This is an op-ed by Representative Len Turcotte (R-Barrington)
NH’s Housing “Crisis”
For the past few years, we have heard a continuous drumbeat emanating from every possible quadrant that New Hampshire is in the midst of a housing crisis. Like a myriad of other crisis’ said to be afflicting our state, those utilizing the term hope that it will instill concern and fear to the point that it will bring about bureaucratic and legislative actions. Many politicians succumb to this fear with an inevitable “we must do something” solution. I have a two-word solution to the “crisis”: laissez-faire. More on that later.
To understand how we got to where we are regarding housing costs and their availability, we must first look at a few of the underlying causes. Nearly everything in our world operates in a cyclical fashion, and the price of real estate and rentals are no exception.
Let’s begin with the economic principle of “supply and demand” and its recent impact on housing in New Hampshire. Since the covid epidemic began, we have seen a large influx of out-of-staters looking to escape the lockdowns, emergency measures and other perceived problems that some have witnessed in their previous home states. During normal times, builders were able to meet the slowly increasing demand, therefore keeping prices relatively stable. During covid, not only did demand outpace the ability of contractors to meet supply, but increases in the price of building materials (along with scarcity of product) rose significantly as more people chased fewer goods. Higher demand, higher material prices and a construction workforce that remained stagnant (and more likely decreased during the lockdowns) sent prices of homes skyrocketing. Rental prices for houses and apartments also accelerated rapidly as demand outstripped supply.
During recent public hearing, one of our committee members asked the question “why are contractors building $450,000 and higher priced homes rather than less expensive ones that are more affordable?” Builders will construct high-end houses until the demand diminishes, as they will build whatever housing yields the highest returns on their investments. When there are no more buyers for expensive properties, they will build whatever the current demand warrants.
Many will say we have never been in a situation like we currently find ourselves. Well, no, actually we have. Twice in the last 35 years, we in NH have witnessed deep swings in the price and availability of housing. In the late 80’s and early 90’s, we saw dramatic drops in the price of real estate after a bubble brought on by several factors created an extreme buyer’s market for almost a decade. Then during 2008, we saw similar decreases in prices, although the duration of that decline was shorter. In each of these real estate downturns, prices of many classes of real estate were more than halved from their recent highs.
Next let’s explore the “we have to do something” calls and look at why interference by politicians and bureaucrats creates market distortions as well as potential inflationary effects. In other words, the negative biasing of the natural, free market model.
Some in the legislature and executive branch believe one solution is to “incentivize” contractors, “invest” in programs, and force zoning mandates on towns. Incentives and investments are simply political-speak that in reality means taking taxpayer money and then redistributing it to select businesses and favored individuals. This past year, as much as $60 million had been requested in the current state’s biennial budget for this purpose. Pumping $60 million dollars into the housing construction economy only increases the costs of building materials for everyone in our state. And just because additional money is available, the number of electricians, plumbers, carpenters and concrete workers won’t magically increase.
The other solution promulgated from NH’s capitol is the idea of forcing municipalities into “one-size-fits-all” zoning regulations similar to central planning models used by socialist countries. In this current term, we have already sent three such attempts to the trash heap in a large, bi-partisan fashion. Two bills looked to apply over-reaching state mandates onto municipalities in direct opposition to their current zoning regulations. Another wanted to apply rent control, a tactic tried and found consistently to be a failure elsewhere. Municipalities want local control of their zoning and despise the state forcing them to do otherwise. Each municipality knows their town or city best. And they will either thrive or suffer on the consequences as a result of their particular zoning laws.
Finally, to where I started this piece, with the term laissez-faire. Here are a couple of superb definitions: a doctrine opposing governmental interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights; and, a philosophy or practice characterized by a usually deliberate abstention from direction or interference especially with individual freedom of choice and action. In simpler terms, laissez-faire suggests we need to allow the economic principles of supply/demand and the free market to right the ship keeping government hands out of the equation.
Where we find ourselves now is not, in fact, in a crisis, but rather in a normal economic cycle where supply is short and demand is high. There are no overnight solutions that politicians can utilize as real estate cycles can be decades long. Ultimately, a combination of free-market principles and laissez-faire policies will drive the supply/demand model to its equilibrium point. Political and bureaucratic interference will solve nothing. It would only negatively distort our markets.
Representative Len Turcotte serves as the Chairman of the House Municipal and County Government Committee, in the NH House of Representatives