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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How licensing makes you wait longer for a haircut

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Unless you’re still growing your pandemic beard, you might’ve noticed that getting an appointment with your barber or stylist seems to take longer than it did before the pandemic. 

It’s not all the extra alcohol you got accustomed to consuming on a weekly basis since 2020. The supply of barbers, hairdressers, hair stylists and cosmetologists in New Hampshire really has shrunk in the last several years. As with so many other occupations, the demand for these services exceeds the supply of providers.

And as with so many other areas of the economy, the shortage is made worse by government regulations. 

Fortunately, there’s a simple tweak to state licensing laws that would encourage more licensed personal grooming professionals to move to New Hampshire. 

Barbers, cosmetologists and estheticians are licensed by the state, and the law regulating these professions does not automatically recognize as valid licenses earned in other states. 

RSA 313-A:14 authorizes the Board of Barbering, Cosmetology and Esthetics to recognize an out-of-state license “provided the other state’s licensing requirements are substantially equivalent to or higher than those of this state.”

Sounds harmless. But it’s not. 

It’s not clear how the board is to determine whether a license is “substantially equivalent to” the qualifications for a New Hampshire license. States require varying hours of education and training, but also varying numbers of tests and varying levels of experience. One state’s program might be more effective than another’s even though it requires months’ less training. 

Economists who’ve studied license portability generally prefer blanket license reciprocity. Stephen Slivinski at Arizona State University has studied occupational license portability among the states and found that the general “lack of license portability has real-world impacts. It keeps workers from moving to a state when they might otherwise. Lack of portability is also especially onerous for ‘trailing spouses’ of military members who are often kept out of the workforce when their family is transferred to a new state.”

“Getting a new license requires costly, time-consuming, and duplicative hours of training just to do the job that the worker was already doing before they moved across the state border. As a result, the lack of occupational licensing portability suppresses the labor market opportunities for new residents of a state. Additionally, it has the effect of discouraging people from moving to a new state at all.”

This is a serious issue for New Hampshire, which is suffering a years-long labor shortage. That shortage includes these licensed occupations. 

New Hampshire Employment Security has a single occupational classification that covers hairdressers, hairstylists, and cosmetologists. In 2021, the last year for which the state has published data, the total number of hairdressers, hairstylists and cosmetologists in New Hampshire was 1,860. 

In 2017, the number was 2,020. We lost 160 positions in these occupations in four years, even as New Hampshire’s population was growing.

House Bill 409, sponsored by Rep. Diane Pauer, would help to fill that shortage by making it easier for licensed professionals in these fields to move to New Hampshire and begin work immediately, without having to spend hundreds of hours and thousands of dollars to be retrained in the field in which they’ve already been trained.

HB 409 would remove from state law the clause that grants barber, cosmetology and esthetics license reciprocity only when the practitioner’s home state license requirements are “substantially equivalent to or higher than” New Hampshire’s.

What would this change do? 

Well, for barbering, New Hampshire has among the lowest hours-of-education requirements in the nation. We require 800 hours of training to become a barber. Only four states require fewer hours, according to licensing data compiled by the Institute for Justice (IJ). 

One of them is New York, which requires just 291 clock hours of training to become a barber. One could easily argue that this requirement is not substantially similar to New Hampshire’s. But does anyone actually believe that Manhattan barbers pose a danger to New Yorkers, or that a licensed barber who moves from New York to New Hampshire is a danger to Granite Staters?

Vermont, Florida and Oregon also mandate fewer hours of barber training than New Hampshire does.

For cosmetology, New Hampshire requires 1,500 hours of training. Eight states require fewer hours, including Massachusetts and Vermont (both 1,000 hours). California, New York, New Jersey and Florida also require fewer hours of training than New Hampshire, according to IJ’s data. 

Again, it would be absurd to argue that cosmetologists in New York, New Jersey, California, Massachusetts and Vermont are so dangerously undertrained that they should be forbidden from working in New Hampshire. If you’re qualified to cut Sarah Jessica Parker’s hair, you’re surely qualified to cut Jeanne Shaheen’s or Maggie Hassan’s.

Though only a handful of states require fewer hours of training for these occupations, they include some of our neighbors and other states not far away. HB 409 would remove the entirely unnecessary equivalency language and allow licensed professionals in Massachusetts, Vermont, New York and a few other states to relocate here and start working right away. 

This change is unlikely to eliminate the shortage of barbers and hairstylists right away. But it would remove one obstacle that needlessly prevents some professionals from moving here. 

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Humbug! Scrooge would want fewer apartments

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In the opening of “The Muppets Christmas Carol,” Gonzo and Rizzo the Rat are selling apples in a dingy London market. Gonzo scolds Rizzo for eating the inventory. 

“Hey, I’m creatin’ scarcity,” Rizzo replies. “Drives the prices up.”

Rizzo is a clever rat.

Later in the movie, the ghosts of the Marleys tell Scrooge how they enjoyed overcharging the poor for rent. (In the Muppets version, there are two Marleys.)

Rizzo didn’t comment on those lines, but he might’ve dead-panned, “maybe someone ate the apartments and drove up prices?”

As Dickens’ classic tale is retold and rewatched this Christmas season, many Granite Staters face a harsh reality that Rizzo — and Scrooge — would understand. Scarcity keeps driving up prices for homes and apartments. 

You don’t need to be visited by the ghosts of housing markets past to see the problem — and why Scrooge would love it. You just have to compare the markets for short-term and long-term rentals.

Demand for short-term rentals has surged nationwide. The number of nights booked in short-term rentals rose 15.8% from October of 2021 to October of 2022, The Wall Street Journal reported last week. 

Investors in short-term rental properties expected prices to rise along with demand. But something happened on the way to sipping daiquiris on the beach as the rent money poured in. A lot of other people responded to the high rates by offering their properties for rent too.

“However, while the absolute number of bookings has risen, there has also been a sharp rise in supply of available short-term rental listings in the U.S., up 23.3% in October 2022 compared with October 2021,” the Journal reported. 

A woman who rents her California home on Airbnb told the Journal, “I’ve felt a massive drop” in rents she can charge. A holiday weekend at her home fell from more than $1,000 per night during the pandemic to around $275 now. Why such a collapse? Demand rose, which drove up prices, and those higher prices prompted investors to increase supply, which brought prices back down. That’s how a market would normally function. 

But it’s not how the market for long-term rentals works. 

In October, median rents were up nationwide by 7.8 percentage points, year over year, according to rent.com. In New Hampshire, the median rent was up 14.12%, by the website’s measure. 

Would-be home-buyers have experienced similar price increases. The median single-family existing-home price was up 8.6% in the third quarter, according to realtor.com. The Union Leader reported Tuesday that the median single-family home price in New Hampshire rose by $34,000 from last November to this November. It’s now $435,000.

For homes, apartments and short-term rentals, demand remains strong. But prices have fallen in only one of those markets: the one where supply faces the fewest constraints.  

“My reaction is that the growth in short-term rentals has come about because people are converting their own homes, or parts of them, into short-term rentals,” said Jason Sorens, director of the Center for Ethics in Society at St. Anselm College and author of the Josiah Bartlett Center’s 2021 housing report. “Rarely do people build units specifically for short-term rental. And that’s where the real housing supply bottleneck is: it’s become harder to build. Without more building, we aren’t going to see a similar supply increase for long-term rentals. But the other point this news shows us is that if we did increase supply, it would reduce rents.”

As we documented last year, overly restrictive local regulations are a significant barrier to new development in New Hampshire. These regulations make it difficult to build new housing, which prevents developers from meeting demand. That creates scarcity, which drives up prices. Rizzo would be proud. 

And Scrooge would be thrilled. Scrooge, don’t forget, was a landlord as well as a money lender. He could get away with charging outrageous rents for decades only if his renters had no cheaper options. So Scrooge would be no fan of loosening land use regulations to allow more apartment and home construction.

If Granite Staters want to avoid turning our existing housing shortage into a Dickensian nightmare, the only solution is to loosen the restrictions and let developers create more supply.   

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