampshire increased from 330.6 per 100,000 residents in 2020 to 432.3 in 2022, reflecting a rate increase of 30.8%,” the report states. Over those three years, chronic homelessness rose by 30% and unsheltered homelessness rose by 41% using HMIS.

Homelessness is undoubtedly a multivariate problem—an issue involving a handful of variables where not one single “solution” will eliminate the problem entirely. But a severe shortage of rental housing is a major factor in New Hampshire. 

“There is simply not enough available housing to meet the need,” the NHCEH states in its report. 

A state’s rental vacancy rate is the percentage of residential rental units in a given area that are currently available. A statewide vacancy rate of 5% is emblematic of a balanced market (supply meeting demand). 

New Hampshire’s vacancy rate is 0.8% for all units (0.6% for two-bedroom units), according to the New Hampshire Housing Finance Authority. 

The state vacancy rate has been under 1% for four out of the last five years. The last time it was at least 5% was 2009–2010. Six of New Hampshire’s 10 counties (Belknap, Carroll, Hillsborough, Merrimack, Rockingham, and Sullivan) have vacancy rates below the statewide figure of 0.8% this year.

Our research has established that local land-use regulations are the main culprit holding back the supply of housing in the state. Parking requirements, minimum lot sizes, exclusionary zoning, and other constraints are examples of land-use regulations that choke the supply of housing by making it more costly, difficult, or impossible to build. Municipal restrictions on rental housing can be severe in some locations.

Multifamily housing is greatly restricted in many of the state’s 13 cities. Here are the percentages of buildable land on which multifamily housing is allowed in each New Hampshire city in 2023, according to the New Hampshire Zoning Atlas:

2-Family 3-Family 4-Family 5+-Family
Berlin 82% 40% 40% 40%
Claremont 87% 5% 5% 5%
Concord 22% 36% 36% 36%
Dover 82% 65% 65% 65%
Franklin 7% 7% 7% 7%
Keene 8% 9% 7% 7%
Laconia 28% 28% 28% 28%
Lebanon 14% 6% 6% 6%
Manchester 23% 21% 21% 21%
Nashua 57% 58% 58% 58%
Portsmouth 28% 30% 30% 30%
Rochester 72% 10% 10% 10%
Somersworth 14% 8% 8% 8%

Eight cities allow duplexes on 30% or less of their buildable land. Another nine allow multifamily housing of three units or more on 30% or less of their land. And these are after some zoning improvements were made over the last year. 

With a current shortage of more than 23,500 housing units, building more multifamily housing is critical to addressing homelessness. But prohibitive zoning laws in many municipalities get in the way. 

Reducing homelessness means increasing rental housing. Increasing rental housing means relaxing the local land-use regulations that severely restrict the development of rental housing. 

It’s no coincidence that as the state vacancy rate has consistently remained below 1%, rents—and homelessness—have increased. 

Median monthly rent for a two-bedroom apartment in the state has increased by 59% since 2014 to $1,764 in 2023. Rents have increased by 31% since 2019 alone.

Again, housing supply isn’t the only factor driving the increase in New Hampshire homelessness. Municipal officials also point to increases in substance use, addiction, and mental illness. But a larger supply of lower-priced homes and apartments would put housing within reach for many who struggle to stay off the streets. 

Illustrating the connection, research by the Pew Charitable Trusts found a strong connection between high rents and high levels of homelessness between 2017 and 2022. That study was consistent with findings from previous studies.  

One policy often proposed as a remedy for both homelessness and high rents is the government imposition of rent caps. For the second year in a row, state lawmakers have filed a bill to authorize municipalities to implement rent control measures.

House Bill 1362 would enable municipalities to enact ordinances limiting how much rents can be raised over a 12-month period. It’s pitched as a way to “stabilize rent increases.”

Price controls like this may be politically seductive, but they are economically harmful. Instituting rent control would have the same deterring effect on developers that burdensome zoning regulations already have. By reducing profitability, rent control would further reduce the supply of rental housing. So, instead of solving the state’s shortage of rental housing, it would only worsen the shortage. This would lead to increases in New Hampshire’s homeless population. 

It’s well established, as we’ve pointed out, that rent control laws reduce the supply of rental housing and tend to push market rents even higher. Rent control is not a solution. 

“[T]he people who are asking for rent control are very angry when they discover there is a shortage of apartments and a shortage of housing,” wrote economist Ludwig von Mises in Economic Policy: Thoughts for Today and Tomorrow.

The problem with housing in New Hampshire isn’t “greedy” landlords or developers. It’s government policies that prevent or discourage landlords and developers from increasing supply. Get those regulations out of the way and the market will step in to meet the need. 



/by

Housing affordability is dinging the state budget

, , ,

The Josiah Bartlett Center has warned for the last few years that local government inaction on housing might prompt legislators to restrict local zoning authority. But legislators might have an even stronger incentive to act than the growing public frustration with local land use regulations: Falling revenue.

A combination of high interest rates and an extreme shortage of homes on the market has pushed housing affordability to a two-decade low in the state. Though interest rates clearly play a role, the New Hampshire Association of Realtors points out that supply remains the primary culprit. “It’s a lack of inventory that continues to push pricing to record heights,” the association wrote last month.

Home prices have fallen a bit in New Hampshire since hitting a record in October. But that’s not because the market has improved. Rather, interest rates are keeping some potential buyers on the sidelines, causing a decline in the number of aggressive bidding wars. When interest rates ease, buyers will return to a market still plagued by a severe inventory shortage.

No one knows how long interest rates will remain high. If the squeeze of high rates and low inventory continues to push buyers out of the market, New Hampshire could see a prolonged home sales slump. And that will be felt in Concord. In fact, it already has been.

For the first five months of the 2024 fiscal year, real estate transfer tax revenues are down 20%, or $23 million. That’s the largest decline of any state tax this year. 

We know what some are probably thinking right now. “But what about Interest & Dividends tax revenue?” Eliminating that tax, as state law does by the end of next year, will have a larger impact on the state budget. 

But the I&D tax phaseout is part of a strategy to make New Hampshire more economically competitive. The anticipated tradeoff is that making the state more attractive to investors, retirees and entrepreneurs will generate greater economic activity, and thus greater economic growth, in the long term. 

There is no such tradeoff with falling home sales. A $50 million annual decline in real estate transfer tax revenue caused by falling home sales is simply lost revenue. 

Worse, it reflects shrinking economic activity in an important industry, which will have ripple effects in the broader economy. Lawmakers have made clear that they want state policy to stimulate economic growth. Local policies that hurt economic growth, such as overly restrictive land use regulations, are increasingly being scrutinized by legislators. 

Though state lawmakers and local boards are unable to affect interest rates, they can do something about the housing supply. They can lift regulatory burdens that block or restrict new home construction. 

So far, legislators have been reluctant to preempt local regulations. Yet with  polls showing that most Granite Staters want government to address the state’s housing shortage, pressure is increasing on legislators to act. Falling state revenue by itself probably wouldn’t trigger state action. Combined with rising political pressure to act, though, it becomes another incentive for legislators to do something. 

So local boards (and voters at town meeting) have another warning sign. The longer local governments wait to clear the way for more home construction, the more likely it becomes that legislators will do it themselves. 

/by

New Hampshire leads the nation in home price growth in 2023 (so far)

, ,

It seems like it’s every week that there’s some new concerning statistic about the New Hampshire housing market.

This time it comes from CoreLogic’s U.S. Home Price Insights. At 9.4%, New Hampshire saw the highest home price growth in the country from August 2022 to August 2023. 

The top 10 states with the highest year-over-year increases in their home prices include four other New England states. The rest of the top 10 are Maine (8.9%), Vermont (8.9%), Rhode Island (8.4%), New Jersey (8.1%), Connecticut (8.1%), Wisconsin (7.0%), Missouri (6.7%), Indiana (6.6%), and Ohio (6.0%).

Nationally, from August 2022 to August 2023, home prices rose by 3.7%, which means that New Hampshire home prices increased by more than double the national average so far this year.

Not every state saw a jump in home prices over the last year. States like Arizona, Idaho, Montana, Nevada, New York, Texas, Utah, and Washington saw some of the largest year-over-year drops in their home prices. 

Many states in the Western U.S.—the three states along the Pacific Coast, as well as all Mountain states but New Mexico—saw annual declines in home prices.

Is this a coincidence? Hardly.

Several of those states happen to be building the most homes. According to an analysis of U.S. Census data by RubyHome Luxury Real Estate, Texas (22.5%), Utah (20.65%), Idaho (20%), Nevada (16.74%), and Colorado (16.30%) all rank among the top 10 states with the highest rate of new homes built (as a percent of their total housing stock) from 2010 to 2022.

Another analysis of U.S. Census data by Construction Coverage found similar results. By new housing units authorized per 1,000 existing homes, Mountain West states like Utah (26.7), Idaho (24.2), Arizona (19.4), Colorado (19.2), Nevada (15.3), and Washington (15.1), as well as Southern states like Texas (22.2) and Florida (21.1), were among the top builders of new housing in 2022. 

This spring, Montana’s legislature passed a slate of zoning reform bills to speed up home construction. 

Towards the bottom of the list are many of those states that experienced the highest year-over-year increases in their home prices, including New Hampshire. At 7.4 new housing units authorized per 1,000 existing homes, the Granite State ranked 38th in housing development in 2022. 

Similarly, Rhode Island (2.8), Connecticut (3.7), Ohio (5.9), Vermont (6.8), Missouri (7.5), and Wisconsin (7.7) all ranked in the bottom half, while Maine (9.5), Indiana (9.6), and New Jersey (9.8) were middle of the road. 

The U.S. Census Bureau’s Building Permits Survey (BPS) tracks the number of new privately owned housing units authorized by state each year. Before 2022, Arizona and Utah each saw 11 consecutive year-over-year increases in the number of housing units authorized, and Idaho saw 10. In total, Colorado, Texas, and Washington each had 10 year-over-year increases in the number of units authorized.

New Hampshire, meanwhile, saw seven total year-over-year increases in units authorized, the longest consecutive stretch being the four increases from 2012 to 2016.

New home construction is one of many different factors that play a role in determining home prices. But at a minimum, there’s a strong correlation between states that have higher rates of home building and states that have seen recent drops in their home prices (or relatively minor increases compared to many states in the Northeast). 

As we’ve shown, New Hampshire municipalities have made housing development very difficult with onerous land-use regulations that restrict supply and inflate home prices.

If Granite Staters want lower home prices, we can follow the lead of many Western states and build, baby, build!



/by

Manchester could boost its housing supply by allowing more duplexes

, ,

Manchester is often seen as the center of multifamily housing in the state, while smaller cities and surrounding towns are viewed as less hospitable. But Manchester’s land-use regulations are unusually hostile to one relatively popular form of multifamily housing: duplexes. 

Two-family housing is permitted on only 18% of Manchester’s buildable area, according to the New Hampshire Zoning Atlas, created by the Center for Ethics in Society at Saint Anselm College. 

That puts the Queen City smack in the middle of New Hampshire’s cities when it comes to permitting duplexes. 

Here are New Hampshire cities ranked by the percentage of buildable land on which duplexes are allowed:

Claremont: 86%

Dover: 57%

Rochester: 56%

Berlin: 45%

Nashua: 42%

Laconia: 19%

Manchester: 18%

Portsmouth: 17%

Concord: 15%

Lebanon: 14%

Somersworth: 10%

Keene: 6%

Franklin: 5%

Besides Bedford, the municipalities surrounding Manchester are much friendlier to duplexes:

Goffstown: 74%

Londonderry: 63%

Litchfield: 59%

Merrimack: 55%

Auburn: 31%

Hooksett: 21%

Manchester: 18%

Bedford: 1%

“I was a little bit surprised about how restrictive Manchester is toward duplexes, but it makes sense when you think about it,” Jason Sorens, senior research faculty at the American Institute for Economic Research and the principal investigator of the New Hampshire Zoning Atlas, said. 

“The very fact that Manchester has had a lot of blue-collar housing near the center in the past has made single-family neighborhoods, particularly in the North End, very protective of their status. And at the same time, business and commercial districts in the city sometimes (not always) allow multifamily development but restrict one- and two-unit buildings. 

“It seems to me the latter problem is easy to fix: There’s no constituency for keeping small-scale housing out of commercial districts. Mixed-use and planned unit developments should be lawful across everything that is now zoned commercial or business.”

On small lots (less than one acre), only 1.9% of Manchester’s buildable area is open for duplex development. 

“Even in the single-family districts, legalizing duplexes is a small step, because ADUs are already legal under state law,” Sorens said. “All you have to do is remove the maximum size requirement (currently 750 square feet), and duplexes are then effectively lawful.”

Manchester is slightly more hostile to triplexes than duplexes. On only 17% of Manchester’s buildable land is three-family housing allowed. 

Opposition to multifamily housing typically arises from fears that large apartment buildings will be erected next to single-family homes, changing the character of residential neighborhoods. But the Zoning Atlas shows that municipalities, including the state’s largest city, can add to the state’s housing stock just by reducing restrictions on duplexes. 

Making it easier to build duplexes and multifamilies in Manchester would make homes and apartments more affordable. The median home price in New Hampshire is up to $490,000, according to the New Hampshire Association of Realtors (NHAR).

These monthly median prices have been increasing for 43 consecutive months (since February 2020). And for the second straight month, the affordability index sat at 59—both an all-time low and a 15% drop from one year ago.

Monthly median gross rent for two-bedroom units in the state is $1,764. 

Duplexes and triplexes offer options for both homeowners and renters. They can be great starter homes that double as investment properties for young couples and individuals. 

To get more of them, municipalities will have to change their land-use regulations, not just to allow more duplexes and triplexes, but to reduce secondary regulations that prevent them from being built. 

“Beyond duplexes, you really have to look at how the zoned density compares to the existing density,” Sorens added. “On much of the West Side, multifamily development is allowed, but tight floor area ratios, low maximum heights, and inappropriate parking minimums have made it impossible to increase density there at all. The strict regulations haven’t gentrified these neighborhoods despite rising rents; instead, they’ve helped create a homelessness problem downtown.”

Though Manchester has allowed the construction of more large apartment buildings, its burdensome restrictions on small multifamily options keep the city’s housing supply artificially low, raise prices, and limit options for city residents. 

/by

Affordable housing is N.H.’s top economic problem, leaders & voters agree

, ,

New Hampshire voters rank affordable housing as the state’s No. 1 problem, according to a UNH Survey Center poll released on August 28. State business and political leaders agree, saying housing affordability is the top problem holding back the state’s economy. 

“Oh, it’s number one,” Gov. Chris Sununu told Drew Cline, president of the Josiah Bartlett Center for Public Policy, on the WFEA Morning Update. “The lack of housing for middle and lower-income families is absolutely number one because…. Without the housing, you don’t have the employees. Without the employees, the businesses can’t grow. If the businesses can’t grow, then economically everything becomes stagnation.”

In June 2023, housing affordability in the state reached a new record low for the second consecutive month, according to the New Hampshire Association of Realtors. With an affordability index of 61, the state’s median household income was only 61% of what’s necessary to qualify for the median-priced single-family home at current interest rates.

At the same time, median prices for single-family homes in New Hampshire hit their highest point ever at $495,000—an increase of $30,000 from the previous month’s record high. Condos notched a record median price of $400,000 in June too. 

Rents are also hitting new heights. The median cost of a two-bedroom apartment soared 11.4% over the past year alone to $1,764 a month.

Despite New Hampshire’s growing economy—ranked fourth overall, third in economic growth, first in economic opportunity, and last in poverty rate by U.S. News & World Report—the state is 36th in housing affordability.

“I would rate housing affordability number one currently among issues or challenges impacting New Hampshire’s economy,” Michael Skelton, president and CEO of the Business & Industry Association (BIA), told the Josiah Bartlett Center.

“It’s unquestionably the single most important problem facing New Hampshire’s economy,” said Jason Sorens, senior research faculty at the American Institute for Economic Research and author of the Josiah Bartlett Center’s landmark 2021 study linking local land-use regulations to the state’s housing shortage. 

Several leaders also agree that land-use regulations are a leading cause of the issue. 

“Most of the affordability problem is due to local land-use regulations,” Bob Quinn, CEO of the New Hampshire Association of Realtors, concluded. “They increase development costs or eliminate the opportunity to build entirely.”

“Local land-use regulations are certainly part of the issue, on par with NIMBYISM [Not-In-My-Backyard-ism],” Keene Mayor George Hansel said.

It comes down to a problem of supply and demand: Limited supply of housing with steady or increasing demand leads to an increase in prices. By restricting what can be built and where, zoning laws are suppressing the supply of housing, resulting in New Hampshire’s current housing shortage, state housing experts and business leaders say.

“There is simply not enough housing for people to rent in New Hampshire,” Ben Frost, deputy executive director of New Hampshire Housing, said on WMUR.

According to the CATO Institute’s Freedom in the 50 States—an index of personal and economic freedom—New Hampshire ranks 40th in land-use freedom, a product of local land-use regulations obstructing supply.  

These zoning regulations include minimum lot size, setback, frontage, minimum square footage, and design requirements, among others—all of which make it difficult to build and/or increase the costs of building.  

“We know developers are interested in building more housing and there are generally financing options and capital available to do so, [but] the challenge they most often face is finding a place to build,” BIA’s Skelton observed. “Local land-use regulations and zoning (minimum lot size being the most prominent) and infrastructure (water/sewer, etc.) availability and requirements, to me, are the most significant local regulatory issues impacting what can be built and where.”

As the New Hampshire Zoning Atlas demonstrates, single-family housing is allowed by right on 90% of the state’s 3.6 million acres of buildable land, yet most municipalities don’t allow single-family homes on small lots (less than one acre). 

In fact, homes on lots of less than one acre are permitted on only 16% of the state’s buildable land. 

The median lot in New Hampshire is 49,223 square feet, according to the Angi U.S. Lot Size Index. This is the second-highest in the country. 

In New Hampshire, minimum lot size requirements can exceed dozens of acres. Districts in Groton, New Boston, Peterborough, and New London require lots to be a minimum of 25 acres (1.089 million square feet).

Zooming in on the Manchester area, 89% of the buildable land in the city and surrounding towns (Auburn, Bedford, Goffstown, Hooksett, Litchfield, Londonderry, and Merrimack) allows single-family housing, but only 33% of that buildable area is open to new single-family homes (after accounting for existing development, vacancies, and growth potential). 

Just 21% of the Manchester area’s buildable land allows single-family homes on small lots. This drops to merely 7.8% when considering only vacant or underdeveloped space.

“It’s not the only factor, but it’s the predominant factor, and it’s easily the most important factor we can actually do something about,” Jason Sorens, the principal investigator of the New Hampshire Zoning Atlas, noted about local zoning laws. 

“We can’t do much about steep slopes and poor soils, and expanding sewer and water service takes time and expense. Growing the construction workforce is another lever, but that will take a long time. Local land-use regulations drive at least 50% of the affordability problem, and we can change them,” Sorens added.

Multifamily development is heavily restricted as well. While housing for five or more families is permitted on 44.2% of New Hampshire’s buildable area, only 21% of this land allows these large-family developments on smaller lots.

Reforming a city’s zoning regime can be quite an undertaking. “Keene has dramatically streamlined and rewritten our land-use codes in the last three years,” Mayor Hansel said. “This was an expensive effort, costing more than $500,000 on top of internal staff time devoted to the rewrite effort. Smaller communities, without full-time planning staff, would have a hard time tackling something like that.”

Though some communities might want to avoid a full rewrite, smaller changes such as reducing minimum lot sizes, eliminating overlay districts (zoning districts that overlap original zoning districts), and increasing density limits (how many housing units can be built in a given area) would have significant impact.

Mayor Paul Callaghan offers Rochester as a model for other municipalities looking to make quick progress on this front. 

“In 2018 we increased the density allowance in and around our three urban centers (East Rochester, Downton Rochester, and Gonic) to allow for more density (and therefore less cost to developers),” Mayor Callaghan said. “And then in 2019 we did away with density requirements altogether in Downtown Rochester and allowed for some residential units on the ground floor level.”

“The system really works when it’s clicking, and the number one thing holding it all back…is housing,” Gov. Sununu told Cline. “And it isn’t, ‘Well, the government needs to build more housing.’ We’re investing more in housing than we ever have.” 

In fact, the 2024–25 state budget spends a record $25 million for the affordable housing fund. 

“But the locals need to permit it,” the governor continued. “Local, even small towns, need to talk to their businesses who are struggling to find employees and say, ‘Maybe if we just put five units up here or we let a small multifamily complex with seven, ten units go over here,’ that in itself can just be a game changer for a lot of small businesses in town to make them more economically viable.”

Capturing the full economic extent of the challenge, the governor added, “Everything moves positively when you have the housing and you can bring in the employees.”

 

/by

Support for new housing surges as local boards keep saying no

, ,

Large majorities of Granite Staters support changing local land use regulations to allow the construction of more housing, the latest annual affordable housing survey from the Center for Ethics in Society at St. Anselm College reveals.

Support for more housing options has surged in the last year as home prices and rents have hit new records in New Hampshire. But despite huge and unprecedented levels of support for relaxing local regulations, news stories show that local boards continue to block new housing proposals when small groups of local residents turn out to oppose them.

In our hyper-partisan era, it’s unusual to get anywhere near 80% public support on an issue. Yet in New Hampshire, 78% of registered voters now agree that “my community needs more affordable housing to be built.” Only 18% disagreed. That 60-point gap was a 40-point gap last year. 

Opposition to housing construction often comes from older voters who don’t want to see their communities change—and who already have homes. Younger people who face the prospects of huge rents and few available starter homes tend to take a more permissive view of new housing construction. The effect of high rents and home prices on younger voters was shown in the results of this new poll. In the survey, “not a single voter under 35 disagreed with the ‘more affordable housing in my community’ position,” according to the Center for Ethics in Society. 

Voters have grown more receptive even to the idea that affordable housing should be built in their own neighborhood. The survey found that 58% of voters agreed that “My neighborhood needs more affordable housing to be built.” Support grew threefold in one year, from +7 in 2022 to +21 in 2023.

Significantly, voters have come to link the state’s severe housing shortage to local planning and zoning regulations. The survey found that 60% of voters agreed that “New Hampshire towns and cities should change their planning and zoning regulations in order to allow more housing to be built.” That 26-point gap was just a 12-point gap last year.

 

When the Josiah Bartlett Center asked voters in our 2021 poll whether they “support relaxing some local regulations to make it easier to build homes for people who need them,” 45% said yes and 34% said no. The growth over just two years in support for relaxing local land use regulations is remarkable. 

Highly restrictive local land use regulations became pervasive throughout New Hampshire because they once had broad support. The damage they’ve done to the state’s housing market has become so obvious that support for anti-housing positions is collapsing.

The Center for Ethics in Society asked voters if “New Hampshire should do more to prevent housing development and keep the state the way it is.” Only 45% of New Hampshire voters disagreed with that statement in the 2020 survey. (Support was at 31%, with the rest undecided.) In this year’s survey, 59% of voters disagreed, representing a 14-point swing since 2020. 

At the Josiah Bartlett Center, we’ve warned for years that if local governments continue to choke the housing supply by maintaining overly restrictive land use regulations, support for blanket state laws to override those regulations will grow. Sure enough, that is happening. 

In 2021, 37% of voters supported and 38% opposed “a bill to allow property owners to build duplexes, triplexes, and fourplexes on any property served by municipal water and sewer, and where the zoning allows residential development.” Opposition to such a law has fallen nine points to 27%, and support has risen to 43%. 

In the Legislature, opposition to such legislation is driven by a perception that voters back home disapprove. But that disapproval is eroding. If local governments don’t swiftly change course and begin allowing more housing, legislators will be pushed by voters to offer a state solution.

Manchester has made strong gains, approving approximately 2,000 new units’ worth of new construction in recent years, according to city officials. But projects still run into road blocks there, and in many other municipalities local boards routinely thwart new construction as a matter of course. 

A few recent examples:

  • Portsmouth’s Zoning Board of Adjustment voted against a plan to convert an abandoned animal hospital into 16 housing units. 
  • Swanzey’s Zoning Board of Adjustment voted against a proposal for an 18-unit residential development. 
  • Seabrook’s Zoning Board voted against a 332-unit luxury apartment development at the former greyhound track. 
  • Brady-Sullivan continues a two-year fight to convert old office building to apartments. 

A sentiment often heard at local planning and zoning board meetings is that multi-family housing belongs in cities like Manchester, not in smaller communities. But most voters disagree with that, and the disagreement is growing stronger.

This year’s survey found that 64% of voters disagreed with the statement, “Our suburbs and rural towns should have mostly just single-family homes. Apartments, duplexes, and townhouses should be built only in cities.” That’s up from 61% two years ago. 

After years of surging housing costs—and a concerted effort by reformers (including the Josiah Bartlett Center) to highlight the role local regulations play in driving those costs higher—overwhelming majorities of Granite Staters now support relaxing local land use regulations.

It’s now up to voters and boards to take up this cause at the local level. If they don’t, it’s only a matter of time before legislators pass state laws to free developers and property owners from the local regulations that prevent the market from supplying people with the homes they want and need.   

/by