This article originally appeared at JBartlett.org.
Nationwide, rents have trended downward in the past year. But that relief has missed New Hampshire.
Here, rents rose in the past year at double the rate of the year before, according to the New Hampshire Housing Finance Authority’s (NHHFA) latest report, further illustrating how desperately underserved New Hampshire’s rental market is.
“The rental market hit a big milestone this month, as national rent growth is finally negative year-over-year,” rent-tracking website apartmentlist.com posted on July 26. “This means that on average across the nation, apartments today are renting for less than they did one year ago.”
A growing supply of apartments is having the predictable negative effect on rents.
“The supply side of the rental market also hit a major milestone this month: our vacancy index has reached 7.3 percent, surpassing the peak vacancy rate measured at the height of the COVID-19 pandemic,” the apartmentlist.com report concluded. “With a record number of multi-family apartment units currently under construction, this vacancy rate will remain elevated in the near future. For the first time since the early stages of the pandemic, property owners will compete for a smaller pool of tenants instead of the other way around.”
That last sentence is key. More apartments = lower rents.
Data from realtor.com also show rents falling in absolute terms from last year.
Harvard University’s Joint Center for Housing Studies concluded in its 2023 housing report that “rental markets are experiencing sharply reduced rent growth and rising vacancy rates.”
The study cited lower demand for rental housing after a surge during the pandemic, coupled with a large increase in construction.
“Multifamily production was extraordinarily strong over the past year, with 342,000 multifamily rental units added in 2022 alone, mostly targeting the high end of the market,” the Harvard study concluded.
Another industry website, rent.com, concluded in a July report that rents nationally are lower in July 2023 than they were in August of 2022.
That report pegged New Hampshire as an outlier, with the eighth-highest rent growth in the nation during the past year.
New Hampshire is bucking the national trend. Not only are rents rising sharply here, but so is the rate of growth. The NHHFA’s 2022 report pegged the average annual increase in gross monthly rent at 5.7%. This year’s report, released last week, pegged the rate at 11.4%, exactly double last year’s.
Heat costs for renters were 58-64% higher than last year, and electricity costs were 62% higher, as measured by NHHFA. Those increases contributed to the surge in expenses for renters.
But the biggest factor was the continued shortage of rental housing amid strong demand. That shortage is caused primarily by local land use regulations that restrict rental construction.
“Local zoning and planning regulations are probably the largest factor,” NHHFA Executive Director Rob Dapice said in an interview this week. “That’s true of both multi-family and single-family construction, and of course a lot of rental housing is multi-family construction. There are perhaps some obstacles at the state level. We really see more obstacles at the local level.”
The Josiah Bartlett Center’s landmark 2021 study of local land use regulations showed how these constraints on construction limit the supply of new housing in New Hampshire, driving up prices.
With the state’s population projected to grow to 1.5 million by 2050, and the New Hampshire economy booming, demand for new housing is expected to continue rising for years. That leaves the supply side, namely new construction, as the only way to arrest the growth in both rents and single-family home prices, which also hit a new record in May.
NHHFA’s research estimates that New Hampshire needs 60,000 new housing units by 2030 and nearly 90,000 by 2040. Without cooperation from local planning and zoning boards, which regulate land use in New Hampshire, those construction goals will remain out of reach.
