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Source: NH Center for Policy Studies Housing Needs in New Hampshire Report, part 3.




Who’ll buy the McMansions?
NH’s tricky housing equation

05/01/14



 If you think of the state’s housing market as an equation, the math is a bit more complicated than it used to be.

That’s what the New Hampshire Housing Finance Authority discovered in the results of a three-part  housing needs and preferences assessment it commissioned to help the state plan for the next few years.  Reports of the studies conducted by the New Hampshire Center for Public Policy Studies have been released during the past few weeks. 
In the past, the study, which is conducted every five years or so, looked at potential housing demand based on population growth and job growth. This time around, in addition to the usual quantitative, census-based data, researchers used qualitative methods. They interviewed realtors, developers and the state’s younger and older adult populations. 
“There was a sense we also had that there has been some pretty significant shifts demographically and economically affecting the state. Given that fact, we really needed to shift the focus of the study,” said Dean Christon, executive director of New Hampshire Housing. 
Researchers found that slowed growth is permeating the state, and that could pose challenges for New Hampshire’s housing future.  
“We hope that people will look at the study and think about a range of things,” Christon said. “It’s not just housing policy, if you will. It’s a whole lot of implications in this change in demographics and economic culture that we need to respond to, publicly as well as privately.”
Start with lots of seniors
The senior population has been on a steady incline, and researchers expect that trend to continue. By 2015, nearly 16 percent of the population will be age 65 years and older, and the demographic is projected to rise to nearly a third of the population by 2035. 
That change poses challenges to the state’s housing market, which in the past has been more focused on the needs of families. 
Many of the state’s senior citizens show a strong preference for staying in their current homes, which tend to be large but relatively empty. Most seniors live in one- or two-person households, but three- or four-bedroom houses. Staying put means aging homeowners may need to make some serious renovations to the infrastructure of their houses. 
“Most older people want to age in place, but there are limitations in their ability to do that,” said Russ Thibeault, president of Applied Economic Research for Public Policy Studies. 
According to the study, some seniors will be looking for assisted-living situations, while others want their children to move back home. Some want smaller, more manageable houses that are single-level and modern. 
 
Add in millennials’ needs
When it comes to young people, many don’t want big, single-family homes. There’s a push to de-suburbanize, Thibeault said. They want to live in walkable neighborhoods with access to resources like stores, restaurants and public transportation. 
But even those who do want large, suburban, single-family homes have difficulty finding the means. 
“The other aspect of change is young people being saddled with a lot of student debt, stricter mortgage qualification standards, and lousier job prospects,” Thibeault said. 
In a nutshell, millennials are doing everything later than baby boomers. Young people are deferring life events ranging from marriage to homeownership. 
“We had a young guy [in a focus group] say, ‘Why should I hook up and possibly marry somebody who has $60,000 worth of debt? That becomes my debt,’” said Dennis Delay, economist with NH Center for Public Policy Studies. “It’s just a very different environment for people, compared to when I was that age. You were a failure if you weren’t married by your early 20s and owning a house by your early 30s.”
Even though the state’s home prices have fallen, the costs of rental units have increased. The demand is outpacing the supply, which is driving rental prices up, Delay said. And for millennials looking to purchase houses, they need smaller, affordable housing, which puts them in competition with aging baby boomers. 
“One of the realtors [in a focus group] said, ‘If you look at young people, they are looking for something affordable, like a cape or ranch, and the older looking to downside are looking for one-level living, so they are all looking for a cape or ranch.’ … We’re starting to run out of capes and ranches,” Delay said. 
 
Multiply by slowed growth
The final critical piece of the puzzle is a lack of population growth, a relatively new phenomenon for the state. From the 1970s to 1990s, the state was growing at a rate of about 6 to 7 percent. But when the last assessment was conducted in 2008, growth became a the primary concern. Currently, the population is only growing about 1 percent a year. 
“New Hampshire hasn’t grown much at all in last four or five years, and there’s little evidence to suggest that’s going to turn around anytime soon.” Delay said.
In  2013 New Hampshire claimed the spot as the seventh-slowest state by population growth, according to the U.S. Census Bureau. Fewer out-of-staters are moving here for work, and more young people are leaving for jobs in bigger cities. 
“That’s concerning in terms of who’s going to be here to buy housing as seniors leave it,” he said. 
 
Solution in new zoning regs?
Experts say one of the most important solutions may be developing new municipal zoning and planning laws. Many of the state’s local building ordinances were created to ensure that people weren’t flooding into areas and creating too much population density too fast. But those ordinances aren’t useful anymore. 
“If you don’t let people build housing, it won’t be available, and the price of what is available is going to go up,” Christon said. 
More flexibility in regulatory policy could permit mother-in-law apartments to be built on single-home properties, allow unrelated people to share houses, and allow rental properties to be built in communities that currently restrict them, Thibeault said. 
But what about the big houses that already exist?  
“The thing we keep wrestling with is, who’s going to buy the baby boomers’ McMansions, in which case you’ve got to start thinking about if you can’t sell them as homes, what else can you do to refurbish them?  In the North End of Manchester, you see a lot of those big houses turned into doctors’ offices and real estate agencies,” Delay said. 
But that’s not practical for the houses that aren’t in central locations or can’t easily be converted. For now, then, the equation isn’t quite solved. 
“There’s going to be be some very interesting challenges coming up,” Delay said.
 
As seen in the May 1, 2014 issue of the Hippo.





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