Affordable Housing
Monday, February 12, 2007 at 07:05AM by John Clark
The Housing situation comes down to two distinct basic and very closely related factors.
1. Land Use Regulations – Zoning, specifically related to allowable Density and minimum frontages/ setbacks.
2. Taxation Methods – reliance upon Property Tax as the primary source of Education funding, combined with current assessing practice.
Zoning, as we know it, is a relatively recent (50 years on average) form of population control. The most significant feature being a requirement for much larger Lot sizes, combined with lot-line setbacks which, in our “free market” style of economy, demands larger houses in order to balance the amount of land used to the expense of development.( return on investment )
Tracking the effects of this practice show quite clearly that the average house size has increased along with lot size, and that the percentage of income required for home ownership has risen proportionately.
Unfortunately incomes have not risen in the same ratio, thus the major impact has disproportionately affected the lower income strata, the first quartile by causing higher rental cost, the second quartile ( composed of the basic workforce / workforce retirees ) by increased financial pressure of home ownership.
Compounding the Zoning problem is the “other leg”. Property Tax alone on these larger homes and lands are reaching twenty-five percent of income. This level of expense, on top of a mortgage, is driving younger residents out of New Hampshire. Retired workers on Social Security without “other income” are in dire straits and often cannot afford to retain their fully paid-for homes.
Towns themselves have restrained spending. Education has not. School spending has risen at an alarming rate. Property taxes related to Schools cannot be adequately controlled at a local level.
Latest Census results, and the Report of the Northern New England Real Estate Network, released this week, confirm these trends once more.
Each of these two apparently independent factors paralyzes and polarizes any movement toward wider discussion or implementation of possible solutions.
It is my opinion that ANY discussion of the Housing Dilemma MUST include both Zoning and Taxation. Although each must be solved separately, both paradigms are equally at question. Attention to only one will result in partial resolution of the overall problem.
Reader Comments (4)
First, public, quasi-public and private land preservation has taken substantial amounts of developable land out of the supply equation. In many areas of the state, towns, conservation organizations and/or private individuals have accumulated literally tens of thousands of acres of land for conservation purposes. This land is in many cases permanently removed from buildable inventory.
This is generally a good thing. However, it is also "anti" affordable housing. With land prices a key driver of housing costs, taking large swathes of land out of the "supply" side of the supply/demand clearing mechanism will raise land prices and restrict affordability. This may even be an economically measurable effect in towns like Hollis with aggressive land preservation programs.
The second factor is the inescapable fact that we live in a regional market. Regional effects are increasing with better road networks (Route 3 upgrade; Route 93 project) and families willing to endure longer commutes. Land and housing prices in southern NH are set in substantial part with reference to regional forces. Our land and housing still trade at a meaningful "discount" to many communities close by in Massachusetts.
Our neighboring state has substantially more high-income earners and wealth, and that boosts the price points on the "demand" side of the equation. If the clearing price for a house lot in a nearby Massachusetts town is $200,000, southern NH houselots are increasingly valued not far behind, because a buyer can realistically choose between the two.
These two factors shift the supply and demand curves to a higher clearing price for land and housing. Higher prices mean less affordable housing.
Thanks, Jim
Yes, you are right that MA housing prices impact NH prices, but MA has the same housing drivers we do. I think the appropriate analysis of the drivers is this:
1) The increase in cost of education has exceeded general inflation over the last 15-20 years, due to better salaries and benefits, higher expectations for what is a "reasonabl;e" education, and no increases in productivity.
2) Since NH relies to a major extent on property taxes to fund education, these education price increases drive up property tax rates to the point where taxpayers rebel.
3) Everyone knows that affordable house = more kids in the schools, and the property tax on these kids' homes does not pay for their education.
4) Towns restrict the availability of building lots for affordable housing through a variety of zoning mechanisms, to avoid the tax increases affordable housing will bring.
5) These zoning restrictions reduce land and ultimately housing stock supply, driving up housing prices.
Don't forget the people who have watched one two many episodes of "Flip this House" on the Home and Garden Network.
The home-buying investor is also driving the cost of home ownership through the roof. Perhaps we need a homestead exemption to draw a distinction between land speculators and long-time residents of NH?
One zoning response to affordable housing is the Residential Density Insentive Planned Unit Development (RDI-PUD) that was just passed by the Portsmouth City Council.
It gives developers a density insentive if they build affordable units in the General Residence A and B districts.
You can view the ordinance at www.cityofportsmouth.com
--Friend of Jim (FoJ)
Good points on all counts. In response to the "Open Space" or "Land Preservation" aspects, most of the fear based reaction to development is based upon the Zoning Regulations which demand ridiculously large lot sizes and setbacks. Our original town neighborhoods not only used less than one twentyth of the land required for a three acre lot, but also enabled "neighborhoods to exist where people could chat with each other rather than have to shout or hide.
Often these "Conservation" lands are of properties close to town, thus inhibiting local Planning Boards from using good Community design principles.
When reasonable Zoning is practiced Open Space will be accomplished without the need for public funds to pay for it.
Speaking to the possible "profiteering" of lower priced housing, it is common to use Deed Covenants to accomplish this, either by resale and or owner-occupier conditions. Most Affordable Housing proponents are aware of how to manage these with little cost or risk of abuse. I feel this kind of instrument should have a definite time span, at some point the owner must have ability to "join the market".