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When Governments’ Barriers to Housing Step over the Line

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When Governments’ Barriers to Housing Step over the Line

Governing May 20, 2021
Urban PolicyHousing

A new state board in New Hampshire offers a speedy, non-judicial way to challenge onerous local land-use decisions. It’s a way to prevent a hot housing market from overheating.

Last month, The Wall Street Journal and Realtor.com ranked the top emerging housing markets — places with both a high quality of life and high expected house-price appreciation. The study crowned Coeur d’Alene, Idaho, with top honors. But New Hampshire stands out as the only state with two markets in the top 10, with Concord and Manchester-Nashua taking the eighth and ninth spots.

New Hampshire is indeed a great place to live. In addition to its low taxes, low crime and great natural beauty, the state has the country’s fifth-lowest unemployment rate and its lowest poverty rate.

But there’s a catch. Potential buyers may be looking at the Granite State, but many are having trouble actually making the move. The housing supply in New Hampshire has not kept up with demand, and the state is a microcosm of the housing crisis that afflicts so much of the country. The median single-family home in New Hampshire sold for $362,900 this March, up 16.5 percent from a year prior. Surging housing demand and prices amid the coronavirus pandemic have put the problem into sharp relief, but the crisis far precedes the recent boom. In New Hampshire, the rental vacancy rate for two-bedroom apartments has been below 2 percent since 2016, while 5 percent is considered a healthy vacancy rate.

The aftermath of the 2008 global financial crisis led to a decade of underbuilding nationwide, and it will take years of renewed construction to make up the deficit. Meanwhile, local governments have increasingly devised new, more onerous regulatory barriers to residential construction. Zoning has steadily become more and more restrictive, including in New Hampshire, where large lot requirements have become the norm in many towns. In response, cities and states across the country have tried everything from preempting single-family zoning to setting housing targets to promoting subsidized units. So far, the impact of these policy interventions has been modest at best.

More needs to be done. But New Hampshire is charting a new way forward on housing policy, as I explain in a new Manhattan Institute report. Acknowledging the state’s dire housing crisis, state Sen. Bob Giuda worked to create a Housing Appeals Board (HAB) to provide a non-judicial avenue for aggrieved landowners and developers to appeal local land-use decisions. In 2019, the HAB passed as part of the state’s biennial budget with the support of a bipartisan coalition and the backing of Gov. Chris Sununu. In 2020, the HAB started operating, and it began taking cases early this year. It issued its first rulingtwo weeks ago, in favor of the developer, and has several other cases under consideration.

Thus far, the new body has received little attention outside the Granite State, but policymakers across the country ought to pay closer attention. A body like the HAB can be a valuable part of any state’s pro-housing toolkit.

First, it is important to establish what the HAB is not. It is far from a state takeover of zoning. It does not deprive local governments of any regulatory authority; they can continue to zone as restrictively as they wish, provided that they comply with other state laws. However, the HAB has the authority to review any discretionary land-use decisions, such as variances and site plans, all while giving local governments a good degree of deference. Where the HAB determines that local governments abuse their discretion, it can intervene to approve formerly denied applications and allow projects to proceed. Moreover, the HAB can check local governments when they try to run around state law, as they often attempt to do when facing state mandates such as New Hampshire’s requirement that they allow accessory dwelling units (ADUs, or “granny flats”) in single-family zones.

Theoretically, courts can play the same role, but the HAB’s most obvious advantage is its expedited process. In real estate development, where timing is key and delays alone can kill projects, the inadequacy of judicial review may be enough for local governments to wrongly stymie development. But where courts are slow and expensive, the HAB is fast and cheap; it is designed to render decisions in months, not years. And it relaxes legal formalities, allowing non-lawyer land-use experts such as professional engineers, architects and land surveyors to represent appellants. Indeed, the HAB deploys non-legal expertise as an integral part of its process, with a real estate broker currently serving on the board.

Meanwhile, the HAB offers a small-government approach for small-government states like New Hampshire that respect local autonomy. The board has only three full-time members and operates on a slim budget of $415,000. The model is simple enough to scale up and deploy in other states. And its light-touch intervention is far less heavy-handed than what other states are doing to coerce local governments into allowing greater housing density.

Right now, the hot housing market in New Hampshire shows little sign of cooling down, but the HAB may very well help prevent it from overheating. Other states should take note.

This piece originally appeared at Governing

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Brian Chen is a J.D. candidate at the Yale Law School, where he studies land use, state and local government, federalism, and public finance. Based on a new report.

Photo by photovs/iStock

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