Can’t Afford a Home? Blame the Government

Part 2 of 3

In Part 1 of this series, we learned that government regulation increases the cost of a median family home by up to $100,000, and that federal regulations – most recently the stimulus funding and financial regulations of 2007 – contributes tens of thousands of dollars to that number. So what is the state government’s contribution to this figure in the Live Free or Die state? The answer may surprise you.

We can begin with the Real Estate Transfer Tax (RET) New Hampshire has the highest RET in the nation at $1.50 per $100, which is split evenly between the buyer and seller. The average median home value in New Hampshire is approximately $200,000, meaning the state RET adds about $3,000 to the price of an average home. If you live where the majority of the state’s population lives in Hillsborough, Rockingham, Strafford, or Merrimack counties where housing prices are considerably higher, then the cost is significantly more.

Then there is the Shoreline Protection Act – a great name – after all, who could be opposed to protecting our shorelines? The Act became law in 1991, but in 2005 the legislature in its wisdom created a commission of 24 stakeholders and experts to recommend changes to the law. The commission recommended 17 changes that became the law of the land in 2008.

The Act as it is currently written creates a 250-foot reference line for the Protected Shoreline restricts the percentage of impervious surfaces (rooflines, pavement, etc.) that can be located within that reference line to less than 30% and any less than 20% without a storm water management plan. It creates site assessment requirements for construction within 200 feet of water; a variety of setback requirements for septic systems based on soil types; and the requirement of an Alteration of Terrain permit for any project disturbing more than 50,000 sq ft of contiguous terrain in most cases. The Act also creates a 150-foot reference line for Natural Woodlands Buffer Limitations that is too complex to summarize here other than to say it makes it very difficult and costly to construct anything within this buffer zone. The act goes on to create a 50-foot Waterfront Buffer and Primary Building Setback that restricts building all together within the setback and requires vegetation maintenance.

Anyone familiar with the Granite State knows that we are a state blessed with flowing rivers, lakes, ponds, and wetlands everywhere. The results of the Shoreline Protection Act are far-reaching and costly. The exact impact of the Shoreline Protection Act to the cost of housing are difficult to quantify, but the direct effect is that fewer housing units can be built in New Hampshire. Certainly, one of the greatest impacts is on the supply of housing. The Act limits the ability to build housing within 250 feet of any protected waterways, which lowers the supply and drives up housing prices. The few developers that are willing to navigate through the bureaucratic and costly permitting process are certainly passing that cost on to housing consumers.

One more example of increased costs of regulations is the increasing political fire and building code process. Gone are the days when fire and building codes were enacted based solely on safety concerns. Now the politicians and lobbyists have figured out that they can push pet projects and sell products that they could not otherwise legislate through the regulatory process – all at a cost to homebuyers. The most egregious example is the state regulatory requirement that all new homes include fire sprinkler systems, a direct result of a national effort by the fire sprinkler association lobby.

This regulation is being fought by the Homebuilders Association of New Hampshire as unnecessary and cost prohibitive. Estimates of the cost of implementing this regulatory requirement would add some $20,000 to the cost of a median home in New Hampshire. The homebuilders have successfully lobbied for a one-year moratorium on the imposition of this legislation while it can be further reviewed. There are several pieces of legislation being considered which would eliminate this requirement. This regulatory battle highlights the very real effect of state regulatory practices driving up the cost of housing, many of which are being driven by politics and effective lobbying.

But the regulatory process does not end with the federal and state governments. Next, in Part 3, we will look at your local communities and how their land use regulatory policies are contributing to the high cost of housing.

Author: Paul Young

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  • Anonymous

    Let’s hope our “new” legislature will fix these serious issues rather than tilting at windmills such as bouncing judges, changing mariage laws and heaven forbid sticking it to the cities and towns.