New Hampshire’s Housing Crisis – Working Together for a Solution

This article, written by shareholder Megan Carrier, was originally published by the NH Bar News and can be found here (pg 36).

The Problem

If you’ve found yourself in the market for a new home recently, you know.  Home prices in New Hampshire have reached record-breaking highs.  The median sales price for a single-family home in New Hampshire was $490,000—8.9% higher than last year.  This, coupled with interest rates hovering around 6-7%, has led many renters who might otherwise consider purchasing their first home to stay where they are.

If you’ve found yourself in the market for a residential rental unit recently, you know.  Logically, if higher home prices and interest rates keep would-be buyers in rental units, fewer rental units will be available for newcomers and those at lower income levels.  According to New Hampshire Housing’s 2023 Residential Rental Cost Survey Report, the statewide vacancy rate was – as of early 2023 – 0.6% (a 5% vacancy rate is considered a balanced market for landlords and tenants).  As dictated by the rules of supply and demand, of course, this limited availability of rental units puts upward pressure on rents.  The Cost Survey Report provides that median gross rent for a two-bedroom rental unit, with utilities, is $1,764/month; this represents an 11.4% increase over last year’s number.  In order for rent of $1,764/month to be affordable—meaning that it represents 30% or less of the renter’s income—the renter would need to earn over $70,600/year, or 137% of the estimated statewide median renter income.

This lack of available housing affects not only those who are struggling to find a place to land, but the rest of us as well.  If there is no affordable, available housing, employers will struggle to recruit and retain employees—out of state individuals seeking employment in New Hampshire may be forced to find work elsewhere, and existing New Hampshire residents (particularly younger individuals) may choose to leave the state.  Those who choose to stay and dedicate more than 30% of their income towards housing will be less able to participate in the local economy.  In addition, the increase in homelessness that frequently accompanies an unstable housing market will place economic pressures on the state and its municipalities.

 The Barriers to Resolution

 While one could certainly propose various mechanisms to address New Hampshire’s housing woes, one option seems the most obvious: create more housing.  The trouble is, New Hampshire needs a lot of new housing; New Hampshire Housing estimates that New Hampshire requires 23,670 new housing units in order to meet our current need.  We will need almost 90,000 units by 2040.

The development of new housing can be difficult for various reasons.  First, many municipalities have adopted zoning ordinances which restrict multi-family housing to certain zones, and sometimes, the land area available for projects in those zones is limited.  Other land use regulations may require that multi-family housing projects receive special exceptions or conditional use permits.  In addition to difficulties associated with satisfying the sometimes strict zoning requirements, multi-family housing projects frequently face staunch opposition from abutting property owners and other members of the community.  For example, in more rural areas of the state, there is often a desire to maintain the existing small-town, rustic feel of the area and, for many, a larger scale multi-family residential project is not consistent with that goal.  Others would prefer to see available land area utilized for commercial purposes, feel that the project is not compatible with surrounding land uses, or worry that the project will overburden existing municipal infrastructure (e.g. the schools).  Volunteer members of planning and zoning boards, who are elected by and represent the community, are often convinced to deny approvals for multi-family housing projects based on these, and similar, concerns.

 Working Toward a Resolution

 Happily, the people of New Hampshire are hard at work exploring various ways to address this problem.  Some municipalities are encouraging the development of accessory dwelling units and multi-generational residences, thereby maximizing available land area.  Others are exploring modifications to their zoning ordinances which would make it easier for multi-family projects to receive required approvals.  Developers, too, are exploring new concepts.  For example, some developers have begun constructing micro housing units, which are typically 350 square feet or less in size and incorporate space saving measures and multi-functional furniture.

The State, for its part, has created a number of programs designed to incentivize both developers and municipalities to develop and approve affordable housing units.  For example, the $100 million InvestNH initiative includes the following four distinct programs:

  • $5 Million toward the Housing Opportunity Planning Grants Program, which provides municipalities with funds to study zoning or other regulatory causes of lack of affordable housing and identify and implement changes to regulations in response to the findings.
  • $5 Million toward the Municipal Demolition Grant Program, which provides funds to be utilized for the demolition of vacant and dilapidated buildings.
  • $60 Million toward the Capital Grant Program, which awards grants to developers/owners of multi-family rental housing to be used for long-term residential rentals in order to address funding gaps caused by inflation, supply-chain constraints, and rising interest rates.
  • $30 Million toward the Municipal Per Unit Grant Program, which provides municipalities with an incentive of $10,000 per unit of new affordable housing they permit.

l state-based initiatives include the Affordable Housing Fund and the Housing Champion Designation and Grant Program Fund.  The Affordable Housing Fund provides grants and low-interest loans to developers for building or acquiring affordable housing.  The Housing Champion Designation and Grant Program Fund—a new program for which rules are expected to be adopted on or before July 1, 2024—would provide funding to encourage municipalities to promote affordable housing via board member training, revisions to local regulations, and implementation of additional infrastructure.  Available incentives include funding for infrastructure upgrades (to address concerns that additional housing will overburden existing infrastructure) and per-unit grants for approved affordable housing.

The housing crisis in New Hampshire is daunting, but not unsolvable.  If we continue to work together, we will see improvement.