Carmen Lorentz: Towns can now use TIFs for affordable housing

In order to build housing that is affordable, it typically has to be higher density. For example, a developer building 50 attached townhouse-style units on a site can sell each for less than they could sell 10 houses on subdivided lots on the same site. This is because the construction costs can be spread out over more units. In order to achieve higher density, though, water and sewer infrastructure is necessary.

Many towns in the Lakes Region do not have adequate water and sewer infrastructure to accommodate dense residential development. There is now a solution to help break down this barrier.

Last year, the NH Legislature approved a change in state law that can help towns expand or build water and sewer infrastructure to promote development of more affordable housing.

RSA 162-K is the statute that governs the use of Tax Increment Financing in New Hampshire.

Tax Increment Financing is a method of financing public improvements with the incremental taxes created by new construction, expansion or renovation of property within a defined area of the community. 

A town can establish a TIF district using the process laid out in RSA 162-K. Property tax revenue generated within the established TIF district gets split into two buckets:

1. Property tax revenue based upon the “original” assessed value of all properties within the district boundary on the date the district was formed. 

2. The “incremental,” or increased, property tax revenue above and beyond the original value generated by new development in the district after it is formed.

The incremental property tax revenue is typically used to pay debt service on bonds the town issues to pay for infrastructure improvements. Once the debt is paid off, the incremental property tax revenue goes into the general fund. 

In 2022, the NH Legislature changed RSA 162-K so that towns can now use TIFs to promote the development of affordable housing. Prior to this, towns could only use TIFs for commercial or mixed use development. This change in NH’s TIF statute enables towns to build or expand water and sewer infrastructure expressly for the development of housing.

With NH’s rental vacancy rate at just 0.5%, well below the national average of 5.8%, the need for affordable housing is greater than ever. Housing economists state that the sign of a healthy market is a target vacancy rate of 5%. We have a long way to go to meet that target, but with the latest changes to RSA 162-K, we have one more tool that can work to address the housing crisis in our state.

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Carmen Lorentz is executive director of Lakes Region Community Developers. LRCD began as the Laconia Area Community Land Trust in the early 1990s as a result of citizens concerned about the pricing and condition of rental housing in the City of Laconia. Thirty years later, LRCD owns and operates a portfolio of 366 affordable apartments in Ashland, Gilford, Laconia, Meredith, Tilton, and Wolfeboro.