New Hampshire faces one of America’s most acute housing affordability squeezes. Only 13 percent of its households can afford the state’s typical new construction home, the sixth-worst figure in the country. While the usual assortment of local zoning rules and regulations — similar to those blowing up family budgets in other states — play a role, one stands out as unusually stringent (and expensive) in the Granite State. Legislators are giving these policies a second look.
Most U.S. localities only allow detached, single-family houses on most of the land they zone for residential development. This housing is more expensive than alternatives like apartments or townhouses. Then, localities frequently tack on minimum-lot-size requirements, mandating that each house sits on a yard of a certain size.
Requiring buyers to purchase both a home and an arbitrary amount of land drives housing costs up considerably. If an acre costs $300,000, a one-acre minimum-lot-size requirement sets a high price floor for new construction.
Minimum-lot-size requirements can also lead builders to deliver bigger, fancier houses where they’re not needed. After all, there’s not a thriving market for small, basic homes on expensive pieces of land.
Homebuilders across the country often use a rule-of-thumb that land costs should make up no more than one-third of a new house’s sale price. That means that with a $300,000 lot, a builder might target a sales price of $900,000 — out of reach for most households making less than $250,000 annually.
New Hampshire stands out for its onerous lot-size requirements. Nationwide, the typical new house sits on a lot of about 8,000 square feet — less than one-fifth of an acre. But across New Hampshire, only about 16 percent of buildable land is zoned to allow single-family houses on lots less than a full acre (about 44,000 square feet).
Senate Bill 84, currently under consideration in the State House, would improve opportunities for starter-home construction by allowing property owners to build on smaller lots if they choose to. Local lot-size mandates would be limited to: 88,000 square feet for the majority of a locality’s land that doesn’t have water or sewer infrastructure; 44,000 square feet for areas with municipal water infrastructure; and 22,000 square feet for areas with both types of infrastructure.
Legalizing lots as small as 22,000 square feet would still leave New Hampshire lagging far behind other places. Houston, Texas, is a model for allowing cost-effective construction. In 1998, policymakers reduced the city’s minimum-lot-size requirement from 5,000 square feet to 1,400 square feet in the central part of the city. In 2013, based on the success of the initial reform, they expanded the change to cover the entire city.
They unleashed a boom in starter-home construction, with over 80,000 houses on small lots built since 1998. In part because of that construction, Houston is more affordable for median-income homebuyers than any other Sun Belt city.
While this small-lot construction has largely been outlawed in New Hampshire, with even cities like Manchester and Nashua forbidding house lots of less than 5,000 square feet for new construction, it’s not out of line with historic development patterns. Houses in downtowns across the state sit on very small lots on charming blocks. These now fetch exorbitant prices in part because such dense, walkable neighborhoods have become effectively illegal to build under current zoning laws.
When homes become too expensive, it’s a clear signal that an area needs more housing — and more types of housing — built. Smaller lots may be the easiest way to provide opportunities for the people raised in New Hampshire to stay and build their own families.
