90,000 units in two decades: New report puts a big number on state’s housing crisis
(Source: “2023 New Hampshire Statewide Housing Needs Assessment” | New Hampshire Housing)
For those living in New Hampshire, the reality is already clear: The state’s housing market is prohibitive and expensive.
This month, a new annual report laid bare exactly how prohibitive. The 245-page analysis by New Hampshire Housing, the state’s housing authority, delivers a clear message. New Hampshire needs far more housing units than previously indicated, and the current rate of development is not going to cut it.
“The longer we go, where we don’t produce enough housing to meet the needs of the current population … the more we’re kicking the can down the road, and the greater the deficit will be,” said Rod Dapice, executive director and CEO of New Hampshire Housing, in an interview.
The outlook is jolting, but there are solutions, Dapice says. Here are six things to know from the 2023 New Hampshire Statewide Housing Needs Assessment.
We need a lot more than 20,000 units
For years, New Hampshire Housing advocates have relied on one key figure: 20,000 units. That’s the amount of new housing units New Hampshire Housing has stated is necessary in order to bring the housing market into balance, stabilize costs, and create a healthy number of vacancies.
But that number does not nearly represent what will be needed in the future, the agency now says. In order to maintain stability, the state will need closer to 90,000 new units by 2040.
The new estimate is a result of new analysis. While previous reports have used current data around prices, occupancy, and demand to determine the housing need, this year’s report builds in demographic projections, too. Because the state is expected to grow in population until at least 2040, the 20,000-unit number will soon be obsolete.
Instead, the state will need 59,934 units by 2030 and 88,395 units by 2040, the report says.
That could be a difficult target to hit. There were on average 4,000 new units constructed per year between 2017 and 2021, the report notes. To hit the new estimated minimums, that annual output will need to increase by 36 percent. And the state’s housing construction industry continues to face workforce shortage and supply chain issues, much of which was triggered by the COVID-19 pandemic.
Housing costs are far outpacing wage growth
Until housing construction picks up again and more units are available, the cost for renters and homeowners is likely to stay high.
In the past two decades – between 2000 and 2020 – median household incomes have risen 73 percent. But new home prices have climbed 111 percent, the report notes. That dynamic has only worsened since 2020; the median sales price in the state hit a new record of $460,000 in 2022 and currently sits at $445,000, according to the New Hampshire Association of Realtors.
The price increases have pushed more people to rent their homes rather than buy them. Working age adults, those ages 25 to 44 years old, are less likely to own homes now than 10 years ago. And the high prices are also keeping some current homeowners from selling and moving elsewhere, meaning there are fewer units available. About 4,500 homes were listed for sale during the peak of 2022, compared to about 9,000 at the same peak in 2019, the report noted.
‘Renting down’ raises rents for everyone else
The high home prices are also changing traditional patterns when it comes to buying homes.
In prior decades, young couples or families who hit a certain income level would often move out of a rental and into affordable starter homes. But fewer are doing that in the current market, even though their incomes are relatively high.
That creates a phenomenon Dapice calls “renting down.” Wealthier people who might normally have left the rental market to buy homes are not doing so. They are “renting down,” and sometimes paying less than they could afford on rent.
That, in turn, means there are fewer rental units available for lower-income people who can’t afford homeownership. And it also means that landlords have more incentive to raise rents, with an abundance of wealthier tenants.
The effect is that the state’s vacancy rate stays low and rents stay high, Dapice notes. And lower income renters feel a greater squeeze.
“Prices for the state’s rental units are concentrated between $1,000 and $2,000 per month, much higher than what lower-income renters can afford,” the report states.
The report found that 23,000 renters in the state are paying a higher rent than they can afford.
Vacation homes are crowding out residential homes
New Hampshire does have vacant units, the report notes. But a majority of them are seasonal and vacation homes.
That phenomenon has only grown lately, making a tight housing market even tighter, the report found.
From 2010 to 2020, the share of vacant units that are dedicated toward vacation and seasonal use has grown from 66 to 71 percent, as more homeowners seek to cater to tourism, the report found.
And some counties have experienced significant increases in short-term rentals: Rockingham County has seen the percentage of vacant units used for vacation homes rise from 43 percent to 53 percent in the last decade.
The report notes that if the state is to keep up with the demand for second homes and tourism, it will need to add up to 23,000 units for seasonal use in addition to the 90,000 for residential use by 2040.
“Low production volume and the conversion of existing housing into seasonal uses have created a housing market that cannot adequately respond to demand,” the report states.
Homeownership among minorities is dropping
The drop on homeownership rates has affected people of color in New Hampshire much more than its white residents.
From 2010 to 2020, the percentage of Black residents who owned homes fell sharply, from 41 percent to 32 percent, according to the report, which cited American Community Survey 5-year survey data from the U.S. census.
The trend was seen among other minorities, too: 41 percent of Hispanic residents owned homes in 2020 compared to 45 percent in 2010, and 53 percent of Asian residents were homeowners in 2020 compared to 59 percent in 2010. Native American residents saw an increase in homeownership from 50 percent to 61 percent in that decade.
Those identifying as non-Hispanic white saw almost no change: 74 percent of New Hampshire’s white residents owned homes in 2010 and 73 percent of the same demographic owned homes in 2020.
Those disparities may be a result of structural barriers. A 2018 analysis by the Federal Reserve Bank of Boston found that denial rates for homeownership loans are twice as high for Black and Latino residents in New England as for white residents.
Short-term, long-term solutions needed
Expanding the number of housing units by 20,000 this year – let alone by 90,000 in 2040 – is a monumental task. Dapice says there are some initiatives that could help.
“It’s going to take action at the state level, but it’s also going to take action at the local level, and what that really means is 200 different actions being taken in towns and cities across New Hampshire,” he said.
This year, lawmakers are uniting behind a bill, Senate Bill 145, that would allow towns to receive special state grants and loans if they improve their zoning procedures to be more friendly to workforce housing. That program is likely to be added to the state budget bill by the Senate after a unanimous Senate floor vote in March.
The creation of a special committee in the House to take up housing-specific legislation is also promising, Dapice said, as well as additional state grant money toward initiatives like InvestNH, a program set up by Gov. Chris Sununu intended to boost housing development.
But meeting the bigger goal of getting more units built is going to require a sea change in public opinion around housing, he said – and a desire for local action to change zoning codes to allow more housing.
“I think, like a lot of issues, when people are personally affected, they get interested in change,” he said. “The housing challenge in this state seems to get worse year after year. But more people are affected and then more people come to the table and say, ‘Hey, I love my community the way it is, but I just realized that my parents … have no place to move to within an hour of me, or my kids are still in my basement because they’ve got good jobs but they can’t find anything that they can afford.’”
GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
SUPPORT NEWS YOU TRUST.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.