On housing, a consensus has settled in among Granite State voters. It can be summarized in four main points:

  1. New Hampshire desperately needs more housing.
  2. Local governments should lift regulatory barriers to the construction of new housing.
  3. The state government should act to prompt local regulatory changes.
  4. Multifamily housing is acceptable in suburbs and rural areas.

The St. Anselm College Center for Ethics in Society has polled New Hampshire voters on housing since 2020. The 2024 poll, released this week, shows that voters’ views have solidified into a strongly pro-construction, anti-regulatory, pro multi-family majority. 

A supermajority (75%) agrees with the statement, “my community needs more affordable housing to be built.” 

Roughly 60% (59%-62%) welcome the construction of affordable housing in their own neighborhoods, the relaxation of local land use regulations to allow that construction, the building of multifamily housing in suburban and rural zones, and state intervention to make all of this happen. 

In the 2020 poll, just 28.7% agreed that local governments should relax their planning and zoning regulations to allow the construction of more housing. 

In the spring of 2021, the poll found a 10% increase, to 39%, of voters saying local governments should relax planning and zoning regulations. 

In the fall of 2021, the Josiah Bartlett Center for Public Policy released our landmark study showing that local land use regulations were the primary cause of the state’s housing shortage.

The next year, the percentage of N.H. voters who agreed that local planning and zoning regulations should be relaxed to allow for more housing shot up to 52%. It now stands at 61%.

High-profile conversations about specific policy problems matter. By 2021, Granite Staters were becoming more receptive to the idea that local land use regulations were a problem. A push by the Bartlett Center and others to identify the root cause of the housing shortage and propose solutions helped more people understand the problem and demand the right fix, rather than continue to falsely blame developers or the market.

Today, a strong majority of voters understands the problem and demands that it be fixed. Yet local voters and boards have not gotten the message. 

A few recent examples:

Hampton Falls rejects proposed 88-unit condo project on Route 1

Owner: McIntyre building still a parking lot due to Portsmouth zoning rules

Stratham select board sues town zoning board over 59-unit condo approval

Exeter 120-plus apartment project faces opposition

Portsmouth board rejects plan to raze 1900-era home for four new houses

Board nixes variance for North Newport senior housing project.”

New residential developments are being approved in New Hampshire. But boards continue to reject housing proposals simply because pre-existing regulations don’t allow the type of housing the market now demands. 

In the Hampton Falls and Stratham stories linked above, boards rejected variance requests because members didn’t want to contradict old, outdated rules.

In the Newport example, the rural zone doesn’t allow multifamily housing. Since the developer could conceivably propose a different use for the property than its highest, best, most in-demand use (multifamily housing), the board rejected the proposal. 

Though Granite Staters now say overwhelmingly that they welcome multi-family housing in suburban and rural zones, local boards continue to reject such proposals simply because old rules don’t allow them.

This discrepancy between voter and market demand on one side and inflexible regulations on the other cannot continue indefinitely.

The Center for Ethics in Society polling shows that on questions of housing, large majorities of New Hampshire voters are on the side of developers, not local regulators. And they want the state to act if local governments won’t. 

Voters say housing is the “most important problem facing New Hampshire,” the UNH Survey Center found last month. Thirty-six percent of voters named housing as the state’s top problem. In second place was education, with only 7% of voters naming it the top problem. 

In the most recent legislative session, the House Education Committee dealt with 156 bills. 

The number of bills referred to the Special Committee on Housing? Nine.

Housing beats education as the top concern of voters by 29 percentage points. But legislators, like local land use boards, are operating on outdated beliefs. They’ve yet to adapt to the changing voter preferences. 

But there’s an election this fall, and we’re already seeing candidates campaign on pro-housing agendas. 

Given the firmly solidified pro-housing position of most voters, hardened each month by news of rising home prices, and the slow pace of change at the local level, it would be political malpractice for lawmakers not to make significant regulatory reform a top priority next year.

For years, we’ve predicted exactly this development. The slow pace of change at the local level has voters turning to the state for solutions. So far, legislators have been reluctant to act. That won’t be the case much longer. The pressure to act is too great.

It’s a safe bet that we’ll see a significant increase in legislative proposals to address the housing shortage in 2025. People are tired of waiting for government to get out of the way and let developers solve the housing shortage government created in the first place. 

 

There’s a growing consensus that New Hampshire’s overly restrictive land-use regulations need to be addressed to reverse the state’s housing shortage. Whether changes should be made at the state or local level, though, remains a major point of contention.

State-level solutions generate reflexive opposition from people who view local land-use regulation as an entirely local issue. Yet some of this opposition, maybe most, is based on an important misconception.

Opponents of state action commonly assert that bills to address the housing shortage are an effort by legislators to take for themselves powers that belong at the local level. This is mistaken. 

Decisions about land use will continue to be made locally. Under many of the bills working their way through the Legislature this session, those decisions will be made by individuals at the local level rather than by local governments—boards and bureaucrats—or voters.

Changes in Manchester

Realizing the desperate need for housing, some local governments are changing their ordinances to allow more development. In Manchester, for example, several proposed amendments to the city’s zoning ordinance would represent small but important steps to relax land-use regulations in the Queen City. 

The amendments would permit four-unit housing to be built on lots currently zoned for three-unit housing, drop the required number of parking spaces for multifamily housing from 1.5 spaces per unit to one space per unit, and no longer require property owners to petition the city’s planning board for a conditional use permit before building accessory dwelling units (ADUs).

These steps are the beginning of a bigger set of reforms being studied in the city. Not every municipality is moving in this direction, though, prompting state lawmakers to intervene in limited but meaningful ways. 

But these interventions don’t amount to the creation of statewide zoning. They just return some decision-making authority to property owners, from whom it was taken in the first place.

Legislation to restore limited rights to property owners

Consider the following bills: allowing one ADU, attached or detached, by right and allowing up to two per lot under certain conditions (HB 1291), forbidding municipalities from banning manufactured housing (HB 1361), allowing the expansion of a single-family residence within an urban residential zone to no more than two residential units without review if it meets certain requirements (HB 1399), and preventing local zoning regulations from requiring more than one residential parking space per unit (HB 1400).

Yes, these would be state laws, albeit modest ones. No, they would not amount to a uniform state zoning code. They would restore some limited rights to property owners while retaining local authority to regulate in each of these areas.

Currently, if a property owner wants to add a second ADU or convert a single-family home into a duplex within an urban residential zoning district—even if the developments wouldn’t encroach on neighboring property, disturb anyone, or change the outward appearance of the property whatsoever—local ordinances can prohibit them from doing so. 

Contrary to popular belief, local governments do not hold that power by right. The power to regulate private property is, under New Hampshire’s Constitution, granted to local governments by the state. 

With each of the bills above, lawmakers are not proposing to impose a single uniform ordinance statewide. They are proposing to reduce the regulation of property in these very limited areas altogether, thus restoring a small measure of rights originally held by property owners. 

Manufactured housing—prefabricated homes that are transported to sites—is an easy, quick, and often inexpensive way to put more people into homes. Under HB 1361, municipalities can still regulate manufactured housing but not to the extent that it is effectively banned. 

Parking space requirements are a pernicious roadblock to creating more multifamily housing. In zoning districts that require 1.5 parking spaces per housing unit, that means every duplex, three-family, and four-family building needs enough land set aside for three, 4.5, and six spaces, respectively. Where municipalities require two parking spaces per housing unit, that means every duplex, three-family, and four-family building must have four, six, and eight spaces, respectively. 

Often these stringent requirements keep a lot of multifamily housing from being created, either through development or single-family expansions. By preventing local governments from requiring more than one space per residential unit, HB 1400 would restore to property owners the authority to decide whether a unit needs more than one parking space on site. 

Because these kinds of state proposals would supersede local ordinances, they rub some the wrong way. Local control has long been a very important principle in New Hampshire.

The state’s historical adherence to local control, however, shouldn’t justify unlimited local control. Local governments are still governments, and as a result, their ordinances can be fundamentally oppressive.  

At the same time, we shouldn’t always assume that the state government overruling some local ordinances automatically represents state overreach. In the case of these four bills, such actions seek to pull back the centralized planning powers of local governments and protect Granite Staters’ property rights. 

Isn’t that what governments are instituted to do, to secure our rights? If so, then private property rights are chief among them.

When you consider that these state laws would be superseding some of the most overly restrictive local regulations that limit property rights throughout the state, and that state lawmakers have only resorted to these very modest steps because of inaction on the part of municipalities, then such proposals look less like top-down state government control and more like state government doing the bare minimum to protect Granite Staters’ property rights and address the state’s housing shortage.



While crime stories, campus protests and political drama captured much of the media attention this week, a bill with tremendous potential consequences for taxpayers quietly passed the House on Thursday.

Senate Bill 383, which has passed both chambers in slightly different versions, would strengthen local tax caps and allow school district caps to be tied to enrollment. 

Under current state law, town and school district tax caps can apply to estimated taxes “as shown on the budget.” That excludes off-budget warrant articles that might also have a tax impact. SB 383 would cover the budget and “all other warrant articles with a tax impact.”

RSA 32:5-b II mandates that a town or district “tax cap shall be either a fixed dollar amount or a fixed percentage applied to the amount of local taxes raised by the town or district for the prior fiscal year…”

SB 383 authorizes voters to use “a multiplication factor” that would cap tax increases at the inflation rate times population growth. That’s been the general idea behind tax caps from the start. The bill lets towns use this more precise formula rather than a fixed amount or rate. Those fixed numbers were always basically a proxy for the multiplier anyway.

Perhaps most consequentially, SB 383 creates a new formula for school district tax caps. The school district formula would be a combination of inflation times enrollment, rather than municipal population growth. That’s an important change. School budgets can be the largest portion of local budgets and the largest driver of local spending and tax increases.

Our 2023 analysis of district school spending in New Hampshire found that there generally wasn’t a strong correlation between school enrollments and local school spending. New Hampshire public school districts lost 29,946 students from 2001-2019, but increased spending by an inflation-adjusted $937 million. School district budgets tend to grow faster than the inflation rate, and faster than all other areas of government spending, even when enrollment is falling, we found. 

In Manchester, for example, school district enrollment fell by 13% from 1995-2018. During those same years, city school district spending grew by a remarkable 68%. 

This year, the Manchester school district’s proposed budget was 7.9% higher than the 2020-21 school budgetafter adjusting for inflation—though enrollment was 4.3% lower than in the 2020-21 school year.

Now, Manchester has a tax cap, and that cap applies to the school district’s proposed budget. Neither the city nor the school district is allowed to propose a budget that exceeds the average inflation rate of the prior three years. 

(City tax caps are regulated in a separate section of state law (RSA 49) than are town tax caps. Manchester’s cap, like Nashua’s, is tied to the inflation rate.)

Though SB 383 doesn’t apply to cities, and thus wouldn’t affect Manchester’s school district tax cap, Manchester’s experience shows how the formula in the bill would put a further constraint on spending.

Manchester’s school district taxes have been restrained by this cap for more than a decade, but spending still grew rapidly despite falling enrollment. The formula Manchester uses does not take into account district enrollment. If it had, the cap would’ve been lower, and therefore might have prompted some efficiencies in district budgeting.

The city school district accounts for about 52% of Manchester’s budget, which shows how consequential the new caps allowed in SB 383 could be. 

The formulas allowed in SB 383 are more flexible than the fixed number or rate caps towns and districts can adopt now. That could weaken some of the opposition to tax caps, leading to their more widespread adoption. At the same time, the bill lets voters strengthen caps by covering warrant articles that have tax impacts and by tying school district tax changes to enrollment. On the whole, the bill would turn tax caps into a more powerful and more appealing tool for taxpayers.

In the last decade, ridership on Manchester Transit Authority (MTA) buses fell by 38.6%, yet city taxpayer spending on the MTA increased by 38.2% above the rate of inflation, an analysis by the Josiah Bartlett Center for Public Policy shows.

As Mayor Jay Ruais and city aldermen search for savings in a stressed city budget, the MTA offers an agency that could be scrutinized for possible spending reductions.

From 2013–2022, data from the MTA reported to the Federal Transit Administration show that city bus ridership peaked in 2015 at 500,575.

Ridership fell each subsequent year, with the exception of 2021–2022, to 279,948 in 2022—a drop of 44.1% in just seven years. While this includes a steep 13.5% decline during the pandemic (2020–2022), the drop of 18.2% before the pandemic (2015–2019) was even larger. The decline over the entire decade was 38.6%. 

While ridership fell, the amount of money spent on Manchester public transportation only increased. From 2013–2022, MTA’s total operating expenses rose from $3,613,280 in 2013 to $5,219,813 in 2022, an increase of more than $1.6 million, or 44.5%, in nominal dollars. After adjusting for inflation,* the increase is still $940,802, or 22%. 

(*The inflation calculation uses Personal Consumption Expenditure (PCE) Indices from January 2013 and January 2022.)

This steep rise in spending includes a 62.4% increase, or a 37.1% inflation-adjusted increase, in funds from the federal government and a 63.6% increase, or a 38.2% inflation-adjusted increase, in local government spending. 

Meanwhile, Manchester public transportation has become less profitable, as fare revenues have dropped 23.9% since 2013. 

In 2013, MTA’s cost per rider was $7.93. The lowest point it reached was $7.51 in 2016. Since then, the cost per rider has skyrocketed, hitting a peak of $25.96 in 2021 before falling to $18.65 in 2022, still more than $10 more per rider than a decade earlier. All told, the last 10 years saw a jump of 135.1% in Manchester’s cost per rider. 

The huge increase in costs per rider was not just a matter of falling passenger numbers. As ridership fell during the past decade, the MTA aggressively increased service. 

Since 2013, MTA’s total miles driven have increased by 52.3%, going from 536,627 total miles in 2013 to 817,081 in 2022. Total hours driven have seen a similar increase as well, jumping 59.3% from 46,159 total hours in 2013 to 73,521 total hours in 2022. 

The MTA’s service area population and total square miles covered have expanded too. 

From 2013–2019, MTA served 135,366 residents and covered 63 square miles. Since the 2020 census, MTA has been serving 248,263 residents and covering 235 square miles, increases of 83.4% and 273%, respectively. 

The official 2023 MTA ridership and expenditure numbers won’t be publicly available until later this year. Although the city has figures showing 328,976 riders and $5,420,475 in total operating expenses for FY 2023 (cost per rider of $16.48), that time frame of measurement is different from what the Federal Transit Administration uses. Therefore, an apples-to-apples comparison can’t be made now between 2013 and 2023. The 2023 numbers won’t be added to this database until the official figures are released. 

The MTA plans to return to upwards of 400,000 annual passengers. But the current numbers and trends show a public service that yields a poor return on taxpayer spending. 

And the poor financial picture is not due solely to the COVID-19 pandemic, as the problems began years earlier. The pre-pandemic years of 2013–2019 saw MTA ridership plummet too. 

The numbers strongly suggest that MTA is hauling more taxpayer dollars than what is required for public transportation in the region. City leaders could find some budget savings by paring back MTA services to pre-pandemic levels, eliminating or curtailing underused routes, and seeking ways to enhance revenues. 



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.



Child care in New Hampshire is often hard to find and, when you do, expensive. A bipartisan group of legislators has offered families some relief in a surprising way: zoning reform.

Child care offered to small groups of children in a caregiver’s home was once a popular option for many families. But professionalization and regulation of the industry produced a shift toward large (and expensive) commercial day care centers. A lot of families looking for cheaper alternatives today wonder where the old-fashioned, home-based child care providers went.

Many municipalities, it turns out, have passed zoning regulations prohibiting or restricting them.

“Many state and local governments have considered home daycares a ‘problem use’ and have therefore used zoning restrictions to ban them. Such restrictions reduce the availability of childcare in the affected neighborhoods and further increase the price of childcare services,” the Cato Institute’s Ryan Bourne has found.

House Bill 1567 would fix that in New Hampshire by requiring local zoning regulations to allow family child care programs as an accessory use (by right) to any primary residential use. 

Such home-base child care programs would be allowed “as long as all requirements for such programs adopted in rules of the department of health and human services (He-C 4002) are met,” the bill states.

Child care is expensive for many reasons, some of them regulatory. It is particularly expensive in New Hampshire. 

According to Child Care Aware, child care in New Hampshire costs an average of $10,140 per year for an infant in family child care and $10,400 for a toddler in family child care. For an infant and toddler in center-based child care, New Hampshire families are spending an average of $15,340 and $14,235 per year, respectively. 

On the “low end,” then, family child care for an infant accounts for 21% of per capita income in New Hampshire and 11.2% of medium household income in the state, while center-based child care for a toddler represents 29.5% of per capita income and 15.7% of medium household income in New Hampshire.

For context, the U.S. Department of Health and Human Services considers its benchmark for affordable child care to be 7% of income. 

HB 1567 would not solve this problem, but it would help lower costs by largely doing away with “problem use” restrictions in residential zoning districts. This change would open more of the state to home-based family child care, free up the supply of those services, and, in turn, help reduce prices. 

This is a smart and efficient way to help lower child care costs by removing an unnecessary regulatory barrier that prohibits the entry of low-cost competitors into the marketplace. 

Legislators could achieve similar results by applying this same approach to a similar service: education.

Since the COVID-19 school closures, interest in small-scale education alternatives has exploded. Many families would love to send their children to home-based education providers in their own neighborhoods. But as teachers and former teachers have begun offering these services, they’ve sometimes run into the same zoning problems troubling many would-be day care providers. 

Kerry McDonald, senior education fellow with the Foundation for Economic Education, wrote two years ago for the Josiah Bartlett Center about a New Hampshire educator who encountered this problem: 

For Becky Owens in Chester, trying to offer sporadic homeschool programs on her farm property turned into a regulatory headache that likely would have deterred many other aspiring education entrepreneurs from moving forward. Owens had been homeschooling her own five children for several years, after pulling her oldest son from the local public elementary school because it wasn’t a good fit for her shy, sensitive boy. She wanted a more personalized educational environment for him and her other children that would be responsive to their individual learning needs and styles.

A college professor for 15 years with a Ph.D. in education, Owens decided to create that personalized learning environment, and eventually expand her offerings to other children in her community. In 2020, she decided to host occasional nature hikes on her property for small groups of local homeschoolers. She had a handful of students register for one of her hikes, and she placed a chalkboard sign in front of her house with the words “Farm Rich Nature Hike” so families could find her.

This simple gesture set off a cascade of events involving the local building inspector, who issued her a “cease and desist” letter for her farm walks. Over the subsequent weeks, Owens had to prepare numerous documents for local officials, including an aerial view of her property, and appear before the planning board to ask for permission to operate as a home-based business. She also had a property inspection from the local fire chief, even though her program was held entirely outside. All of this was required just so Owens could welcome a few children to her property for a nature walk. Her walks never exceeded 10 kids.

And although these local regulatory roadblocks didn’t stop Owens (eventually she got approved to operate as a home-based business), she’s the exception that proves the rule. Who knows how many other aspiring education entrepreneurs seeking to offer alternative learning environments have either given up when faced with such prospects or haven’t even tried. 

As with child care, some municipalities don’t allow “education” services to be offered in residential zones even if all other regulations are followed and there’s no impact on the neighbors. The provision of the service itself is forbidden.

HB 1567 offers a blueprint for how the state can easily expand the marketplace for needed services simply by allowing home-based providers to offer them on a small scale, provided the service doesn’t violate other rules that offer legitimate protections for consumers and neighbors.

 

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. 

Nationwide, rents have trended downward in the past year. But that relief has missed New Hampshire. 

Here, rents rose in the past year at double the rate of the year before, according to the New Hampshire Housing Finance Authority’s (NHHFA) latest report, further illustrating how desperately underserved New Hampshire’s rental market is.

“The rental market hit a big milestone this month, as national rent growth is finally negative year-over-year,” rent-tracking website apartmentlist.com posted on July 26. “This means that on average across the nation, apartments today are renting for less than they did one year ago.”

A growing supply of apartments is having the predictable negative effect on rents.

“The supply side of the rental market also hit a major milestone this month: our vacancy index has reached 7.3 percent, surpassing the peak vacancy rate measured at the height of the COVID-19 pandemic,” the apartmentlist.com report concluded. “With a record number of multi-family apartment units currently under construction, this vacancy rate will remain elevated in the near future. For the first time since the early stages of the pandemic, property owners will compete for a smaller pool of tenants instead of the other way around.”

That last sentence is key. More apartments = lower rents. 

Data from realtor.com also show rents falling in absolute terms from last year.

Harvard University’s Joint Center for Housing Studies concluded in its 2023 housing report that “rental markets are experiencing sharply reduced rent growth and rising vacancy rates.” 

The study cited lower demand for rental housing after a surge during the pandemic, coupled with a large increase in construction. 

“Multifamily production was extraordinarily strong over the past year, with 342,000 multifamily rental units added in 2022 alone, mostly targeting the high end of the market,” the Harvard study concluded. 

Another industry website, rent.com, concluded in a July report that rents nationally are lower in July 2023 than they were in August of 2022. 

That report pegged New Hampshire as an outlier, with the eighth-highest rent growth in the nation during the past year. 

New Hampshire is bucking the national trend. Not only are rents rising sharply here, but so is the rate of growth. The NHHFA’s 2022 report pegged the average annual increase in gross monthly rent at 5.7%. This year’s report, released last week, pegged the rate at 11.4%, exactly double last year’s.

Heat costs for renters were 58-64% higher than last year, and electricity costs were 62% higher, as measured by NHHFA. Those increases contributed to the surge in expenses for renters. 

But the biggest factor was the continued shortage of rental housing amid strong demand. That shortage is caused primarily by local land use regulations that restrict rental construction.

“Local zoning and planning regulations are probably the largest factor,” NHHFA Executive Director Rob Dapice said in an interview this week. “That’s true of both multi-family and single-family construction, and of course a lot of rental housing is multi-family construction. There are perhaps some obstacles at the state level. We really see more obstacles at the local level.”

The Josiah Bartlett Center’s landmark 2021 study of local land use regulations showed how these constraints on construction limit the supply of new housing in New Hampshire, driving up prices.

With the state’s population projected to grow to 1.5 million by 2050, and the New Hampshire economy booming, demand for new housing is expected to continue rising for years. That leaves the supply side, namely new construction, as the only way to arrest the growth in both rents and single-family home prices, which also hit a new record in May.

NHHFA’s research estimates that New Hampshire needs 60,000 new housing units by 2030 and nearly 90,000 by 2040. Without cooperation from local planning and zoning boards, which regulate land use in New Hampshire, those construction goals will remain out of reach.

In 2021, we published a landmark study that showed how local land use regulations drove New Hampshire’s housing shortage. That study changed the conversation on affordable housing in New Hampshire, from one focused on government subsidies to one focused on regulations. This week, the Center for Ethics in Society at Saint Anselm College set the next housing policy landmark when it released the New Hampshire Housing Atlas.

The New Hampshire Zoning Atlas is the most powerful tool Granite Staters have ever had for understanding local zoning ordinances. It catalogues—and maps—23,000 pages of zoning regulations in 2,139 districts in 269 jurisdictions. Never has this information been available in one place, much less open for public examination. 

In the atlas, users can quickly find the building and land use restrictions in one community, or search the state to see what restrictions are in effect across multiple communities. The search tool and maps reveal just how severely New Hampshire municipalities have restricted people’s housing options, and how much freer some towns are than others. 

The atlas shows that single-family homes are allowed by right on 90% of New Hampshire’s buildable land, and by public hearing on another 6%. Sounds good, right? 

A closer look, though reveals that single family homes on lots of less than one acre are illegal—yes, literally illegal—on most of that property. It is legal to build a home on less than one acre in only 16% of the state’s buildable land.

You might think of zoning as “allowing” certain types of property uses. In reality, zoning is a prohibition. It carves communities into areas in which most uses of private property are outlawed. Large minimum lot size requirements are the perfect example of a regulation that outlaws a once common housing preference. The result is a nearly statewide prohibition on the construction of affordable starter homes.  

People generally have no problem with municipalities using zoning to, say, keep industrial operations out of residential neighborhoods. The New Hampshire Zoning Atlas shows, however, that municipalities commonly use this power to outlaw small yards, duplexes, apartments and any mixing of commercial and residential activities. The maps show that it isn’t unusual for municipalities to take zoning restrictions to absurd extremes.

Lebanon’s rural lands 3 zone has a huge 10-acre minimum lot size for single-family homes, which we knew from previous research. But the atlas shows that Hanover isn’t alone. Meredith’s forest and conservation district also has a 10-acre minimum lot size. Marlowe’s rural lands district has a minimum lot size of 20 acres!

Neighboring towns can have huge discrepancies in the types of homes they allow. 

No portion of Bedford, Merrimack or New Boston has a minimum lot size of five acres or more. But significant portions of Mont Vernon and Amherst do. Two-family housing is allowed in most of Londonderry, but in only a small sliver of Derry. 

Though the New Hampshire Zoning Atlas is itself policy neutral (it’s just a presentation of data), it’s likely to lead to policy changes. It’s hard to justify zoning that allows rental housing of five units or more, but bans duplexes and triplexes, for example. This particular rule shows up in a surprising number of communities.

The atlas offers an invaluable tool for citizens who want to better understand how government regulations prevent the market from providing housing options that people want, even in times of sky-high demand.

Two events on opposite ends of the state last week highlighted the central problem with New Hampshire’s housing market.

In Newmarket over the weekend, a group of renters held a demonstration to denounce landlords and protest high rents.

After experiencing a substantial rent increase, one couple said they had to move out of town to find a place where the rent and the quality of the apartment were better matched. 

That place, they said, is New Jersey.

Another protester said she had moved to Maine to find a more reasonable rent.

It’s true that, on average, moving from Rockingham County to Maine will lower one’s rent, as average rents are lower in Maine than in New Hampshire.

Apartmentlist.com puts the average rent for a one-bedroom apartment at $952 in Maine and $1,329 in New Hampshire.

Home prices are lower in Maine too.

The median home price in New Hampshire is about $430,000. 

In Maine, it’s about $350,000.

Maine and New Hampshire have almost identical populations. Maine has 1.34 million people, and New Hampshire has 1.35 million people.

That’s not enough of a difference to create such huge price variations for housing.

Why would prices be so much lower in Maine?

In a word: Supply.

Maine has 101,000 more housing units than New Hampshire does, according to Census Bureau data.

That’s almost exactly as many housing units as exist in Merrimack and Cheshire Counties combined. 

If New Hampshire had 101,000 more housing units, what do you think the effect would be on home prices and rents?

A few days before the Newmarket protest, residents of Keene demonstrated exactly why New Hampshire is suffering from a severe housing shortage that has driven home prices and rents to record levels.

On Wednesday, Keene’s Planning, Licenses and Development Committee recommended unanimously that the city council send back to committee a proposed zoning ordinance that would allow more housing in the city’s rural district, the Keene Sentinel reported.

The city had proposed reducing the minimum lot size in the rural zone from 5 acres to 2. 

That’s right. The City of Keene has a rural zone with a mandatory minimum lot size of five acres. Within that zone, no house may legally be built on any lot smaller than five acres.

This is exactly the kind of government regulation that reduces the housing supply and raises prices. 

Keene officials wanted to do their part to make it less expensive to build single-family homes in large sections of the city. But about 15 people showed up to oppose the ordinance, with many saying it would change the rural character of the City of Keene. 

Spooked city officials promptly moved to withdraw and rework the proposed ordinance.

Meanwhile, prices continue to rise and pressure continues to build for legislative action. Activists are pushing hard for state laws to pre-empt local zoning ordinances or regulate prices.

If local governments don’t take more decisive action to trim regulations that limit housing supply, state-imposed solutions will come. It’s only a matter of time.