State’s Economy Hangs by the Housing Market Thread

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Garry Rayno is's State House Bureau Chief. He is pictured in the press room at the State House in Concord.


Gov. Chris Sununu’s introduction to the state’s fiscal 2022 annual audit, touts the state’s economy and the significant revenue surplus during the 2022 fiscal year.

He notes business taxes were 27 percent ahead of estimates and the surpluses of the interest and dividends, real estate transfer and rooms and meal taxes, without once mentioning the billions of dollars of federal relief and infrastructure money has been a blowtorch to the state’s economic fuel.

And the backbone of the state’s economy — small local businesses — does not look as great when you look at the breakdown in the business taxes between the profits tax and the enterprise tax.

Large multinational corporations pay about 80 percent of the business profits tax which was more than $220 million above estimates while the business enterprise tax is assessed on payroll, interest and dividends of  businesses and generally is more reflective of state business health.

The revenue from the business enterprise tax last fiscal year was slightly below estimates and state tax officials warned of a coming slowdown in the revenue stream recently.

The slowdown may be a little sharper than state business leaders warned budget writers earlier this month unless the housing crisis is fixed.

The problem however, is the crisis has taken many years to arrive at this point of average housing prices in the $400,000 range in many areas of the state and a vacancy rental rate of less than 1 percent.

The problem is not new and lawmakers have been warned for some time that unless the state develops more workforce or affordable housing, the state’s economy will be vulnerable.

Housing prices have been increasing steadily for some time, at least since the last major recession from 2007 to 2009.

But the mass exodus from the cities to rural areas because of the COVID-19 pandemic shot prices up like one of Musk’s or Bezo’s rockets.

Since the days of Ronald Reagan, middle-class income has stagnated or in many cases gone backwards, making the American dream of owning a home a little further out of reach with every passing year.

But the recent increase in real estate values has put home ownership out of reach of anyone not earning more than $100,000 annually or more.

Prices are not the only problem, supply chain disruptions have caused building materials to be scarce and — as a result — more expensive.

The cost to build a home or an apartment building puts prices beyond the attainment of many people today.

People are living in SUVs on Portsmouth streets, and in vehicles in Manchester and other cities and many of the most vulnerable people — often with mental health or addiction afflictions — are living on the street with the biggest problems in Manchester.

Solving the problem is often looked at in two general routes: government intervention or letting the market solve the problem.

Well the market has not solved the problem in the last decade and the government has been slow to respond and when it does, it is to address the immediate problem and not craft a long-term solution.

Some people say the problem is overly restrictive zoning, and that may be true in some towns, but not true everywhere.

But another significant problem is the state’s tax structure and its over-dependence on property taxes to fund government from schools to nursing homes and from plow trucks to public beaches.

The state’s tax structure encourages the building of a few large palaces, preferably on the water, versus apartment buildings for service industry workers.

The people living in the palaces do not require much in town or city services but those service industry workers often come with kids who will go to public schools.

But in order for the state’s economy to keep “firing on all cylinders,” as the governor said in the annual audit, restaurant, hotel, health care, cleaning, retail and many more lower-income workers need a place to live or restaurants will not be open seven days a week, nursing homes will not be able to fill all their beds, and shelves will be empty at grocery stores, all things that are happening now.

The state was urged for years to establish an affordable housing fund, but never did much more than lip service until two years ago when there was a significant budget surplus and established a fund and urged businesses to contribute as well.

Sununu announced a major housing program last summer to make it easier to traverse the local approval process, with matching grant incentives and help for communities with zoning and planning changes, but little of it is actually reserved for affordable housing units.

A look at the legislative calendar this session and it is loaded with bills trying to address the most visible problem, the rental market.

Last week Rep. Ellen Reed, D-Newmarket, presented a bill that would allow cities and towns to take emergency steps to cap increases in rent or lengthen the tenant notification time before a rent increase would go into effect.

The real estate lobbyists were adamantly opposed and used the let-the-market-fix-it argument that more units are needed in order to reduce the crisis.

That is fine over a period of years, but with vacancy rates less than 1 percent, more apartments two or three years away is not going to help someone evicted from an apartment he or she lived in for years so the new owner of the apartment building can renovate it and double or triple the rent.

With the cost of rentals going up, apartment buildings are a good investment and overpaying is not a problem if you can raise the rent high enough and fast enough to satisfy the loan requirements.

A look at the House Calendar for the Judiciary Committee Wednesday shows seven bills having hearings beginning at 9 a.m. dealing with rental properties’ problems such as rent increases, building sales, evictions and tenants’ rights.

The problems are not going away and new laws take time to go into effect, while there are people living in encampments and shelters that have little hope of finding a permanent residence anytime soon.

And investors are purchasing rental property in tourist areas or college and university towns and turning it into short-term rentals.

That both takes units off the markets and drives up the price of existing long-term rentals because there are fewer of them. 

That is supply and demand. When it is in balance, it works, but in the housing market, it is greatly out of balance with the demand so much greater than the supply, there needs to be a correction.

The state’s 2022 annual audit shows the state finished the year with a surplus of $361.3 million.

The state ought to take about half of that money or even $100  million and buy apartment buildings that come on the market and freeze the rents to bring some market stability until new units can be constructed. 

That would at least be the beginning of trying to move housing from crisis mode to just an emergency.

Garry Rayno can be reached at

Distant Dome by veteran journalist Garry Rayno explores a broader perspective on the State House and state happenings for Over his three-decade career, Rayno covered the NH State House for the New Hampshire Union Leader and Foster’s Daily Democrat. During his career, his coverage spanned the news spectrum, from local planning, school and select boards, to national issues such as electric industry deregulation and Presidential primaries. Rayno lives with his wife Carolyn in New London.

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