How housing regulations push youth to socialism

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Jason Sorens at the American Institute for Economic Research has posted a provocative essay connecting young people’s affinity for heavy-handed government economic intervention to overly restrictive land use regulations.

Restrictive land use regulations play a significant role in driving housing costs higher. That’s very well documented.

Government zoning regulations that limit homebuilding are a big factor in housing costs over the long run. A lot of research has shown this, but so does common sense. Look at the populations of Boston, Houston, Miami, and San Francisco over time. Between 2010 and 2020, Boston’s county (Suffolk) grew 2 percent, Houston’s county (Harris) grew 16 percent, Miami-Dade grew 7 percent, and San Francisco County grew 8 percent. Clearly, San Francisco’s huge expense is not solely a result of hot demand; otherwise, its population growth rates would be much higher than those of the others. Boston also looks pretty bad when you compare rents to population growth, while Houston looks amazing. It has accommodated rapid growth at moderate rents.

What’s less well known is that persistently high housing costs, caused by a long-term supply shortage, price younger adults out of the housing market, and in their frustration they demand government remedies. The longer the shortage persists, the more extreme their proposed remedies become.

Right now, left-of-center states and localities are experimenting with rent control and public housing, would-be solutions to the problem of rising rents that economists know are incredibly costly. Simply reforming zoning would be a better solution.

Not only do artificial restrictions on the housing supply turn people toward radical economic interventions, but they also tend to make communities more left-leaning over time.

A standard-deviation increase in housing regulation makes a place shift toward the Democrats about three percentage points over the next eight years, because noncollege voters, who are becoming the Republican base, move out.

“But won’t building apartment high-rises bring in more Democrats than Republicans?” I often hear. Yes, usually, but by increasing housing supply these high rises will make single-family homes cheaper in the suburbs, keeping blue-collar families from moving to Texas or Florida. And building tract subdivisions in the suburbs directly helps blue-collar families stay put.

Many Democrats and progressives are at least somewhat free-market on housing, because they want to keep rents down. That’s admirable. On the other hand, democratic socialist types insist on harmful “solutions” like rent control and public housing. Republicans and conservatives have largely sat on the sidelines of zoning reform so far. But the data strongly suggest that to fight the radical left, we need to build more homes.

A lot of Republicans and conservatives believe that strict zoning is a way to protect their communities politically right-of-center. The opposite tends to be true. It makes them more left-of-center over time and causes people, particularly the young, to seek more government economic interventions.

 

 

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N.H. becomes first New England state to grant universal license recognition

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Two weeks after New Hampshire posted a record-low unemployment rate of 1.9%, Gov. Chris Sununu signed two bills to make it easier for licensed professionals from other states to work here. 

New Hampshire requires state-issued licenses for dozens of occupations, from barbers and cosmetologists to doctors, landscape architects, and even foresters. For decades, anyone who held an out-of-state license to practice in one of these fields had to first get a separate New Hampshire license before being allowed to practice here. 

House Bill 594 ends that regulatory nightmare and grants universal recognition for occupational licenses that are “substantially similar” to New Hampshire licenses. 

The adoption of HB 594 makes New Hampshire the only state in New England with broad universal license recognition. (Vermont recognizes out-of-state licenses for some but not all occupations). 

Research on licensing recognition suggests that this should produce a noticeable increase in in-migration by licensed professionals who live in other states.

A study published in May by the Archbridge Institute found that universal license recognition produces an almost full percentage-point increase in employment in covered occupations and a 50% increase in immigration into recognition states among people who hold licenses that aren’t easily portable because the regulations vary a lot from state to state.

HB 594 allows the state Office of Professional Licensure (OPLC) to issue professional licenses to out-of-state applicants who hold a license in another state, provided that the other state’s licensing requirements are “substantially similar” to New Hampshire’s.

The “substantially similar” language is not ideal, as it often serves as a pretext for state licensing boards to reject license applications from out-of-state competitors. But HB 594 and a companion bill, House Bill 655, shift more authority from individual boards to the OPLC, which is expected to limit those anti-competitive board interventions.

HB 594 streamlines what was otherwise a tedious regulatory process for out-of-state professionals looking to work in New Hampshire. Not only did license holders have to obtain a separate New Hampshire license, but they often had to wait weeks or even months for their industry’s particular regulatory board to meet, consider their application, and vote on it. 

Now, anyone with an active license in good standing from another jurisdiction can apply directly to the OPLC and obtain permission to work in New Hampshire almost immediately. 

Once limited to only a few fields, such as medicine and hair care, occupational licensing “affects nearly 1 in 5 American workers,” research by the Institute for Justice shows.

By establishing a procedure to recognize most out-of-state licenses automatically, New Hampshire becomes a more attractive option for skilled individuals seeking to bring their talents to a new state. 

For fields in New Hampshire with critical labor shortages, such as nursing, the change could provide a desperately needed supply of new workers.

The greatest beneficiaries of universal licensure might be New Hampshire’s small businesses. Among the many trades affected by licensing in the state are tattoo artists, massage therapists, architects, barbers and cosmetologists, chiropractors, foresters, psychologists and other mental health professionals, real estate agents, occupational and physical therapists, and electricians.

An increase in skilled labor will benefit consumers too. Occupational licensing has been shown in academic studies to limit the supply of service providers and increase costs. Universal recognition won’t necessarily lower costs across the board, but it could stabilize prices in fields with serious labor shortages. And by attracting more providers to the state, it can reduce wait times and increase access to services.

The governor’s approval of the two bills was immediately noticed by policy leaders in other New England states that don’t have universal license recognition. Responding to the news, the Maine Policy Institute tweeted, “File this in the big folder of things that NH does far better than Maine.”

Massachusetts, which ranks fifth in the country for residents leaving the state, according to USPS change-of-address data from Forbes, might want to keep a particularly close eye on the number of licensed professionals who disappear from state registries in the next few years.

Nationally, New Hampshire joins only 14 other states (Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Mississippi, Missouri, Montana, Ohio, Pennsylvania, Utah, Virginia, and Wyoming) with broad universal recognition laws, according to recent studies by the Archbridge Institute and Goldwater Institute.

Four of those states (Colorado, Montana, Pennsylvania, and Wyoming) require out-of-state licenses to be “substantially similar” to their own, like New Hampshire. But unlike five of those states (Arizona, Arkansas, Iowa, Kansas, and Mississippi), New Hampshire doesn’t require residency to receive a license to practice. This means that barbers or nurses in Massachusetts could quickly be licensed to work in New Hampshire without having to move over the border (where housing is extremely hard to find).

The companion bill, HB 655, consolidates and simplifies licensure authority within the OPLC, moving its authority to a separate location in state law and authorizing the OPLC to act with more speed and independence than in the past.

Taken together, these bills, now law, promote greater efficiency in state licensing and reduce bureaucratic barriers that never should have been erected in the first place.

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Legislators remove sales cap for home-based food operations

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It just got a lot easier to grow a home-based food operation in New Hampshire.

It’s long been legal to make what the state defines as non-dangerous food products in your kitchen and sell them to the public, under certain conditions. One of those conditions has been a cap on total sales revenue. If you sell no more than $35,000 worth of food, no state license is needed. A penny more, and you’re subject to state licensing and inspection.

Until July 1, that is.

House Bill 119, adopted on Thursday, removes revenue as a condition that would trigger state licensure. 

As introduced, HB 119 would have doubled the sales cap to $70,000. But the House struck the income threshold entirely, and senators agreed to the change. Restrictions on food types and sales locations remain in place.

This might sound like a controversial change, but the bill sailed through the Legislature, passing the House in March and the Senate in May, both on voice votes. Fifty-three people signed up to testify on the bill during its Senate hearing, none in opposition. A veto is not expected from the governor. 

The sales threshold had just been raised from $20,000 to $35,000 last year. Legislators’ efforts to rapidly expand and then eliminate that threshold are a testament to the growth of home-based food businesses in recent years and the general acknowledgement in Concord that the sales limits have served no valid public health purpose. 

That’s probably because you can’t sell just anything you make in your kitchen. RSA 143-A:12 defines a homestead food operation as one in which food is prepared entirely in a residential kitchen, but the law prohibits these small businesses from selling foods that require temperature control (think dairy products or anything else that must be frozen or refrigerated) and certain canned foods. Sales locations are also limited to residences, farm stands, farmer’s markets, and retail locations. A home-based food business that meets those conditions is exempt from state regulations that apply to food service establishments and retail food stores.

There was bipartisan agreement in both the House and Senate that eliminating the sales threshold would eliminate a needless burden for home cooks, bakers, jam makers, and similar food vendors who sell non-hazardous food products prepared in a residential kitchen. 

A small, home-based food business, for example, will be able to scale up without having to worry about becoming subject to state licensure after a few successful fall fairs. 

The House Environment and Agriculture Committee “heard in testimony that the current annual gross sales threshold is not even tracked or reported by DHHS Food Safety Division, and there is no violation penalty for going over the current threshold, so there is no real reason to have it in current statute,” according to the committee report. “Also, the one size fits all approach on annual gross sales makes no sense due to the varying sale price of goods offered for sale, and this bill will also eliminate that issue,” the committee further noted. 

Non-potentially hazardous foods that home-based entrepreneurs will be able to sell more freely include breads, baked goods, candy, fudge, packaged dried products, dried herbs, roasted whole bean coffee or ground coffee, and jams and jellies, among others. 

Examples of potentially hazardous foods that homestead food operations are prohibited from selling include “processed acidified and low-acid canned foods” like pickles, salsa, and relish. Others include meat, poultry, fish, eggs, milk and other dairy products, cut fruit and vegetables, baked potatoes, mushrooms, and more. 

By removing the maximum sales cap, HB 119 would improve New Hampshire’s standing amongst other states’ homestead food laws. According to a survey by the Institute for Justice of homemade food laws across the 50 states, New Hampshire has an overall C grade and a C+ for its homestead license laws (before HB 119).

Massachusetts and New York have similar grades of C and C+, respectively, while Florida has a B-, Tennessee has a B+, and Maine has a B+ in cities and counties with their own food sovereignty ordinances. 

While the bill removes a state-level regulatory hurdle, New Hampshire will still have 15 self-inspecting cities and towns with their own licensing requirements for homestead food operations within their borders. 

The only drama involved with this bill came when legislators tacked on an amendment allowing the sale of uninspected elk and red deer meat in addition to bison.

The bill exempts farms that raise elk or red deer for human consumption, as well as their direct sale, from licensing and inspection requirements, provided the animals are slaughtered and processed in accordance with state law. The slaughtering of these animals and their preparation for sale are also exempt from inspection.

HB 119 adds elk and red deer to the labeling and purchasing rules that already exist for uninspected bison. 

The legislation itself sunsets these changes regarding elk and red deer meat. Unless reauthorized by the Legislature, these food service and meat inspection exemptions will automatically end in 2025. This allows the state a two-year period in which to test whether eliminating regulations causes any public health issues. 

The easy passage of HB 119 is an encouraging sign that legislators are paying closer attention to unnecessary food regulations that burden residents without improving public health. 

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When ‘market rate’ doesn’t mean ‘affordable,’ government’s probably involved

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The Portsmouth Planning Board did something remarkable last week. It ever so slightly loosened its iron grip on a small portion of the city’s iconic downtown. And in the loosening, a lesson fell out. 

Local investors want to create at 238 Deer St. a mixed-use building with 21 micro apartments. These units would be no more than 500 square feet and would have no on-site parking. 

Though the location is a short walk from the city’s $26 million Foundry Place parking garage—built specifically to facilitate additional commercial activity downtown—the developers needed permission from the Planning Board, in the form of a Conditional Use Permit (CUP), to build those tiny apartments without on-site parking spaces.

A dispute over the need for private parking dragged on for two years, and last week the board voted, despite some member misgivings, to grant the CUP. 

That’s a huge decision, for many reasons. Among them, it separates housing from parking not just for this project but possibly for others in the future. Planning boards typically insist on maintaining minimum parking requirements that raise housing costs and occupy real estate that could be turned to more productive uses. 

It also allows tiny apartments to fill a huge market need in Portsmouth, where astronomical housing prices are driving away lower-and middle-income people.

During the board meeting, members kept asking about the rental price of the apartments. The developer’s attorney at one point answered, “…it’s going to be market rate, it’s not going to be affordable, that’s really all we can tell you at this point.”

This comment might not sound off to a lot of people, but it would be a strange thing to say about most products.

Why should there be a difference between “market rate” and “affordable?”

We don’t think of most other consumer goods in these terms. 

No one says, “the bananas are going to be market rate, not affordable,” or “are you pricing those chainsaws at market rate, or are they ‘affordable?’”

Sure, we browse clearance racks, wait for sales, clip coupons, buy generics or store brands, ransack the corner drugstore in protest of systemic oppression. (OK, maybe you do only some of these things.) But for most consumer goods, we don’t conceive of there being a market price and a separate “affordable” price. 

That’s because the market, if allowed to, will provide a gazillion options of most products at a wide range of prices.

If you need toilet paper, the market offers everything from wafer-thin sandpaper to quilted, pillow-soft rolls that smell like a flowering Alpine meadow in spring. 

If you need a car, you can pick up a no-frills Nissan Versa (MSRP: $15,700) or save up a little longer and spring for the slightly flashier Bugatti Chiron Super Sport (MRSP: $3.4 million).

If you need a cell phone, you can get a Nokia flip phone for $19 (less than the price of a 12 piece KFC bucket) or a Samsung Galaxy Z Fold 4 for around $1,800.

Sure, housing prices have a range, too. But in housing, government regulations have literally outlawed the construction of many options at the lower end of the range. So builders can’t offer the lower-price fare that manufacturers are able to offer in most other industries. 

And so we talk of “market rate” housing and “affordable” housing. That’s not because the market doesn’t want to provide less-expensive options. It’s because governments don’t want the market to provide those options. 

As Mark Perry has demonstrated, markets tend to lower prices and improve quality unless government gets in the way. Industries in which government regulations have prevented robust competition (health care, education, housing, child care) have experienced steady price increases, while less regulated industries have experienced price declines. 

Remove the regulatory barriers, and the market will be happy to provide micro apartments, tiny homes, duplexes, in-law apartments, single-family homes on half-acre lots and any number of other less-expensive options for people who want them. 

Once the supply catches up with demand, “market rate” will become “affordable” in housing just as in most other markets.

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NH Zoning Atlas offers groundbreaking insight into local building restrictions

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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.

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The Boston Globe agrees: local regulations are the root of the housing shortage

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When the Josiah Bartlett Center released our landmark study of the nexus between New Hampshire’s housing shortage and local land use regulations, in October of 2021, the connection between the two was not widely reported in the popular press. Academics, developers and planners knew that local regulations were responsible for reducing the supply of housing, but it was rarely mentioned in the media.

Not even two years later, and even media organizations that generally embrace government activism and progressive regulation of the economy are acknowledging that local land use regulations are at the root of the housing shortage here in New England.

The Boston Globe is out with a long editorial titled “A hundred years of choking housing growth catches up with Massachusetts.”

The conclusion: “Since the early 20th century, the Legislature has let individual municipalities thwart housing. Now the consequences threaten the Commonwealth’s future.”

The Globe pointed out that in 1920 Massachusetts legislators, acting on authority granted to them by a 1918 state constitutional amendment, authorized municipalities to regulate land use.

Municipalities “promptly started using their new authority to pass rules that suppressed housing growth and kept out poor people and renters.”

It didn’t take long for warning signs to start flashing about the impact of local obstructionism spawned by the zoning amendment. Just after World War II, the Globe reported that “zoning restrictions in many Greater Boston communities are hampering large rental projects” for returning veterans. In 1961, the Globe reported on complaints from builders that zoning rules made “more moderately priced housing ‘an impossibility to build.’ ” In 1971, a developer said, “until ways are found to force towns to change zoning codes … ‘we are not going to be able to lick the housing shortage in Massachusetts.’ ” A 1979 feature about housing in Braintree reported, “Because of zoning regulations and environmental restrictions … it is no longer financially feasible to build housing for the middle class in town.”

By and large, those warnings were ignored. Meanwhile, the gap between the cost of housing in Massachusetts and the cost of housing elsewhere kept widening. In 1940, according to the census, the median home value in Massachusetts was 1.3 times the national median. In 2000, it was 1.55 times. In 2021, it was 1.7 times.

Now, the bill may be coming due. The median single-family home in Greater Boston cost $707,250 in January, compared to $378,700 nationally in the fourth quarter of last year. In Boston, 46 percent of renters are “rent-burdened.” For years, housing advocates warned that crippling housing prices and the lure of cheaper housing elsewhere would eventually affect the state’s ability to sustain and attract businesses. Now a tipping point seems to have been reached; 110,000 people have left the state since the beginning of the pandemic, nearly enough to fill Fenway Park three times over.

The same story can be told of New Hampshire, although the timeline is somewhat different. Progressive zoning ordinances swept the state, separating workplaces from living spaces, segregating multi-family units from single-family units, and putting government in charge of everyone’s property. The results were predictable. Government regulations prevented developers from supplying the amount of housing necessary to meet demand, and the resulting shortage drove prices to record highs.

It’s not that this story was never told. It showed up in stories about specific housing proposals over the years. But now mainstream news organizations are connecting the dots to tell the bigger story. The Globe’s recognition that local regulations are central to the region’s housing shortage is important because the problem can’t be fixed until we’ve identified its cause. With the largest newspaper in New England lending its voice to the land use regulation reform movement, the push for increased private property rights gains an unexpected but welcome ally.

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N.H. could become first New England state to license music therapists

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As Gov. Chris Sununu moves to undo the state’s overly burdensome occupational licensing regime, legislators are trying to add more licenses. 

On Wednesday, March 22, the House voted 210-166 to require a state license for the practice of music therapy. 

Why? Health insurance.

Supporters said New Hampshire needs to license music therapists to ensure that patients can be reimbursed by their health insurer when they purchase music therapy treatment. 

It’s not that music therapists don’t practice — and practice safely — in New Hampshire. They do. It’s purely a matter of insurer reimbursement.

But as Rep. Carol McGuire, R-Epsom, pointed out, that’s hardly a reason to create an entire licensing bureaucracy for one therapeutic specialty. 

“…it is not the best use of our time and our state resources to create a separate statute, a separate license, a separate registration board, separate rules for each tiny specialization in the therapy field,” McGuire said.

House Minority Leader Matt Wilhelm, D-Manchester, argued that licensing music therapists would increase the supply of music therapists.

“New Hampshire is in the middle of a mental health crisis and the need for therapists is an urgent need,” he said.  People who need this type of therapy “could benefit from additional therapists.”

“…if there were certified music therapists and licensed music therapists,” he said, “it would increase the amount of people that would have access to care and high-quality care….”

But research on occupational licensing finds that licensing requirements tend to reduce the supply of practitioners and drive up prices. 

Only nine states license music therapists, according to the Certification Board for Music Therapists, a national organization that promotes excellence in music therapy.

If House Bill 532 becomes law, New Hampshire would be the only New England state to require a license to practice music therapy. Rhode Island registers, but does not license, music therapists, and Connecticut requires certification, but not a license, for anyone who uses the title “music therapist.” 

National certification through a respected trade organization offers a simple method for consumers to seek outside expert verification of music therapist credentials. 

In fact, supporters did not even make a health or safety argument for the license. There were vague references to “quality” therapists, but no one argued that the public is in danger from unlicensed music therapists, or that consumers are incapable of checking a therapist’s degrees or other credentials. 

In his budget, Gov. Sununu proposed a thorough restructuring of the state’s occupational licensing bureaucracy, complete with a consolidation of numerous boards and the elimination of 21 permanent licenses and 13 temporary licenses.

Other states are moving in this same direction. There’s a growing movement nationwide to remove unnecessary barriers to economic opportunity, particularly after the COVID-19 pandemic exposed just how economically damaging so many licensing restrictions are. 

Creating an additional licensing bureaucracy for a single niche field — when no health or safety reason has been identified — would move New Hampshire in the opposite direction. 

If health insurance reimbursement is the issue legislators want to address, then they could do so through insurance laws.

 

Editor’s note: Do you like the painting used to illustrate this piece? It’s the first AI-generated art we’ve used to illustrate an essay. We asked for a woman listening to music in a therapist’s office. Not bad. And no artist’s license was required.

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How to crush youth employment? Make it more costly to hire young people

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A surefire way to suppress already low levels of youth employment is to raise the cost of employing younger workers. Some proposals in the Legislature would do that, in the name of helping these same workers. 

One proposal, House Bill 125, would make it illegal to employ 16-and 17-year-olds after 9 p.m. Sunday-Thursday and after midnight Friday and Saturday during the school year. 

Were this to become law, employers would be subject to fines of up to $2,500 each time a high school student clocks out a minute late. (These fines are seldom imposed, according to the state.)

State law currently caps at 35 the number of hours older teens can work during a five-day school week. HB 125 was intended to fix an oversight in a previous revision of youth employment law that inadvertently let teens ages 16 and 17 work up to 48 hours during shortened school weeks. But this particular attempt at a fix would inevitably trigger unintentional violations of state child labor laws. 

The predictable effect of such a law would be to discourage the hiring of high school students, and to reduce the hours of those who are hired. 

New Hampshire already limits youth under the age of 16 to working between 7 a.m. and 9 p.m. Adding a 9 p.m. curfew for older teens would further depress employment in this age group. Teen employment was declining sharply before the pandemic and fell again in 2020. It has not recovered to pre-pandemic levels. 

With a precise time limit on the books, employers would be in violation of state labor law every time a teen doesn’t punch out on time. To avoid being written up for labor law violations whenever a teen gets distracted at the end of his or her shift, employers would end shifts earlier, hire fewer teens, or both. 

As if intended to depress youth employment even further, House Bill 58 would raise the wage for tipped jobs to a minimum of $7.25 an hour. Currently, New Hampshire employers may pay wages as low as $3.26 an hour to employees who earn tips.

HB 58 would set the regular federal minimum as the floor for all jobs, even those with substantial tip income. Were this to become law, restaurants would have to pay all servers an additional $3.99 per hour. The negative effect on employment would be immediate and predictable. 

A University of California-Irvine study published last August found that raising the tipped minimum wage reduced employment. 

“(O)ur evidence is quite clear and unambiguous in pointing to higher tipped minimum wages (smaller tip credits) reducing jobs among tipped restaurant workers, without enough of an increase in earnings of those who remain employed to offset the job loss,” the authors found.

Other research has found that higher minimum wages reduced teen employment, and that “teens exposed to higher minimum wages since 2000 had acquired fewer skills in adulthood.” 

Well-intentioned regulations such as those in HB 58 and HB 125 would end up worsening New Hampshire’s existing labor shortage and hurting the very people they are intended to help. 

In 2019, the U.S. Bureau of Labor Statistics recorded 67,000 employed Granite Staters between the ages of 20-24. In 2022, that number was down to 52,000. 

In 2019, the state estimated the number of waiters and waitresses in New Hampshire at 12,390. In last year’s report, it was down to 7,260, a decline of 41%, even though the entry-level wage was $1 per hour higher. 

Restaurants, already pressed by rising supply, labor and energy costs, have been raising prices to maintain their meager margins. Add in a state mandate to more than double base pay for wait staff, and some restaurants certainly will be forced out of business. Others will raise prices even further. Restaurant prices rose 8.2% from January of 2022 to January of 2023, according to the National Restaurant Association. That’s higher than overall consumer prices, which rose 6.4%.  

According to surveys of New Hampshire Lodging and Restaurant Association members, servers in New Hampshire earn between $20-$45 an hour when tips are included. Granite Staters do tip generously, ranking fifth nationally and first in New England, according to Toast, a Boston company that provides software for point-of-service tablets used by the restaurant industry.

As New Hampshire employers struggle with a labor shortage, persistent inflation and predictions of a looming recession, artificially increasing the cost of employing younger and lower-skilled workers would add an additional burden. As that burden would be tied to the hiring of those workers, it would likely lead to reduced opportunities for them. 

Hurting both employers and younger workers is not the intent of such regulations, but it would be the predicted outcome.  

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As legislators debate minimum wage hikes, the market is pushing wages higher on its own

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In the midst of an acute labor shortage that has pushed wages to new highs, a few legislators have opted to introduce another bill to raise New Hampshire’s minimum wage. 

House Bill 57 would raise the minimum wage to $15 an hour by 2025, then tie it to the inflation rate, ensuring regular, automatic increases. 

New Hampshire has about 48,000 job openings, according to U.S. Bureau of Labor Statistics data, and only about 20,000 unemployed persons. 

This imbalance between job openings and available labor has persisted for years. And that has driven wages in New Hampshire higher. New Hampshire Employment Security put the mean average wage at $30.12 an hour in last year’s report (based on 2021 data). In 2019, it was $25.94. 

The average entry-level wage in the 2022 report was $14.36, up from $11.80 in 2019. 

Competitive pressure is pushing wages up to the point that dishwashers have moved out of the list of the 10 lowest-paid occupations in the state. The lowest average wage in the 2022 report belonged to gambling dealers, at $11.59 an hour. Food preparation workers were above that at $12,10 an hour. 

With a booming economy and a severe labor shortage combining to raise wages naturally, the market is already moving compensation in low-paying occupations toward the $15 an hour goal. House Bill 57 would mandate a $13.50 minimum wage by this September. Fast food restaurants regularly advertise jobs well above that rate now, and food prep workers on average are quickly approaching that level. 

Into this discussion, researchers last month dropped yet another study showing that minimum wage increases have costs that can make people who work in the lowest-paid occupations worse off. 

Researchers at the John Hopkins Bloomberg School of Public Health and the University of Minnesota-Twin Cities School of Public Health found that minimum wage increases reduced the number of employers who offered health insurance. 

“We find that a $1 increase in minimum wages is associated with a 0.90 percentage point (p.p.) decrease in the percentage of employers offering health insurance, largely driven by small employers and employers with more low-wage employees. A $1 increase is also associated with a 1.80 p.p. increase in the prevalence of plans with a deductible and three percent increase in average deductibles.”

Though minimum wage hikes led to reductions in employer-sponsored health insurance, they did not lead to increases in uninsured rates, the authors found. That is “likely explained by an increase in Medicaid enrollment,” they wrote.

This study comes on top of decades’ worth of research that, on the whole, tends to find a negative effect on employment — particularly for younger workers and those with less education — from minimum wage increases. 

The preponderance of research on minimum wage increases shows that government-mandated compensation increases are not cost-free. Forcing employers to raise wages in ways that are unrelated to productivity tends to result in shifting resources from other parts of the business. That can include eliminating hours, positions or benefits.

Advocates for high minimum wages seem to assume that employers, including small businesses, simply have troves of cash reserves lying around and pay what they do out of stinginess. But employers generally aren’t sitting on piles of treasure like Smaug in his cave under Lonely Mountain.

And employers can’t simply manufacture more money whenever they want to spend more. Only the government can do that. Employers have to make trade-offs. If the government makes them pay more for low-skilled labor, they’ll take that money from somewhere else. And the results won’t necessarily be net positive for the low-skilled workers legislators intended to help. Usually, the opposite is true. 

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Rent control would only worsen New Hampshire’s housing crisis

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“In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

— Swedish economist Assar Lindbeck

New Hampshire renters have endured steadily rising prices for many years. Their frustration has reached the point that some lawmakers and activists are advocating a policy once unthinkable in the Granite State: rent control. 

The sense of helplessness is real. From 2013-2022, the median rent for a two-bedroom apartment in New Hampshire rose from $1,076 to $1,558, an increase of 45% according to the New Hampshire Housing Finance Authority’s 2022 Rental Rental Cost Survey. This is well above the inflation rate. Had the median New Hampshire rent tracked the national Consumer Price Index over the last decade, it would be about $200 lower.

Rent control is being offered as a remedy for this desperate situation. But more than 75 years’ worth of research into the effects of rent control reveals a disastrous record. 

Establishing a government-mandated cap on rents or rent increases does not suddenly abolish the real world and the economic laws that apply to it. Investors will continue to seek strong returns, and if government artificially constrains their return on one form of investment, they will seek it elsewhere.

No one has to be a landlord. People choose to build and own apartments in anticipation of earning a significant return on their investment. Studies on the effects of rent control laws show that they tend to make communities worse off by reducing investment in rental properties, shrinking the supply of apartments, raising market rents, lowering overall property values, and locking renters into sub-par units while discouraging them from building their own wealth through homeownership. 

Here are a few of the demonstrated harms caused by government rent control policies:

  • St. Paul, Minn., passed a rent control ordinance in 2021. A University of Southern California study the next year found that “rent control caused property values to fall by 6-7%, for an aggregate loss of $1.6 billion.” It further found that “the tenants who gained the most from rent control had higher incomes and were more likely to be white, while the owners who lost the most had lower incomes and were more likely to be minorities. For properties with high-income owners and low-income tenants, the transfer of wealth was close to zero. Thus, to the extent that rent control is intended to transfer wealth from high-income to low-income households, the realized impact of the law was the opposite of its intention.”
  • A 2018 study of rent control in San Francisco found that the imposition of rent controls reduced the supply of rental housing by 15%, raised rents by 5%, and fueled the conversion of lower-end rental units to higher-end condominiums. The authors found that “landlords of properties impacted by the law change respond over the long term by substituting to other types of real estate, in particular by converting to condos and redeveloping buildings so as to exempt them from rent control. This substitution toward owner occupied and high-end new construction rental housing likely fueled the gentrification of San Francisco, as these types of properties cater to higher income individuals. Indeed, the combination of more gentrification and helping rent controlled tenants remain in San Francisco has led to a higher level of income inequality in the city overall.”
  • From 1970-1994, Cambridge, Mass., imposed strict rent controls and made it hard for the owners of rent-controlled properties to convert them to other uses. Those ordinances were abolished with the passage of a 1994 referendum banning rent control in Massachusetts. This led to increased apartment construction. “Over the next several years, direct dollar investments in housing units, as measured by building-permit filings, more than doubled on an annual basis,” a 2012 study found.
  • A separate 2007 study of the effects in Massachusetts found that rent control did lower rents in covered buildings, but also “led to deterioration in the quality of rental units” and encouraged apartment building owners to “shift units away from rental status.” 
  • A 2000 study of the effects of rent control on tenants found that rent control raised market rents and “the average benefit to tenants in regulated units is negative. This implies that, on average, tenants in rent regulated units would be better off if these controls had never been established.”
  • A 2019 study of rent control in Berlin, Germany found that rent control “reduces rents in the controlled sector, but also leads to rent increases for uncontrolled units. And it “reduced the propensity to move house within rent controlled areas, but only among high-income households.”
  • A 1989 University of Pennsylvania study of rent control in New York City found that capping rents discouraged homeownership, helped whites more than minorities, and reduced investment in and upkeep of rent-controlled units. In short, rent control lowered the quality of apartments while simultaneously discouraging renters from becoming homeowners. “The expected rent control benefits had a significantly negative influence on the propensity to own. That is, consumers with large expected rent control benefits had lower demands for homeownership.”
  • A 2009 review of the economic literature on rent control found that “economic research quite consistently and predominantly frowns on rent control.” It also found that the effect on homelessness was inconclusive. “Several empirical studies find no clear relationship between rent control and homelessness,” according to the review. Some studies found that rent control increased homelessness, others that it had no clear effect or reduced homelessness. Given the mixed results, rent control should not be considered a solution to the problem of homelessness.

The negative effects of rent control are so thoroughly documented that there’s almost no disagreement among economists, left or right, on the issue. “The analysis of rent control is among the best-understood issues in all of economics. Its known adverse effects illustrate the principles of supply and demand,” as Paul Krugman, the left-wing economist and New York Times columnist, put it.

Supply and demand also explains New Hampshire’s high rents. The chart below shows building permits for multifamily housing going back to 1999. 

Though building permits have slowly increased, they haven’t kept up with demand. As a result, New Hampshire’s rental vacancy rate fell from 3.4% in 2013 to 0.5% in 2022. Our high rents are not caused by greed or avarice or the wickedness of capitalism. They’re the direct result of a decades-long slow-down in apartment construction. 

The remedy is not for government to attempt to cap apartment prices. It is for government to permit the construction of new rental units. 

Download this policy brief as a pdf: Rent Control Policy Brief 2-2023

Editor’s note: The percentage increase in the median two-bedroom apartment rent in New Hampshire from 2013-2022 is 45%. The initial post inadvertently had the figure for the five-year increase (26%) pasted in the spot for the 10-year figure. 

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