Only 7 percent of New Hampshire rentals affordable, new report finds

By MICHAELA TOWFIGHI

Monitor staff

Published: 07-22-2023 6:45 PM

The cost of a two-bedroom apartment in New Hampshire five years ago, including rent and utilities, was just below $1,300 a month. Today, that monthly expense is over $1,700, an unaffordable number for many New Hampshire families.

The 36% increase over five years is a symptom of inflation in the broader economy, according to Rob Dapice, the executive director of New Hampshire Housing.

In the past year alone, prices jumped by 11%, according to a new report from New Hampshire Housing.

Rising costs are a common narrative in the post-pandemic housing market. Over the course of the last three years, the housing market exploded – cash sales, record high prices and out of state license plates lining driveways at open houses.

The same held true for the sale of multifamily homes, which contributes to rents.

Beyond affordability is availability – even finding an open apartment is often the challenge for New Hampshire renters.

The state-wide rental vacancy rate for all units is 0.8%. This means out of every 1,000 apartments in New Hampshire, only eight are available to rent at any given time.

It’s a slight improvement from last year, when the vacancy rate sat at 0.5%.

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But in a healthy housing market, where supply is able to meet demand, a vacancy rate of units should be around 5%. The last time the state saw a healthy housing market was in 2009-2010, according to New Hampshire Housing’s past survey data.

To meet demand, it’s clear more housing is needed. Exactly how much housing is needed changes with population and industry growth.

New Hampshire developers would need to build 23,000 units today to meet current demand. By 2030, the state needs 60,000 new units, and over the next two decades, by 2040, 90,000 units are needed, according to housing experts.

This critical shortage is on the radars of state leaders. Last year, using American Rescue Plan Act funding, Gov. Chris Sununu established a $100 million fund, InvestNH, to accelerate the development of affordable housing.

In November, the Executive Council approved $50 million of this funding to support 30 housing projects. By 2024, these projects will contribute 1,500 new units to the state.

Yet in InvestNH funded projects only 20% of units must be designated as affordable, which are often restricted by income thresholds and must remain at this price point for 10 years.

State-wide, only 7% of two-bedroom units are at or below an affordable rent, according to New Hampshire Housing.

The estimated median income of renters in the state for two-bedroom units is just over $50,000 and affordable rent, with utilities included is just under $1,300. Only seven out of 100 apartments are affordable to average income earners in the state.

Compared to the rest of New Hampshire, Merrimack County prices have not risen as fast. Over the last five years, Grafton County prices for a two-bedroom unit have increased by 82%, with the median rent just over $2,000.

Still, in the greater Concord area, rent for a two-bedroom is $1,500, which is almost a 30% increase from prices in 2018.

The rental market continues to be squeezed by the lack of affordable homes for first-time buyers, according to Dapice. With interest rates between 6% and 7%, many potential homeowners have remained renting, further straining the limited supply.

To restore balance to the housing market, development of many different housing options – including single-family and multifamily homes – is key, said Dapice. Communities also need to evaluate their zoning and planning ordinances, so that towns and cities have a flexibility to continue to add housing across the state.

In Concord, the city is in the process of redesigning its zoning code. Reconfiguring the zoning code would provide more flexibility for homeowners like adding additional dwelling units, by limiting the need for site plan reviews and by helping increase the city’s housing stock with fewer restrictions on multi-family development.

It’s zoning reforms like this that will help alleviate the state’s housing crunch, said Dapice.

“How do we get to a more balanced market, where our state’s workforce and people can find and afford a home, whether they rent or own?” he said.

“Additional funding and financing tools to support the development of single-family and multifamily housing are key. So too, are evaluating planning and zoning changes in our communities to enable us to add different types of housing to meet the needs of the people of New Hampshire, regardless of their income or age or where they live in the state.”

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