CONCORD, NH – The fix to New Hampshire’s housing crisis doesn’t have a price tag and won’t be easy – it’s going to take a combination of new perceptions, revised zoning laws, money, time and some deep thinking by state and local governments.

That was the message from two housing industry experts at Tuesday’s “Unpacking New Hampshire’s Housing Crisis – Insights, Data, and Solutions,” sponsored by the NH Business Review.

Panelists Julie Jussif, managing director of New Hampshire Housing’s Homeownership Division, and Bob Quinn, CEO of New Hampshire Association of Realtors, discussed the housing crises in an hour-long Zoom panel moderated by Ernesto Burden, Yankee Publishing group publisher for New Hampshire and vice president.

State programs, including Invest NH, which is pumping $100 million into the affordable housing industry, help, but they’re just a drop in the bucket, the panelists said.

“We are not going to be able to use public funds and, in essence, fund our way out of this problem,” Quinn said.

The “problem” is that the state needs 23,670 units of housing immediately. Estimates are that 60,000 new units will be needed by 2030, and 90,000 by 2040, based on population growth, the 2023 New Hampshire Housing Needs Assessment found.

Jussif said standing in the way of building more housing are the “four Ls”: lumber costs, labor shortage, land shortage and affordability, and laws and regulations.

Misperceptions about the housing crisis and what types of impact proposed solutions may have are also a hurdle that must be overcome, Quinn said. “Not everyone agrees we’re in a housing crisis.”

Anatomy of a Housing Crisis

New Hampshire median sales prices are among the most quickly rising in the nation, and listed homes are snatched up faster than in almost any other state. 

“The demand for housing in the state is enormous,” Quinn said. Lack of inventory, which has been steadily declining in the past decade, is a big cause.

the median sales price in July was $480,000, according to NHAR, and $440,000 according to NH Housing, which filters out some property types.

The state’s housing affordability index of 62 is the lowest since NHAR began using it almost 20 years ago. The number means that the state’s median income is only 62% of what’s needed to buy a median-priced house (monthly mortgage payment, taxes and insurance). 

Rising interest rates don’t help, both Jussif and Quinn said.

A 3% interest rate on a $400,000 mortgage results in a $1,602 monthly payment. If the rate is 5%, the payment is $2,040. Raise it to 7% and the payment is $2,528, nearly $1,000 a month more than the person with the 3% rate is paying.

The median rate is 7.23%. While interest rates in the past have been higher, the median home price was much lower, so the actual dollars represented were exponentially lower as well.

“I think these high interest rates are going to be with us for a while,” Jussif said. 

Because of the high cost of owning a home, people who would normally be first-time homebuyers are renting apartments instead, she said.

The demand for rentals, driven by lack of inventory and more people being forced to rent, has put the monthly payment out of reach for many. The median rent for a two-bedroom apartment is $1,764, which is an 11.4% increase over last year, and 36% in the past five years. For any size unit, the median rent has increased 40% in five years. The 2023 vacancy rate statewide is 0.6%.

“Every single county in the state of New Hampshire is seeing increases,” Jussif said. People with low income, a disability, or employment challenges “are at an extreme disadvantage,” when it comes to finding an apartment they can rent.

But anyone looking for an apartment is also at a disadvantage finding what they want for a price they can afford, she said.

“If you’re trying to find an apartment, it’s going to take some networking, persistence and a whole lot of luck,” Jussif said.

The median age of a first-time home buyer in the state is 36, the oldest it’s ever been.

And once someone starts looking for a home, the situation is not much better than when they were renting.

There were only 1,700 single-family homes listed for sale in July, usually one of the best months of the year for listings. That’s compared to 2,371 last year, more than 5,000 in 2019, and close to 15,000 in 2010, according to NHAR data.

While the state single-family home median sales price in July was $480,000 (median means that half of the houses sold for more, half for less), that’s on the low end for some areas. In Rockingham County, of the 726 houses sold between May 1 and July 31, only 73 were less than $400,000.

New Hampshire’s 6.7% July year-over-year MSP increase is one of the highest in the nation, according to NHAR. The national MSP is 1.9%.

Closed sales also tell the housing crisis tale – so far they are down 20% from last year, when there was a 17% drop from 2021. The projected 11,000-12,000 closed sales for 2023 would be the lowest since 2008’s 10,200. That year, the bottom fell out of the housing market, spurring the Great Recession.

The difference, Quinn pointed out, is that in 2023, homeowners have a large amount of equity, there are few foreclosures, and unemployment is low.

The number of building permits for housing issued in the state has dropped sharply over the decades, with less than 5,000 issued in 2022. Most were for single-family homes. That’s in contrast to the 1980s, when permits issued reached 18,000 in 1986.

In 2019, both neighboring Maine and New Hampshire each issued about 4,900 housing building permits. Since then, Maine has issued 5,500 more than New Hampshire, according to the NHAR.

“New Hampshire needs to do better on that,” Quinn said.

Inventory has been steadily declining for the past decade, Quinn said. In 2013, there was a 10 months supply; in July there was 1.6 months. That means that if all the available listings were sold and no new ones added, it would take about a month and a half to sell them off. An ideal inventory is at least six months, industry experts say.

“Demand for housing in the state is enormous,” largely because there is so little supply, Quinn said. 

Single-family homes stay on the market about 24 days in New Hampshire, the lowest number in the nation, Quinn said.

He said that what happens next in the state government, as well as local governments, will determine whether the crunch begins to ease. He said, “Can we get that supply up?”

Perceptions must change

Changes to local zoning that will allow more homes on fewer acres, particularly multi-family housing, is key to creating more inventory, something that housing industry stakeholders are pushing strongly for. In May, the release of the New Hampshire Housing Atlas aimed to make that goal easier.

In a recent St. Anselm Ethics in Society poll, 60% of those surveyed agreed that towns and cities in the state should change zoning and planning regulations to allow more housing. That’s up from 28.70% in 2020. But 34% of those surveyed disagree.

Quinn said that negative perceptions about changing zoning to allow more density are an obstacle to solving the crisis, particularly when those making the laws are concerned about the value of their home decreasing.

He said that some of the biggest misperceptions are that more housing means more kids, which means higher school costs; that density ruins the state’s rural character; and that it lowers the value of surrounding property owners. People also say that they moved to New Hampshire to get away from people, and don’t want more people moving to their town.

The NHAR has posted videos on its website that address, and largely debunk, these concerns.

The site also links to a study that found there’s no correlation between more housing and higher taxes because of added school costs. Research also shows that the values of existing homes don’t go down because of multi-family housing being built nearby, Quinn said.

As far as damage to rural character, he pointed out that more housing on fewer acres allows more acreage to remain undeveloped.

Housing hope

“It’s extremely challenging for people to buy their first home, but there’s still hope,” Jussif said.

New Hampshire Housing, which helps first-time homeowners buy a house as well as supports affordable housing development, financed 1,800-plus units of multi-family rental housing last year, helped more than 1,000 families buy a home and helped about 9,000 New Hampshire residents pay their rent.

New programs in the state that are helping include InvestNH, which incentivizes housing development; Housing Champions program, which provides grants to cities and towns that adopt housing-friendly policies; the Housing Appeals Board and Land Use Review Docket in Superior Court, which help move housing disputes through the pipeline faster.

There is a federal proposal for a capital gains holiday for people who are selling a first home, which would mean more starter-home inventory on the market.

Changes to zoning on a local level to allow more housing is something that’s advocated by almost all industry stakeholders. 

Jussif suggests developing model ordinances and technical assistance, incentivizing higher density development, making local land use allowances for smaller and multi-unit homes, making it easier to develop accessory dwelling units, encouraging redevelopment of office and commercial space into residential and supporting expanded manufactured housing development.

Quinn said the state government will have to decide how big a role it wants to play in determining local policy. If state policies designed to increase housing give municipalities too much leeway, they may not be effective, he said.

The continuing crisis has had ripple effects for the state’s residents, and the state itself, that go far beyond the immediate challenge of affording a place to live.

The inability to buy a home has an impact on younger residents who are falling behind on building the wealth that owning a home brings, Quinn said.

He said it’s important for the state, as well as town and city governments, to recognize that the people who are priced out of the housing market are the same ones New Hampshire needs to move here to fill worker shortages and help replace the quickly aging workforce.

“Where are they going to live?” he asked.