New study links state’s high cost of living to the number of building restrictions

By: - October 13, 2021 3:24 pm
A city street lined with houses

The report urges local municipalities to consider eliminating ordinances that tend to hold back housing development. (Dana Wormald | New Hampshire Bulletin)

New Hampshire has one of the highest costs of living in the United States and the fourth highest number of building restrictions. A new study from the Josiah Bartlett Center for Public Policy and St. Anselm College’s Center for Ethics in Society says the two are connected. 

In a 50-page report published Wednesday, study author Jason Sorens says data analysis demonstrated a direct relationship between zoning regulations and the cost of housing in the state.

“Widely available measures show that New Hampshire is one of the most restrictive states in the country for residential development,” Sorens wrote. “By suppressing building, land-use regulations drive up the price of housing as demand rises.”

Sorens, the director of the Center for Ethics in Society, says it’s a relationship that can be seen nationally. States identified by the Wharton Residential Land Use Regulatory Index as having a high number of housing regulations, such as Hawaii, New Jersey, Massachusetts, and New Hampshire, also have the highest costs of living, as identified by the U.S. Bureau of Economic Analysis, Sorens’s report noted.

“The relationship between housing supply regulation and cost of living over all 50 states is extremely strong and positive,” Sorens wrote. “As we have seen, there are good reasons to believe that a causal effect of regulation on prices is responsible for this relationship, implying that by reducing zoning restrictions, New Hampshire could substantially cut the cost of living for thousands of families.”

The report identified a number of New Hampshire municipalities that have put in place regulations that limit home building. Manchester requires an exemption to build housing higher than three stories. Portsmouth employs a web of zoning ordinances to protect historical districts and character districts, making new housing construction a complex and expensive process. Other towns use building permit caps to set a hard upper limit on the number of houses that can be built at all. And nearly half of Hanover is protected from any housing development at all, without the chance of variance. 

The effect, Sorens and others say, is that New Hampshire towns have attempted to freeze themselves in time. 

Sorens’s report found a correlation between building restrictions and migration out of the state. 

That means that even as populations decline in certain areas of the state, housing prices often stay stubbornly high, breaking the traditional forces of supply and demand, Sorens said. Those inelastic prices are, in part, driven by “rent-seeking”; residents who use the high regulations to keep housing stock low, which in turn makes property values high and reduces newcomers, the report found.

Overall, the regulations have the effect of keeping out lower-income residents from certain towns and cities – and driving them into less-restrictive towns, the report found.

The report includes a map showing the highest regulation areas in the state – the Upper Valley, the Seacoast, the Lakes Region, and towns along the southeastern border with Massachusetts. Those appear to correlate with the areas in the state with the priciest housing. A second map shows the towns with the highest “excess price,” determined by comparing the price of houses in the town with a formula demonstrating a “predicted sale price” under normal supply and demand. The towns on that map are clustered in the same four regions. 

Speaking at a panel at St. Anselm Tuesday, some housing experts said the report laid bare a dynamic that has grown for decades. 

“They’re the kind of conclusions we would have come to ourselves,” said Ben Frost, managing director of policy and public affairs at New Hampshire Housing Finance Authority. “But I think in an effort to essentially quantify these relationships, this is really important, groundbreaking research for New Hampshire.”

The report urges local municipalities to consider eliminating ordinances that tend to hold back housing development, such as minimum lot sizes, distance requirements from roads, and building permit caps. 

And it advances some suggestions for statewide policies to alleviate some of the zoning barriers, such as a law requiring municipalities to reimburse landowners if they passed new zoning regulations that might lead to a drop in property values. 

New Hampshire has made some strides in favor of housing development, including the creation of the housing appeals board to attempt to expedite zoning disputes that might otherwise end in court. But comprehensive legislation to address housing barriers has proven politically tricky.

A bipartisan bill seeking to streamline the approval process for affordable housing units was tabled earlier this year after some Republican lawmakers argued it needed more work. 

“To get out of the arms race and make decent homes affordable to Granite Staters of all ages and walks of life, policymakers and citizens have to understand how local land use regulations affect the supply and price of housing,” the report concluded. “Better policies will come from a better understanding of the downstream effects of those regulations.” 

A map showing building regulations
(Source: Josiah Bartlett Center for Public Policy)

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Ethan DeWitt
Ethan DeWitt

Ethan DeWitt is the New Hampshire Bulletin’s education reporter. Previously, he worked as the New Hampshire State House reporter for the Concord Monitor, covering the state, the Legislature, and the New Hampshire presidential primary. A Westmoreland native, Ethan started his career as the politics and health care reporter at the Keene Sentinel.