One of the great advantages of my job is that I sometimes get paid to answer questions which bug me. This article, which ran in Sunday’s Concord Monitor, is an example:
The arrival of springtime means the start of the busy season for housing sales, but to some extent, it has been the busy season for real estate for six straight years.
Since 2012, the median sale price for a single-family home in New Hampshire has risen every year, the number of sales has risen every year except one and, in perhaps the most significant measure, the length of time that the average house stays on the market has fallen every year. It now takes only half as long to sell the average house as it did six years ago.
This won’t be news to people looking to buy homes or to those who lament how the state’s shortage of affordable housing is, among other things, making it hard for young adults to stay here, which contributes to a much-publicized labor shortage.
The question is: Why? Why is housing so tight?
After all, New Hampshire’s population is barely growing – it was only 2 percent bigger in 2018 than it was six years earlier – and houses, condominiums and apartments are still being built. Under the rules of supply and demand that are taught in Economics 101, it seems like there should be enough housing to go around.
This question has been pondered by many business, advocacy and government groups. Here are a few possibilities:
Our total population may not be increasing much. But it is changing.
“Even though the growth rate isn’t very high, many people come and go. Only one-third of the New Hampshire population over age 25 was actually born in the state,” said Ken Johnson, senior demographer at the Carsey School of Public Policy at UNH.
When somebody leaves the state and sells their house to somebody who is moving in, the sale price will almost certainly be higher than it was when purchased. So median prices can rise even if the population hasn’t changed.
“Some of the tightest and more expensive real estate in the country is in places that aren’t growing in population,” such as New York City, he said.
The same number of people require more houses now than they did a generation ago.
“A lot of our communities aren’t seeing a lot of growth but there’s still a lot of demand for housing because of demographic changes that require more housing for the same amount of people,” said Dean Christon, director of the New Hampshire Housing Authority.
“Households are smaller. Where once you’d have two adults and multiple children using a single housing unit, now you might for that same set of people have to have two units,” he said.
New Hampshire, as you have undoubtedly heard, is getting older. The state’s median age of 43.1 is virtually the oldest in the country – Maine or Vermont might be older, depending on which numbers you use – and our over-65 population is expected to outnumber the below-18 population by 2035.
One result is an increase in the number of empty-nesters – parents whose children have grown and moved away – who want to simplify their life, selling the multi-bedroom house that was useful when the family was full and replacing it with something smaller and easier to maintain.
This puts them in competition with younger buyers who are also looking for a small home, which explains why homes selling for less than $250,000 disappear quickly.
“People are looking to downsize or rightsize into that market. Those first-time homebuyers are now competing with baby boomers, right-sizers,” said Susan Roemer of the Masiello Group in Concord. “That’s what I see now in that market.”
Those factors may explain why the demand side of the market remains strong. But what about the supply side?
“There’s a startling statistic we try to get people to focus on: We’re producing substantially fewer homes than before the recession hit. We’re probably (building) less than half the single-family (homes) we saw then – perhaps 40 percent, which is a huge downward shift,” Christon said. “We’re several years out of the recession. You don’t see any increase of any significance in that development activity.”
Why aren’t enough houses being built to meet the need?
“That’s a very good question being asked by a lot of people … across the country. It’s not a unique problem in New Hampshire. Lack of single-family construction, especially at the lower end of the market, is a pretty widespread issue across the country,” Christon said.
There are two obvious reasons for this, and one that’s not so obvious.
The first reason is the rising cost of many materials, such as wood, steel, concrete and asphalt. It’s difficult to build a house from expensive materials and keep it cheap.
The second reason is the labor shortage that can be seen in almost any industry but which is particularly acute in construction.
The Associated General Contractors of America recently reported that 79 percent of contractors in its survey are unable to hire enough workers to meet their customer demands. That lengthens the time it takes to build each home and increases the cost.
The third reason is harder to pin down: regulatory barriers.
Housing construction is one of the nation’s biggest industries, worth hundreds of billions of dollars annually, but it is heavily dependent on decisions and attitudes at the state or local level.
Building codes and land zoning and environment rules are implemented at the town level, and by varying from place to place they make it harder for housing construction to be standardized, raising costs.
Christon says that New Hampshire’s culture of local control contributes to the problem.
“Here, land use policies are made and implemented at a very local level, often by volunteer boards that may not have a lot of staff support. So the process may take a lot longer,” he said.
This fact, Christon said, explains something surprising: “Some developers say it’s harder to build in parts of New Hampshire than in Massachusetts, which people think of as a high-regulatory environment.”
New Hampshire Housing Authority is pushing for more training and technical support for volunteer bodies such as planning boards, zoning boards and conservation commission.
It also supports proposals to create an administration review body for housing-related regulatory decisions, similar to the current Board of Tax and Land Appeals. Right now, if a builder or developer is turned down by a local board, the only recourse is to file a lawsuit, which is expensive and time-consuming. A state-level appeals board would speed up a final decision and might produce more consistency, he said, although it has drawn opposition from those who fear it takes away local control.
There’s another, even less obvious, factor in the equation: Attitudes toward growth.
Much of the current zoning in New Hampshire communities was first instituted in the 1960s and 1970s, when the state, particularly the southern section, was seeing a surge of development and influx from Massachusetts. Patterns like two-acre zoning became common as a reaction – but you can’t build an inexpensive house if the sale price has to also cover the cost of two acres of land.
Communities worried about rising taxes sometimes sought to actively limit the number of families because public education is so expensive, via practices such as giving breaks to housing complexes that are limited to people over age 55.
“A lot of our zoning policy now is based on restricting, regulating, limiting growth, when a lot of our communities aren’t seeing growth anymore,” said Christon.
He thinks this has to change if New Hampshire has any hope of controlling housing costs. There are some signs that people are noticing, such as last year’s law making it easier to build “in-law apartments” and the attempt this year to ease restrictions on so-called tiny homes, which are often touted as a lure to young adults. The tiny home bill was sent to committee and may come back before lawmakers next year.
“This is increasingly being noticed by folks – a lot of public officials, a lot of business folks are talking about this,” said Christon. “I have some optimism that we can address this issue but this really does require a lot of changes in people’s attitudes, as well as action at a very local level.
“And that,” he added, “takes a lot of time.”