Zoning and Portsmouth’s ‘cursed’ gas station

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In May, Foster’s Daily Democrat reported the exciting news that celebrity chef Bobby Marcotte planned to convert an abandoned Portsmouth gas station into a unique Asian-Spanish fusion restaurant. 

Portsmouth has a certain cachet, cultivated by its inhabitants as well as its government. One might think that a super-fashionable, high-concept restaurant helmed by a local celebrity chef would be just the sort of thing to sail through the city’s approval process.

One might also be unfamiliar with just how absurd local zoning restrictions can be.

On August 17th, the restaurant concept that was met with such fanfare in May was rejected by a 4-3 vote of the Zoning Board of Adjustment. The Portsmouth Herald report can be read here.

The reason for the rejection? 

To make the restaurant work, Marcotte needed the ability to seat up to 100 customers during warm weather. The current zoning caps restaurant capacity at 50. 

Larry Gormley, attorney for Marcotte and his business Partner Paul Simbilaris, explained that the converted space would seat 50 people inside year-round, with an additional 40-50 people outside on a new patio when weather permits. 

The capacity would be “up to 90 or 100 at peak in the appropriate season,” Gormley said.

Board member Beth Margeson objected, saying the additional seating would bring too much traffic and parking to the neighborhood.

Gormley pointed out that the restaurant is within walking distance of the city’s new parking garage, which is where restaurant employees will be required to park.

Gormely didn’t say, but might have added, that the location is 0.4 miles (less than a 10 minute walk) from TWO parking garages, including the city’s new, $26 million Foundry Place garage, which the city itself acknowledges is only half full on a daily basis.  

The city built that garage for the express purpose of enabling additional commercial activity in the city, given the relative scarcity of on-street parking. 

The city has had several meetings to try to figure out how to increase the five-story garage’s use, as it has remained well under capacity since it opened in 2018. 

And yet the Zoning Board of Adjustment continues to cite on-street parking as a reason to reject commercial development within a short walk of the multi-million-dollar taxpayer-funded garage. 

“We think we’re presenting an amenity for people to walk to and from the area,” Gormley explained. 

But a majority on the board couldn’t see that.

Some members fixated on the current zoning’s 50-seat capacity limit and the idea that an increase might have people parking on side streets when the patio is open. 

Gormley didn’t even win over any board members when he described this restaurant’s food as “Asian-infused tacos.”

Not a single board member leapt up and screamed, “ASIAN TACOS!!”

Which seems weird. Not ASIAN TACOS. Those seem delicious. It seems weird that no one stood up and screamed, “ASIAN TACOS!!”

Even weirder, four Zoning Board members willingly chose an abandoned gas station over… ASIAN TACOS.

Not all board members chose a vacant service station over tacos filled, presumably, with things like General Tso’s chicken or seafood tempura. 

Board member Arthur Parrott said the restaurant “will be a net gain to the neighborhood and the city as a whole because the one thing that’s clear to everybody is what’s there now is an eyesore and is long deserving of an improvement. Does a gas station belong there? No, but it’s there, and we have to deal with it.”

That’s precisely the choice the board had. It was either an abandoned gas station, or a 50-seat ASIAN TACO restaurant with an additional 40-50 seasonal patio seats. 

But the nays envisioned a third option — a magical Ideal Use that would perfectly fit the zoning ordinance and be commercially viable for the long term, but which, mysteriously, no one has proposed in all the years the ordinance has existed.

“I think this is just too much restaurant use,” Margeson said.  

She added later that the property is “just seemingly cursed or something, I don’t know.”

Explaining his yes vote, Parrott said he’s voted four times on proposals to convert the property to a better use, and yet it remains an eyesore gas station. 

Given that record, maybe the property is cursed. 

Maybe, just maybe, the curse is that city officials have dictated an extremely narrow range of approved uses for the property, none of which is economically viable under current market conditions.

A majority of the board imagines that on some glorious day, someone will appear before them and propose a use that is both profitable and consistent with the severe restrictions set by the city’s ordinance.

Until that day, however, they’ll ensure that the property remains an abandoned gas station.

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N.H.’s Housing Appeals Board: A surgical approach to state land use intervention

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The Manhattan Institute has published an analysis of New Hampshire’s Housing Appeals Board that praises the new body as a narrowly tailored, small-government way to address the serious problem of arbitrary and ad-hoc denials of new housing construction. The board “respects localism while attempting to address the state’s housing crunch,” writes author Brian Chen.

Chen sums up the Housing Appeals Board this way:

“Amid worsening housing shortages, states across the country are considering how to reform land-use policy. For a promising model of how to achieve strong reform with relative ease, policymakers ought to look to New Hampshire. Its new Housing Appeals Board (HAB) provides efficient administrative review of local land-use decisions while respecting local autonomy.

“HAB represents a light-touch, small-government approach to state land-use policy. The board cannot review legislative enactments such as zoning or subdivision regulations; local governments can choose to zone however they wish. However, HAB does have broad power to review the discretionary and individualized processes, allowing it to reverse arbitrary and abusive decisions. HAB provides a superior alternative to judicial review, as its structure and process allow for a quicker and cheaper resolution of conflicts than the courts.”

The board serves as an administrative review panel where citizens can appeal local planning and zoning board decisions without having to undertake the expense of going to court. Its purpose is to ensure that local boards are following state law and their own local ordinances and rules.

The board will not fix the state’s severe housing shortage. It is merely a less costly tool for holding local boards accountable should they stray from existing laws, ordinances and rules. The difference it makes will come on a case-by-case basis. Over time, it should begin to discourage boards from making decisions based on political considerations and encourage them to stick with written policies. That should reduce some of the arbitrariness and unpredictability that has made it harder and more expensive for builders to meet the huge demand for new housing in the state.

The board began accepting appeals of local planning and zoning decisions in January. You can follow its cases and keep up with its activities at its website.

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New Hampshire starts 2021 with a severe housing shortage

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It’s the heart of winter, and home sales in New Hampshire are hotter than a leprechaun on a Lucky Charms-fueled bender in Vegas. 

December typically is a slow home sales month, for obvious reasons. But in December, 2020, sales were up 25% over December, 2019, and sales volume was up 49%, according to data tracked by the New Hampshire Association of Realtors. 

A home spends an average of only 33 days on the market in New Hampshire, down 47.6% from the previous December. And the median sales price hit $349,900, up 16%.

In December of 2019, housing experts were concerned because the median home price rose to $299.999, just a dollar shy of $300,000. In a year, the median price rose by nearly $50.000.

And that price increase happened as new listings rose by 30%. People couldn’t put houses on the market quickly enough to meet demand. There was 2.4 months’ worth of supply in the housing market in December of 2019. A year later, that was down to 0.9 months.

Just five years ago, the median home price in New Hampshire was $249,800, fully $100,000 less than today’s median. 

Although urban coronavirus refugees pushed demand even higher in 2020, it was far outstripping supply long before the pandemic hit.

A state report issued in December noted that even though 2019 was the sixth year in a row to experience a growth in the number of housing units permitted by local governments, “the level of building activity continues to be less than half of the level at its peak in the early 2000s.”

Housing totals illustrate how slow the pace of new construction has been.

Hillsborough County, home to the state’s two largest cities, had 166,050 total housing units (single-family, multi-family, and manufactured) in 2010. In 2019, it had 174,824, an increase of only 8,774, or about 5.3%. 

Statewide, total housing units rose from 614,238 in 2010 to 646,889 in 2019, an increase of 32,651, or just 5.3%. 

For contrast, the U.S. Census Bureau measured the change in housing units from April, 2010 to July, 2019 (so the time frame is different from the state’s by a few months). The Census figures show the total number of housing units nationwide rising by 6.1% from 2010-2019. The increase in New Hampshire was only 4.5%, by the Census’ count.

Rental housing is also in short supply, suffering from a severe shortage of new construction. The good news in 2020 was that the vacancy rate roughly doubled. The bad news is that it was below 1% last year and rose to only 1.8% this year. 

A healthy rental vacancy rate is considered to be 5%. New Hampshire last had a vacancy rate above 5% in 2009 — during the recession. Rents rise every year, driven largely by the extreme shortage of units, especially in places that are experiencing stronger economic growth. 

Legislators have introduced several bills to try to address the problem. But many of the bills focus on incentives and subsidies, as if developers need prodding from the Legislature to get rich selling homes people are clamoring to buy. 

The best way to get more housing is to reduce local government restrictions on the construction of new housing. Until that is done, anything else is just window dressing. Really, really expensive window dressing.

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Mask mandates and the urge to control

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Portsmouth’s City Council approved a mask mandate on a 7-2 vote last week. The city had fewer than five known active coronavirus infections the day the ordinance passed, meaning more councilors voted for the ordinance than there were active cases in the city, NH Journal pointed out. The city still has fewer than five known active cases.

Manchester aldermen are considering a mandate that would carry an absurd $1,000 fine. City Health Department Director Anna Thomas told aldermen the point of the ordinance would be to educate the public about the importance of wearing masks. 

No, the purpose of a public relations campaign is to educate. The purpose of a mandate is to force compliance. The purpose of a fine is to punish.

Manchester Community College charges only $215 per credit. For $1,000, you could take a course in the Health Sciences curriculum, say, Probability & Statistics, learn more about the value of mask wearing, and still have $140 left over. 

Manchester’s COVID-19 dashboard, as of Friday, Sept. 25, shows only 39 known active infections recorded in the city of 110,000 people. Most of those infections are in people who live outside the city. Manchester has only six active in-patient hospitalizations. Not one of them is a city resident, according to the city’s own data.  

This is hardly the basis for an ordinance compelling mask wearing on penalty of a $1,000 fine. 

Last month, Hanover, Lebanon and Enfield passed mask mandates, as did Durham, despite having few recorded infections. Nashua, the first N.H. municipality to pass a mandate, last week updated it to require that businesses refuse to serve customers who aren’t wearing masks.

The new language forces employees to confront customers, even if no one else is in the business, and even if the employee is a teenager who might not have the training or confidence to engage in such a confrontation. 

After months of declining infections, hospitalizations and deaths, the urge to impose mandates on the population is growing rather than shrinking. Municipalities are pushing forward with new or expanded mandates even when presented with evidence that the large majority of people already wear masks. 

Nationally, 85% of Americans say they regularly wear masks when in stores or other businesses. A casual walk in downtown Manchester or a trip to any area supermarket is evidence that most people already wear masks when outside the house. 

The new municipal mandates typically require that masks be worn within six feet of someone else. Yet the World Health Organization recommends maintaining one meter (three feet) of distance. The British Medical Journal has suggested basing distancing on level of risk, with outdoor, less congested places needing smaller distance requirements. But municipalities are acting as if six feet of separation is an unbreakable law of science that is universally applicable to all situations. It isn’t.  

Mandates are blunt instruments. They don’t allow for nuance or for in-the-moment decision-making. And they explicitly preclude people from using their own judgment in any circumstances. 

With a mandate, individuals, not trusted to make a good decision at any time, have their judgment entirely replaced by the judgment of elected officials. 

And so we have Granite Staters being subject to fines for not maintaining twice the WHO’s recommended distance, even when outside in non-congested spaces where the risk of spread is low.

The state confirmed on Thursday that only one case of COVID-19 has been linked to Bike Week, and not a single case has been linked to any other large, outdoor gathering, including two Trump rallies and a NASCAR race. Multiple Black Lives Matter protests did not cause an infection surge in New Hampshire. But the public is supposed to believe that two individuals passing on a sidewalk within five feet, 11 inches of each other is a public health emergency? 

The Josiah Bartlett Center has, from the start, recommended voluntary mask wearing based on the strong evidence that it reduces the spread of the coronavirus. We also recommended a state public relations campaign to encourage mask wearing.

Mandates, however, are not the same as education. Education informs, but does not compel. A mandate compels. It is an extraordinary measure to be reserved for the most extraordinary emergencies. Subjecting American citizens to fines as a means of “educating” them is an abuse of government power. 

The coercive power of government is not a tool with which to fine tune people’s sensibilities. It is a last resort to be deployed when all other options are exhausted and the consequences of inaction are most dire.

Too many elected officials consider their temporary access to the levers of power an entitlement that permits them to replace others’ judgment with their own, whenever they feel like it. 

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Eight police reform proposals

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In our republican form of government, all public employees, including police officers, exercise only the powers granted them by the people. All public employees serve the citizens and are accountable to them. The powers granted to public employees are altered from time to time as the people demand.

High-profile abuses of police power in recent years have led to widespread demands for increased accountability. In this paper, attorney Chuck Douglas offers eight proposals for reforming New Hampshire police practices and making officers more accountable to the people.

The eight proposals are:

  1. Make police discipline files public.
  2. Outlaw chokeholds or neck compression, regardless of the circumstances.
  3. Mandate body cameras and verbal warnings.
  4. Require officers to intervene, stop, and report misconduct.
  5. Improve screening and treatment for PTSD.
  6. Pursue more and better de-escalation training.
  7. Adopt better use-of-force policies that require force to be reasonable, necessary, and proportionate to the crime and circumstances.
  8. End officer immunity from civil lawsuits.

You can download and read the full report (in pdf format) here: Josiah Bartlett Center Eight Police Reform Proposals

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Regulations keep food trucks from riding to the rescue

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By Andrew Cline

Ken Spilman usually spends early April preparing B’s Tacos for the season. This week, the food truck he’s owned for seven years sits idle as he waits out the coronavirus. 

“We’re hunkered down and we’re not going to get out there until the curve starts to go down,” he said.

He’s already lost lucrative event contracts, he told the Josiah Bartlett Center.

“The cancellations are right across the board. We’ve lost a significant amount. I have contracts that have now been either canceled completely or rescheduled. Two weddings that were planned, early summer weddings, and they’ve decided to wait a year.”

In the rapid economic contraction following massive business closures last month, local regulations prevent Spilman and other food truck owners from improvising new ways to find clients. 

“I can think of neighborhoods in Londonderry and Derry that if I announced I’m going to be at this location on Wednesday night for an hour, I’d do very well. It’d be a huge opportunity for us food trucks to go into certain neighborhoods. It’d be more local. I could serve my local community instead of going down to Massachusetts.”

But food trucks generally are not allowed in residential zones. 

“Licenses or site vending permits shall not be granted for vending within any residential district,” states Londonderry’s vendor ordinance. 

“You’d be surprised how many people have reached out to me and said, ‘why can’t you come to our neighborhood like an ice cream truck,’” Spilman said. “With social media today, you really could come to a neighborhood.”

Location restrictions keep food trucks out of large portions of commercial and industrial zones, too. Portsmouth restricts food trucks to private property and a public parking space downtown. Seven sidewalk spaces are reserved for food carts. The city bans food trucks from doing business on city streets, with the exception of exactly one downtown parking space this year. (The ordinance allows for three.) The parking space is auctioned to the highest bidder annually. By ordinance, the starting bid is $5,000. 

State law requires food vendors to get a state license ($50), which allows them to operate everywhere in the state. They remain subject to local regulations. Fifteen New Hampshire municipalities regulate where, when and how food trucks can do business. Food truck operators say the local regulations are highly restrictive and the fees expensive. 

This month, with Granite Staters ordered to stay home and non-essential businesses closed, ordinances prohibit food trucks from going where their customers are — homes, public parks and hospitals — and force them into deserted downtowns and big-box-store parking lots.

“They could be operating more freely,” Aaron Krycki, environmental health supervisor for the City of Manchester, said. 

“Rules aren’t designed to tell you what you can do,” Krycki said. “They’re designed to tell you what you can’t do.”

But for food trucks, local regulations are so broad that they often amount to a short list of places vendors may operate.

Manchester reserves Stanton Plaza on Elm Street, in front of the DoubleTree hotel, for food truck vendors. It lets truck owners bid on spaces at eight city parks. Vendors must get written permission to use any other public property — and most private property as well. 

The city’s regulations require vendors to obtain “written permission of the abutting landowner and/or tenant” to do business on private property, even their own.

In Manchester and many other municipalities, it is illegal to sell food from an on-street parking space even if your truck is fully licensed, inspected, fits in the space, and the meter is paid. 

Cities typically prohibit food trucks from doing business on public streets even if not obstructing traffic. Some, like Manchester and Keene, make exceptions for “frozen confections” vendors (ice cream trucks). 

There is not a single licensed mobile ice cream truck in Manchester, and there hasn’t been one in years, according to the city clerk’s office. So Manchester residents stuck at home during the state of emergency can’t even be cheered up by a visit from the ice cream man. 

Keene generally prohibits mobile food vendors from doing business on public property, including roads and parking spaces, with a few center city exceptions. 

“We do have some locations downtown on the sidewalk where we allow food carts to be. Five right now,” Assistant City Clerk Terri Hood said. “They go through clerk’s office to get permission to use the space. In addition to normal license, they have to have additional license agreement and small rental fee.” 

The fee is $250 for a one-year permit, she said. 

Ice cream trucks can roam most Keene neighborhoods (there’s a list of narrow streets they are not authorized to use). But food trucks cannot sell in any residential area unless invited to cater an event on private property.

Keene recently revised its parking ordinances so city officials could allow vending from parking spaces at their discretion. Vending is allowed in “parking spaces or parking lots as may be designated from time to time by the city….”

Among food vendors, Concord and Portsmouth have reputations for being prohibitively strict and expensive. 

“I won’t go to Concord because of how expensive it is,” Spilman, owner of B’s Tacos, said. 

Concord’s license costs $212. (Nashua charges $10 for a day, $25 for a week, or $100 for a year.) 

Concord prohibits food vendors everywhere except in the central business district “at locations approved by the Licensing Officer.” By ordinance, “approved locations are limited to Eagle Square and to four (4) within the public way.”

That’s it for the city. Even for authorized spaces, vendors must get “the written approval of the landowner and tenant in front of whose property and business the applicant intends to operate and the written permission of the majority of the two (2) adjacent businesses located on both sides of the proposed location.”

With so many restaurants downtown, that likely means getting the permission of a restaurant owner, which is highly unlikely. 

“In Concord, if you could set up in front of the State House, that would be great, but they’d never let you do that,” said Chris Kozlowski, the award-winning owner of Crescent City Kitchen, a mobile food trailer. 

Some cities make the restaurant protectionism even more explicit. Manchester bans food trucks from doing business within 50 feet of a restaurant that sells a similar product. A truck that sells hot dogs, for example, can’t operate on the street near a restaurant that also sells hot dogs.   

That provision is probably unconstitutional. In 1979, the Los Angeles Superior Court in People v. Ala Carte Catering Co. struck down just such a regulation as unconstitutional, calling it a “rather naked restraint of trade.”

In 2011, the Institute for Justice, a public-interest law firm, sued El Paso, Texas, over its ordinance prohibiting food trucks from operating within 1,000 feet of any restaurant, grocer or convenience store. Rather than face a trial, the city repealed the rule, acknowledging that it served no public health purpose. 

The Los Angeles case helped food trucks to flourish there. The city is considered by many foodies to be the birthplace of gourmet food trucks. Its regulations are cited as a model for other municipalities because they are focused on health and safety and largely avoid anti-competitive restrictions.  

Remarkably, New Hampshire municipalities have food truck regulations that can be more burdensome than those in New York City or L.A. Even when one city’s regulations are relatively easy to meet, the costs of complying with different rules in multiple places adds up.

“The hardest thing about New Hampshire is that it’s not state-based, it’s not county-based, it’s local rule,” Krycki, Manchester’s environmental health supervisor, said. “Every individual town can create a list of ordinances that can differ from one location to another.” 

Kozlowski, who operates in New Hampshire, Maine and Massachusetts, estimated that he spent roughly $1,500 on government fees in New Hampshire alone last year. 

“I have a wall full of licenses inside my trailer,” he said.

The paperwork can be duplicative too. 

“The thing with the hawkers and peddlers that blows my mind is that you have to get a background check with the state, and then they want another for the permit, so it’s just a tax grab,” Kozlowski said. 

Some municipal officials understand how burdensome the rules can be. 

“I think the biggest issue that these food trucks face, and a lot of the complaints I get, is finding an area. That’s tough,” said Stacy Disabato with the Manchester City Clerk’s office. 

Having fielded lots of queries about the lack of food trucks over the years, there is interest at City Hall in becoming more accommodating, she said. 

“Anything we can do to bring business here, we’re really interested in learning.”

In Rochester last month, city officials invited four local food truck operators to set up in normally prohibited public spaces so they could keep their businesses alive.

“With the Covid-19 situation, their events and catering gigs had all dried up,” Rochester City Manager Blaine Cox said. “Two of our food trucks had semi-permanent locations. One was at the Home Depot and another was at the Harley Davidson dealership, and they were closed.

“They were basically shut out. And at the same time, with the governor’s order, we had quite a number of fixed-base restaurants that shut down. They didn’t bother to go to takeout, they just shut down.

“We reached out to our food truck operators and said, we know your business is drying up. If you’d like to come downtown, we have space for you.”

The idea was to keep the city’s four registered food trucks in business. With one of the newer operators, it worked, Cox said.

“One of our food truck operators said, If you guys haven’t done this for us, we wouldn’t survive.”

Food truck operators say the burden of so many costly and varied local regulations makes it hard to work in New Hampshire. 

“It seems to me that other states have their ducks in a row,” Spilman said.

If municipalities do not begin lifting onerous restrictions, state legislation is possible. 

Earlier this year, Kozlowski and other food truck operators went to Concord to petition legislators to adopt uniform, statewide regulations. They say they would rather have one set of state rules and a single fee than 15 different local ordinances and thousands of dollars in fees. 

Other states have already acted. 

After fielding similar complaints for years, Arizona legislators in 2018 passed a statewide food truck licensing bill that limited local regulatory authority. That same year, Rhode Island adopted a similar law that exempts food trucks from local hawkers and peddlers licensing. 

If municipalities want to avoid a statewide law that overrides their own ordinances, Los Angeles and some other California cities offer useful models. Food trucks flourished in L.A. after the city repealed regulations that restrained trade. Cities such as Fresno wrote regulations that achieved public safety goals without being overly restrictive. 

A 2012 Institute for Justice report, Food Truck Freedom, offers a list of suggested policies that would remove needless barriers while maintaining health and safety standards. The following suggestions are put together from recommendations made by food truck operators and the IJ report. 

To make immediate changes, leaders in municipalities that have declared a state of emergency might be able to relax rules temporarily during the state of emergency. This short-term measure could let food truck owners serve immediate local needs and relieve them from the burden of complying with regulations that sequester them to now-vacant downtowns.

  1. Lower hawker and peddler fees. These fees should exist only to cover nominal paperwork costs, not to raise revenue or discourage applications. Fees that range into the hundreds of dollars are clearly unreasonable burdens that have no relation to actual application costs. 
  1. Remove “abutter approval” language that gives neighbors a veto over a food truck’s location. These rules have no relationship to public health or safety and are merely a restraint on doing business. 
  1. Remove any language that restricts food truck operation within a certain distance of a restaurant. These restrictions are likely unconstitutional and should be removed immediately. In any case, they harm consumers by giving established businesses a veto over potential competitors. They also hurt other local businesses by keeping popular food trucks, and the customers who seek them out, away.
  1. Allow food vendors to operate on public streets and sidewalks as long as they do not obstruct traffic. Instead of creating specific set-back distances, Fresno, Calif., simply requires that vendors not “obstruct the free movement of pedestrians or vehicles on any sidewalk.”
  1. Allow food trucks to do business in any metered parking space for the duration of the meter. This will free vendors to find the spots most convenient for customers while preventing them from taking a space all day. 
  1. Allow food trucks to operate on residential streets. These prohibitions sometimes are handled by zoning departments, which treat food trucks as if they are opening a permanent store in a neighborhood. They are not. Food trucks can take orders by apps or online, just as take-out restaurants do, and deliver directly to customers’ homes. They also can use apps and social media to respond to customers’ location requests. Instead of cruising streets like an ice cream truck, some food trucks can stop and vend for a few minutes or a few hours in neighborhoods at the request of residents.This would be an especially valuable service during a stay-home order. 
  1. Allow food trucks to operate on more public property, particularly in parks and parking lots. Though many municipal ordinances limit food trucks to a few public locations, city officials often retain the authority to open other spaces at their discretion. The result is a random, unpredictable, and changing list of extremely limited available spaces. Food truck vendor locations should not be subject to the whims of municipal employees. A better policy would be to open parks and off-hours parking lots as a rule. Scarce space, such as near public swimming pools in the summer, can be put out to bid. Manchester auctions food truck spaces at eight city parks. 
  1. Let vendors compete. Manchester prohibits two trucks of the same type from being at the same park. Because there are so few vendors (only eight food trucks bid for eight park spaces in 2019), it hasn’t been an issue recently. But in more popular parks it could hurt consumers once food truck business expands. Vendors often respond to trends (cupcakes, for example). A city might have multiple grilled cheese trucks but no burger truck one year, then four hot dog trucks the next year. There’s no public harm in having two taco trucks at the same park. Limiting options, though, could keep prices higher and reduce consumer choices. 

Andrew Cline is president of the Josiah Bartlett Center for Public Policy.

Download a pdf copy of this report here: JBC Food Truck Regulations.

 

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Government-inflated rents hurt even more during periods of economic decline

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On April 1, rents were due for the first time since Gov. Chris Sununu declared a state emergency on March 13. News organizations reported on Granite Staters struggling to pay rent after suffering significant income loss in March.

As communities come together to help each other through these difficult situations, it’s important to understand that renters in New Hampshire have been squeezed for decades by a problem identified years ago and never fixed: government-inflated rental rates.

Emergency aid and help from caring communities can provide short-term relief during the next few months. But long-term rent relief can come only by addressing the apartment shortage created by local government regulations. 

In 2002, a legislative commission created to study workforce housing concluded that local government regulations were making rents unaffordable for many families. (The commission’s report was titled “Reducing Regulatory Barriers to Workforce Housing in New Hampshire.”)

“Individual communities, each acting in its own economic self-interest, have disconnected the State’s local housing markets from the rest of our economy and created an artificial scarcity that has driven prices beyond the reach of a large and increasing number of working families,” the commission found.

In 2008, the Legislature tried to provide relief by passing a workforce housing law that required municipalities to create “reasonable and realistic” opportunities for workforce housing. 

Twelve years later, rents are still rising as municipal housing restrictions have continued to strangle the supply of rental units.  

Data collected by the New Hampshire Housing Finance Authority illustrate the problem. 

The average rent for a one-bedroom apartment in New Hampshire rose from $587 in 2000 to $1,055 in 2019. Had rents risen at just the rate of inflation, the price would be $871, or $184 less than the 2019 rate. 

The average rent for a two-bedroom apartment rose from $774 in 2000 to $1,347 in 2019. Had rents risen at just the rate of inflation, the price would be $1,149, or $198 less. 

Saving $198 a month on rent would come to $2,376 a year. Some people who can’t pay rent this month because their hours were cut or their employer closed might have been able to cover a payment that was $184 or $198 cheaper.

As the 2002 legislative report noted, rents are being pushed up by local government regulations that have created an artificial scarcity in the rental housing market. For decades, demand for apartments and multi-family homes has far outstripped supply. Not enough rental units are being built because local governments have made it extremely difficult to build them. 

That inescapable fact is reflected in the state’s shockingly low rental vacancy rate. A healthy apartment vacancy rate is around 5 percent. New Hampshire’s rental unit vacancy rate in 2019 was 0.6 percent. The rental vacancy rate for the United States at the end of 2019 was 6.4 percent, according to the Federal Reserve Bank of St. Louis. 

New Hampshire renters have been burdened for decades by regulations that have prevented the supply of rental housing from matching demand. In boom times, restrictions on the construction of rental housing give the appearance that growth is being limited at no cost. But the cost is always there, and it hurts the most during times like this when thousands of people are losing their jobs or having their pay reduced.

If New Hampshire communities want to be places where everyone can find a home, the supply shortage will have to be addressed.

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Rent control rhetoric vs. reality

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Last November, Ontario’s government scrapped rent controls for new rental properties. Activists called it class warfare against low-income renters and predicted huge rises in rents.

“The class war fare (sic) launched by Doug Ford’s mean-spirited government continues. Their regressive policies including removal of rent control is going to make Toronto and Ontario less affordable and livable. That’s unacceptable. We must fight this,” tweeted a self-described “human rights activist” in Toronto.

A Toronto city councilor tweeted: “Doug Ford’s decision to remove rent control from new buildings will make Toronto even less affordable. It removes tenants’ rights & drives young people out of our city.”

Eight months later, Bloomberg reported that a spike in new apartment construction and permits had created a “record apartment surge” in Toronto. The rapid addition of new units pushed the vacancy rate up to its highest level in four years and slowed the high rate of rent increases.

“The vacancy rate rose to 1.5% in the second quarter, the highest since 2015, when research firm Urbanation began tracking the data. Rent increases eased to 7.6% from 10.3% last year, bringing the cost of an average-sized unit of 794 square feet to C$2,475 ($1,894).”

This outcome should have been as surprising as hearing a Canadian say “eh.”

Reams of research show that removing rent control laws raises rental property values, encouraging construction and leading to an increase in the supply of rental housing. That increase in supply, if not artificially restricted, puts downward pressure on rents.

A Stanford University study published in March found that rent control in San Francisco reduced the supply of rental housing by 15 percent. “Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.”

“In addition, the conversion of existing rental properties to higher-end, owner-occupied condominium housing ultimately led to a housing stock increasingly directed towards higher income individuals. In this way, rent control contributed to the gentri􏰃cation of San Francisco, contrary to the stated policy goal. Rent control appears to have increased income inequality in the city by both limiting displacement of minorities and attracting higher income residents.”

New Hampshire has its own version of rent control: Local land use regulations.

Needlessly burdensome restrictions on the size, location and type of apartments reduces the number of available units. These government-imposed constraints on the supply of rental units raise rents.

That, in turn, makes it harder for high-school and college graduates to afford to stay in New Hampshire after they leave the nest. And a shortage of rental units makes it more challenging for employers to recruit new talent, which puts an artificial restraint on economic growth.

It’s been widely reported this summer that many New Hampshire employers face a severe shortage of workers. A contributing factor is that many local governments have priced younger people out of the housing market.

More apartments would mean lower rents, which would make the state (Rockingham and Hillsborough Counties in particular) more accessible and attractive to the people employers are trying to hire. The same goes for single-family homes.

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Energy and housing’s self-inflicted wounds

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New Hampshire Public Radio reported this week on a study showing that rural New Englanders pay a higher percentage of their income on energy. This isn’t really new information. But it was a slow news week and the report’s recommended solutions seemed written to get NPR listeners to spill their morning coffees from their pledge drive mugs from all the vigorous head nodding.

The study concluded that Americans on average spend 3.3 percent of their income on energy, but for rural households the burden rises to 4.4 percent. In New England, rural households spend 5.1 percent.

The proposed solution? Energy efficiency projects. It’s probably a total coincidence that the report was released by a group called the American Council for an Energy Efficient Economy.

It’s true that making homes more energy efficient reduces energy use, thus reducing bills. ISO New England, the non-profit that runs New England’s energy grid, noted in this year’s Operational Fuel-Security Analysis that New England states have collectively spent more than $1 billion to improve energy efficiency, slightly tapering energy demand.

Since 2005, electricity demand in New England has fallen from a combination of the recession, milder weather, increased adoption of small-scale solar power, and energy efficiency investments, according to ISO New England.

Yet energy remains extremely expensive and the region remains at risk of rolling blackouts during periods of peak demand. Another billion dollars on energy efficiency could help shrink demand a little more, but it’s not going to solve the cost and supply problems.

To ensure enough capacity for peak demand times and to bring down prices for everyone — from low-income rural households to major manufacturers — we need more infrastructure and fewer rate-raising regulations like subsidies for politically favored power producers.

ISO New England projects a 4,600 megawatt reduction in power generation capacity by June of 2021. But states and communities are rejecting the construction the new infrastructure needed to replace those megawatts.

ISO New England figures show that in 2000, coal and oil generated 40% of New England’s electricity, and natural gas just 15%. By 2015, natural gas generated 49% and oil and coal just 3%.

Fracking fueled this change. Since 2009, natural gas has become much cheaper than coal and oil (and it produces fewer emissions). But we can’t tap it from maple trees (unfortunately, because flaming maples would be pretty great on Halloween).

We need pipelines to bring natural gas here. Without more pipelines, we’ll continue seeing high prices and more ships from Russia and other energy exporting countries docking in Boston.

In recent years, pipeline projects have been rejected throughout New England with such animosity that you’d think they were importing emerald ash borers or New York Yankees players. For proposing to bring enough fuel to ensure that Red Sox Nation survives winter, they’ve been run out of town. That’ll show ‘em.

We’ve artificially restricted our energy supply and raised rates by blocking construction and heavily regulating the sector. This has hurt rural and low-income residents.

And by the way, our housing policies have done the same thing.

Rural residents tend to live in older homes, and older homes are less energy efficient. The subsidized winterizing of old homes is always the recommended approach, but it is not going to address the underlying problem, which —like energy generation — is one of artificially restricted supply.

Home construction costs are at record highs because of rising labor costs, land costs, lumber costs, credit costs, and regulations. Every one of these costs is being driven higher by government policies — from immigration to tariffs to zoning to building codes to financial regulations. Regulatory costs account for 24 percent of the price of a new home, according to a National Association of Home Builders study.

If we scaled back housing, labor, land use, trade, and energy regulations, we would see energy and home construction prices rise less quickly or even fall. People of all income levels could better afford to buy, heat, and live in new homes.

But untangling those regulatory webs is difficult. It’s simpler to ask legislators to meddle in the markets by passing laws to shield lower-income residents from the consequences of the legislators’ past meddling.

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Gangster Tactics

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If you live in New Hampshire and enjoy wine, there’s something you should know (besides how approach a tasting). Your own state government, which sells wine, wants to be your primary supplier. Really, it wants to be your only supplier, but the Legislature won’t allow that. So to satisfy its impulse to smash all enemies, it’s rigging the wine market to kneecap upstart competitors.

The New Hampshire Liquor Commission both sells — and regulates the sale of — alcohol. This blatant conflict of interest gives it the power and incentive to limit its competition. Naturally, it uses that power.

After Prohibition, the Liquor Commission was the state’s only alcohol retailer. In the decades that followed, it aggressively fought the private-sector sale of beer and wine, changes that were proposed and ultimately ordered by legislators, who have grocers and drinkers as constituents.

Today, the commission is fighting a new competitor — direct wine retailers. The Liquor Commission is this week acknowledged that it has been systematically banning the direct-to-consumer sale of wines that are also sold in state liquor outlets.

The National Association of Wine Retailers this week called the commission’s actions “gangster tactics.”

During Prohibition, gangsters controlled the production and distribution of alcohol and snuffed out competitors. Ironically, the Liquor Commission, which was created to control alcohol distribution after Prohibition ended, wound up operating like a more lawful version of La Cosa Nostra. It pursues competitors relentlessly and does what it can to eliminate, or at least handicap, them.

Using the word “gangster” to describe the behavior of New Hampshire officials might call to mind images from a Weird Al parody. But where the power to whack competitors exists, it’s used.

Occupational licensing laws often grant specific industries the power to restrict competition. Licensing boards, made up of practitioners of a particular trade, are empowered to both practice and regulate that trade. Not surprisingly, they tirelessly suppress competition and seek legislative authority to further restrict entry into their field.

Public schools succeeded sank an Education Savings Account bill that would have expanded the definition of what constitutes a public education. It would have allowed families to spend the state portion of their public education dollars at non-public schools (local dollars would remain with the local public school district).

Perceiving this as a competitive threat, public school administrators, some local school boards, the teachers’ unions, and their political allies fought hard to maintain their advantage. They successfully turned enough Republicans against the bill to kill it in the House.

Even preppy suburbanites do it. Municipal officials and voters regularly approve ordinances to limit new business and home construction, reducing competition and raising prices.

It’s not that institutions granted such power attract people with a lust for blood and conquest. It’s that the combination of incentives and opportunity leads inevitably to anticompetitive behaviors.

So if you wondered why you could no longer order your favorite wine online, wonder no more. The Liquor Commission’s been taking a lead pipe to the knees of your favorite winery.

This was originally published in our weekly email newsletter, for which you can sign up here.

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