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Workforce Shortage Highlights NH’s Housing Crisis

Published Wednesday Mar 13, 2019

Author Judi Currie

Efforts to attract and retain millennials, including partnerships between businesses and schools to address the workforce shortage, are beginning to change the demographic tide. But a big question that officials across the state have struggled for years to answer remains: Where will these workers live?

Over just the past few months, The NH Housing Finance Authority (NHHFA), the Business and Industry Association (BIA) and the regional workforce housing coalitions have held forums and summits in a pursuit to solve the workforce housing shortage.

While NH is doing well with low unemployment and earnings above the national average, the state’s housing mix is out of balance and it is exacerbating the biggest challenge businesses face, attracting new workers.

Affordable rental housing is defined as costing no more than 30 percent of one’s income for gross housing costs, including utilities. Yet the NHHFA 2018 residential rental cost survey revealed the statewide median gross rent of $1,296 (for a two-bedroom unit) had increased nearly 19 percent in the past five years. Based on the median income of renter-households (about $40,000) fewer than 10 percent of the units in the state are affordable.

Heather McCann, NHHFA director of housing research, says even with the recession and the crash, rental prices in NH never went down. And, unlike past economic recoveries, wages have remained nearly stagnant, says Russ Thibeault, president of Applied Economic Research in Laconia and a contributor to the report.

The latest housing market report from NHHFA shows homebuyers also face a lack of affordable inventory and an extremely competitive market. “Homebuilding remains in the doldrums, and the few homes that are being built are affordable only for the few,” Thibeault says, adding between 2010 and 2018 listings for homes less than $300,000 declined by 59 percent. What’s worse, competition for smaller homes between first-time home buyers and empty nesters is fierce. Lack of inventory for first-timers means many are staying in the rental market.

“It has never been so expensive or so difficult to access housing for renters and buyers,” says Elissa Margolin of Housing Action NH, a coalition of organizations working for affordable housing. “The reasons are mixed: some policy-based, some market-based, some are regional issues. It impacts everyone, from vulnerable populations, including people experiencing homelessness and substance misuse all the way to professionals.”

According to NH Housing Finance Authority Executive Director Dean Christon, the relationship between the state’s housing needs and economic prosperity are becoming clear. “While the growth of our statewide median income offers a reassuring reflection of the state’s economy, it also adds weight to the questions about where our workforce will live.”

One of the state’s largest employers, Dartmouth-Hitchcock Health Systems (D-H) has around 600 openings at any given point. Sarah Currier, director of workforce development, says people interested in positions at all levels consider housing a key stumbling block. “On average, about 15 percent turn us down because they don’t like what they see. It’s across the spectrum, even physicians turned down jobs because they couldn’t find an affordable place.”

She says 50 percent of the entry-level workers live more than 30 miles away, some traveling an hour each way. “They are the ones least likely to be able to bear the burden of that commute,” Currier says.

“Absenteeism, lateness, car trouble and child care issues start to crop up and pretty soon they are looking for a job closer to home. They pass two other health care facilities on their way to work and eventually they will be driving by one of those and think, ‘I can save gas, have more time for myself and my family,’ and they leave.”

Twin Pines Housing, which serves the Upper Connecticut River Valley region, is the result of a merger in 1990 between a NH and a Vermont affordable housing organization. Michelle Kersey, director of communications and development says, “It is a challenging environment working in two states but double the opportunity.”

Twin Pines has 417 rental units and just started construction on a project in Hanover to replace a 24-unit building for seniors and the disabled with 24 energy-efficient units. A density bonus approved by voters allows for an additional 18 units to be built on an adjacent site, says Andrew Winter, executive director.

In West Lebanon, Twin Pines is building the 29-unit Tracy Community Housing to serve people at or below 60 percent of area median income, or a family of four living on $48,000 annually.

Despite these projects, demand for affordable housing far exceeds supply in the region. “The Upper Valley Lake Sunapee Regional Planning Commission did a housing assessment in 2012 and determined we are behind by 5,000 units,” Winter says. “Meanwhile, Dartmouth-Hitchcock is adding 600 jobs. They have been very focused on the need for workforce housing and have been involved in trying to get developers to invest. They see it as a major issue for attracting talent,” Winter says.

About a mile from the NH border, Wentworth Community Housing in White River Junction, Vt. will have 30 units, which Winter says will help NH employers. “We see a real need in the region for housing for people in the 60 to 100 percent range,” Winter says. “A lot of people cannot afford $1,700 month. We want to be creating units to support that population.”

How Did We Get Here?
More than a decade ago, NHHFA funded a survey that found between 2000 and 2006, approximately 3,500 units of over-55 housing had been built or permitted. While the NHHFA doesn’t have updated figures, the developments are popping up all over the state. But, they say, one could ask, “Does NH have so much over-55 housing because it has an older population, or does NH have an older population because so many communities only wanted to build over 55 housing?”

The documentary, Communities and Consequences, The Unbalancing of New Hampshire’s Human Ecology & What We Can Do About It, warned in 2008 that the push for over-55 housing and restrictions on workforce housing would lead to an exodus of young people and harm the state’s economy.

Filmmaker Jay Childs says the goal of the project was to start a conversation. “Back then, the storm was gathering and now it is here,” he says.

In the companion book to the film, Peter Francese and Lorraine Stewart Merrill wrote that the demographic shift may seem natural, as baby boomers age, but most of it results from land use and development choices made in reaction to increasing property taxes. “A host of measures—growth-control ordinances, large-lot zoning, impact fees, buying up developable land for conservation, plus an array of expensive restrictions and requirements … have effectively priced many young people and families with children out of the housing market,” they wrote.

Communities and Consequences team, from left: Lorraine Stewart Merrill, Jay Childs and Peter Francese. Courtesy of Jay Childs.

Francese says there is a widespread belief that what towns do is their business and doesn’t impact other communities because we don’t talk about how “The collective action of all the cities and towns impacts the county, state and the entire region,” he says. “Until we get people to realize we are all in this together, it will continue to be an uphill battle.”

Dawn DeAngelis, VP and chief content officer, says when NH PBS aired the original film, there was a lot of interest and some communities took heed. “There are lots of pockets in the state where they are bucking trends, they paid attention and are doing things a little differently.”

The team is working on a sequel, Communities and Consequences II: Rebalancing New Hampshire’s Human Ecology, which they expect to complete this year. Childs says they will show where workforce housing projects have moved forward, such as Portsmouth and Dover. “There are tremendous upside consequences to providing the foundation upon which we can grow the economy,” he says. “Planners who talk about workforce housing need to be clear that it can serve anybody, including retirees who want to downsize.”

Francese says too many communities and land use boards believe that if they allow any workforce housing or any family-friendly development, their property taxes will skyrocket. “This myth is so deeply entrenched that even with 10 percent declines in public school enrollment they still believe it,” Francese says. “We want to showcase vibrant communities that have welcomed children. They are fun places to live and taxes haven’t gone up.”

Is Affordable Housing Viable?
Even as communities wake up to the need for a better housing mix, developing workable projects isn’t easy. The state’s workforce housing law attempted to open the door to development, but some say it doesn’t go far enough. “Enacted in 2008, this was landmark legislation,” says Dave Juvet, senior vice president of public policy for the NH BIA. “It established for the first time a statutory definition of workforce housing and codified a community’s obligation not to put up unreasonable barriers.”

Christon says the workforce housing law compels communities to rethink zoning to be sure they are not unnecessarily impeding development of broader housing stock. NHHFA offered recommendations to help communities comply with the intentions of the law, including lifting limits on building permits, removing requirements to build large developments in phases as the delays imposed by such restrictions can add to the cost of a development. Another recommendation is reduced road frontage requirements.

While the law opens the door to workforce housing, it can still be difficult for developers and communities to figure out the economics of developing affordable housing projects. Portsmouth City Councilor Rebecca Perkins Kwoka, an attorney in commercial real estate, says she ran for office on one issue—affordable workforce housing. She says the housing issue is a structural barrier to continued economic prosperity.

“Each of our cities and towns are making it difficult to build housing. Zoning really is the problem. We have all the amenities and attributes to compete with top job markets,” Perkins Kwoka says. “We have the mountains and the beaches and the community life [millennials] are looking for. There’s just one problem—workers actually have to be able to physically locate themselves here.”  

Perkins Kwoka led a committee that realized Portsmouth needed to have housing policy that empowers city employees to proactively seek opportunities to make housing less expensive, “things like road widths, sidewalk construction, and [getting] infrastructure to our undeveloped parts of town.”

But Robert White, a landscape architect with Greenman-Pedersen in Portsmouth, says requiring affordable or workforce housing but not enacting the density increases to be able to pay for it doesn’t work. “The price differences between the financial ability to pay for housing and the value of market rate housing are out of sync,” he says. “If the development community is going to build affordable housing then the densities need to be roughly doubled to make up the revenues.”

While a 20-percent density bonus, which allows a developer to build 20 percent more units than regulations allow, is a step in the right direction, over-55 communities are often granted 50 percent density bonuses, which incentivizes developers to choose those over workforce housing. Housing advocates and developers want to see more parity in how those bonuses are granted.

Christon says the ability to envision much denser housing is an adjustment that communities need to come to grips with. He says it’s not just what’s needed, it is what young people want. “There remains a significant challenge getting people to understand that for the economy to continue to flourish you need a balanced level of housing. There is also increasing evidence that younger workers prefer renting to owning,” Christon says.

Along those lines, the state approved an accessory dwelling law that would allow a rental unit in a single family home, but some communities are placing the maximum restrictions on the units making them less affordable.

Not in My Backyard
One of the biggest challenges housing advocates face is the lack of understanding of the terms affordable and workforce housing. Low income housing is typically open to households earning no more than 30 percent of the area median income. While workforce housing targets rental households at no more than 60 percent of the median income and homeowners earning 100 percent.

Francese says as the Communities and Consequences team travels around the state, they must overcome the gut reaction of the NIMBYs (Not in my backyard). “They immediately say, ‘you want Section 8 and we don’t want those people in our community.’ We are not proposing Section 8 housing and we are not even talking about it. We have couples—both working full time—who cannot afford $1,200 to $1,400 per month nor get a mortgage; and millennials burdened with student debt upwards of $500 per month,” he says.

Michael Castagna, president of Castagna Consulting Group, a development consulting and program management firm in North Hampton, says, if towns really want to be proactive, and fix the housing mix and the lack of affordability, they need to be partners to developers. “The planning board, the selectmen, need to work together to find common goals rather than starting out as adversarial.”

Getting out in front of a project can make all the difference. As Castagna points out, even if a developer clears all the land use hurdles, there are still the NIMBYs to deal with. “People in the neighborhood can have legitimate concerns, but too often what they read is inaccurate, taken to the extreme and very negative.”

White says sometimes the very people who resist affordable housing also complain about the lack of available housing for their employees, or for their children to move closer to home.

Among those fighting against the NIMBY effect are the regional workforce coalitions. Francese and Merrill dedicated Communities and Consequences to these groups, citing “their tireless efforts on behalf of workers across the state who simply need an affordable place to live.” One of these groups is the Workforce Housing Coalition Greater Seacoast (WHCGS), which has run 18 charettes to date, with the latest in Rochester.

According to Sarah Wrightsman, executive director of WHCGS, the charettes are a two-day intensive process to explore housing options on a particular parcel to get the community thinking and talking. “We put together a team of experts in the field, such as developers, architects and bankers, who donate their time to spend two days evaluating a site and crafting a plan,” Wrightsman says. “The plans are hypothetical but site-specific. The goal is to get housing units in the ground—but we pick a specific site because it is easier to use the experience to gauge a community’s acceptance of workforce housing.”
After the site walk, they conduct listening sessions. “Obviously engagement is a huge piece—we need the community to support a project, not speak out against it,” she says. “The demand for housing is there, so if it is not getting developed there must be some sort of barrier.”

An architectural rendering of a proposed housing building from the WHCGS Rochester charette. Courtesy of Robert White/GPI.

Executive Director Laurel Adams, of the Regional Economic Development Center (REDC) in Raymond speaking at a housing summit in November, says too much of NH’s home construction is expensive single-family homes. “We really have to ask: are we building for the next phase of our growth or just taking advantage of the time we’re in now?” Adams says REDC helps create business, which helps the economy and creates jobs, “But without a mix of housing options for all income levels, we can’t house these people.”

Volunteers for the Workforce Housing Coalition Greater Seacoast’s Rochester charette participate in a site walk, above, and take part in a community listening session, below. Photos by Laura Harper Lake.

Creating a New Path for Appeals
As developers look for ways to make an affordable or workforce project viable, they need zoning variances to build with greater density, have fewer parking spaces, build taller buildings or create projects that blend housing and retail in commercial zones. These requests get funneled through land use boards for site review, zoning and planning—a process that can drag on for years.

If a developer submits a project and it is rejected, or the needed permits or zoning variances are not granted, the only recourse is superior court, says State Sen. Bob Guida (R-Warren).  “It can get very expensive very quickly for both the developer and the community defending its actions.”

Guida is spearheading a measure to establish a three-member panel, knowledgeable in real estate development and land use, that would be a state entity that could weigh whether to overturn a denial, just as the state court does now. “It is important to point out that the board would not be usurping any local rights. We are just establishing an alternate track for adjudicating these disputes,” Guida says. “In the end, if either party doesn’t like a result, they can still go to court.”

Guida says it is also important that state and local statutes on workforce housing development are respected and not abused. “What has been misconstrued is that the panel would be taking away local control, but it’s not. It’s providing a measure of oversight of sometimes parochial town boards or board members with an agenda.”

Guida says the appeals board would render a decision within 150 days, which is lightning speed in the development world. “We were elected to solve problems. I think this is a valid solution that respects all stakeholders,” he says.

Building a Range of Housing
The shortage of workforce housing and the general lack of affordable rentals across the spectrum also limit the ability of those in low-income housing to take a step onto the property ladder. The difference between subsidized housing and even the lowest market-rate rentals is a divide too big for many to cross.

Josh Meehan, executive director of Keene Housing, says the method for calculating rent in low-income or subsidized housing discourages advancement. “Rent is a percentage of income, so one third of any new income will go to rent,” Meehan says. “It is a dis-incentive baked into the computation.”

In 1996, the U.S. Congress allowed 39 housing authorities to waive rules under a federal program called Moving to Work. In exchange they had to show they were getting people to a greater level of self-sufficiency. In 2018, Congress allowed an additional 100 agencies to join the waiver program.

Meehan says Keene Housing, despite its small size, was known for cutting edge thinking and using Moving to Work in innovative ways. “By taking the rent computation system and throwing it out the window and finding a completely new way to work with people, Moving to Work allowed us to be creative,” he says.

Instead of paying 30 percent of income for housing, Meehan says Keene Housing residents pay only 20 percent for the first two years, but then go into a step system. “On day one you meet with a residence service coordinator...We look at education, illnesses not being addressed, and anything that makes it difficult to work steady,” Meehan says. “We start to address issues from day one so that by the time they reach the last step they are ready.”

Meehan says the Keene Housing clients taking part in Moving to Work earn about $20,000 annually, stay in housing for three years, and have about 5 percent unemployment, compared to those not in the program who earn an average of $14,000 annually, stay in housing 4.5 years and have 51 percent unemployment. The Keene program is now being offered as a national model.

Finding the Money
Among the funding streams developers use to make an affordable housing project viable are tax credits.

Businesses purchase the tax credits and the money becomes a funding source; but those tax credits are limited. Kersey says the state of Vermont, in 2017, passed a $35 million bond to support a range of affordable housing. But White and Margolin say NH does not provide enough.

“We just finished a project in Hanover replacing low-income elderly housing...,” White says. “It took three years going through the process to get the tax credits.”  

Margolin says legislation aimed at incentivizing investment in affordable housing is the top priority for Housing Action NH. “Almost every other U.S. state has an affordable housing fund for partnerships with developers,” Margolin says. New Hampshire has such a fund but appropriations have not been consistent.

Christon says the Affordable Housing Fund, which is administered by NHHFA, was created by the legislature in 1988, with appropriations to-date totaling about $17.5 million. “The fund is used to support development of new affordable housing and special needs housing,” Christon says. “About 2,200 units have been built across the state with it over the years.”

A recent resurgence in funding over the past three years includes $2 million for recovery housing, $800,000 for workforce housing focused on veterans, $2.5 million for workforce housing, and $2.5 million for transitional housing. But a lack of consistent funding, and funding at a level lower than neighboring states, puts NH at a disadvantage.

And when funding for a project is pieced together from multiple sources, using various tax credits, delays can mean part of the funding expires, making the project untenable. “If you are dealing with low-cost or nonprofit housing, time is critical,” Juvet says. “You cannot have the thing drag on for a year.”

In Manchester, as mill buildings and other older properties are redeveloped to meet the demands of the tech boom, it adds pressure on the rental market. New housing is being built, but Robert Tourigny, executive director of NeighborWorks Southern NH, says it’s market rate and higher end.

A NeighborWorks Southern NH homebuyer education seminar. Photo by Cross Photography.

Tourigny says when NeighborWorks builds and renovates properties, the clock is always ticking. “That is our biggest struggle: balancing the timeline and it can take two years if everything falls into place,” he says. “For us, in order to be successful, the task is to educate people to show there is a need and how we can solve the need. We help them understand the needs in the market, then show them solutions.”

A recent NeighborWorks Southern NH affordable housing project. Courtesy photo.

Just as with market-rate projects, density is critical to making an affordable project work. “You need maximum number of units to make it affordable,” Tourigny says. “Land isn’t getting any cheaper, building materials are becoming more expensive because of wildfires, tropical storms and tariffs being passed onto builders.”

Getting the Message Out
Key to securing more support for affordable housing is to get facts to community members and decision makers. The Workforce Housing Coalition Greater Seacoast is hosting its first Seacoast Housing Advocate Training on Feb. 16. Wrightsman says the group plans to empower potential advocates and engage business leaders.

Stay Work Play also plans to engage in nonpartisan, issues-based advocacy for housing. According to Will Stewart, executive director, above-average rents and pricey limited starter home inventory means many young people simply cannot afford to live here.

And when the film, book, and web portal for Communities and Consequences II are ready, the team will embark on a tour and offer a discussion guide for communities that hold their own events.

DeAngelis says every community is going to have to find their own way to solve the problem. A screening gets people to think about and envision what the community can be. “How do we open the conversation to get more ideas and information?” she says. “We have to keep asking the question…How do we make New Hampshire welcoming to people throughout the lifespan?”

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