Annual survey shows rental market continues to be tight

For many years New Hampshire Housing has conducted an annual statewide survey of market-rate apartment rental costs. This year’s survey was especially challenging as it was carried out from March to May, amid the sudden emergence and impact of the coronavirus pandemic and Governor Sununu’s “stay-at-home” emergency orders.

Our 2020 Residential Rental Cost Survey, conducted by the University of New Hampshire Survey Center, received responses from the owners and managers of more than 21,600 unsubsidized (market rate) rental housing units around the state (14% of all units statewide). The survey results show that there is still a high demand for apartments, a tight supply, and a low vacancy rate, making it a challenging market for New Hampshire renters.

Rents reflect the demand: this year’s statewide median gross rent (including utilities) of $1,413 for two-bedroom units is up 5% over last year (and up 2% for all units). Rents have increased in each of the past seven years. Despite the ongoing tightness of the rental market, there is a positive note from the survey: at 1.8%, the vacancy rate for all units is nearly 1% higher than last year (a vacancy rate of 4% to 5% is considered a balanced market for tenants and landlords). In comparison, the U.S. vacancy rate is 6.6% and in the Northeast it is 5.5%.

In the past few years there has been an increase in multi-family building permits, particularly in southern New Hampshire. It is likely that the construction and lease-up of those new units is reflected in the slightly higher vacancy rate this year. Many of the new units, however, tend to be more expensive. To afford the statewide median cost of a typical two-bedroom apartment with utilities, a New Hampshire renter would have to earn 125% of the estimated statewide median renter income, or over $56,500 a year. To sustain New Hampshire’s economy, additional housing is needed to support our labor force, as well as those who cannot work because of age or disability.

According to a recent study, about 20,000 more housing units are needed to meet current demand and stabilize the market. Over the past year, New Hampshire Housing committed financing for more than 2,300 rental units. These will be available to renters within 12-18 months. Even so, it is clear that we as a state must continue to encourage and support the development of more housing opportunities throughout New Hampshire.

Meanwhile, we will not know for some time how the coronavirus is impacting the rental market. Many workers have been required or encouraged by their employers to work from home during the pandemic. For certain industry sectors, this flexibility could remain after the pandemic, leaving those employees with substantially greater choice in where to live. However, in some industry sectors – retail and hospitality, for example – there is no such flexibility; workers must be on-site and must live within commuting distance. The benefits of remote working are likely to disproportionately favor those with higher-income jobs and not those renters with lower incomes.

The home buying market remains active and competitive, due in large part to very low interest rates. However, many households that could purchase a home continue to rent because of a scarcity of homes for sale. This lack of for-sale inventory continues to add pressure to rental costs in New Hampshire this year, as it has in the past seven years.

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Dean J. Christon is executive director of the New Hampshire Housing Finance Authority. This column originally appeared in the agency's July/August newsletter.