Housing New Hampshire’s Seniors

senior-woman-845522_1920As the country’s Baby Boomers continue to age, New Hampshire in particular will be facing a housing challenge brought on by the so-called “silver tsunami.” Currently, New Hampshire has the fourth oldest median population in the country. Our population of people aged 60 and older is projected to grow so that by 2025 they will occupy one in three housing units in the state. As the state’s demographics shift, we will have to decide how to best create affordable housing for a generation that will require more services, often on a fixed income.

The Challenge of Aging in Place

It was once assumed that seniors would want to downsize once they retire; however, the data indicate this isn’t happening. According to American Community Survey data for the Northeast, only 3% of seniors move annually, compared to 55% of people aged 18-46. AARP surveyed the nation’s population of people aged 45+, and the majority of seniors indicated they would prefer to stay in their current home as long as possible.

Although seniors are holding off on downsizing, there are real limits to seniors aging in place. Forty-two percent of the state’s seniors have at least one significant disability, and one in six seniors living in conventional housing report difficulty living independently. The majority of New Hampshire homes and rentals are older buildings with multiple floors. They don’t usually have characteristics like a first-floor bedroom and bathroom, wide doors, or a step-free entrance that would help seniors stay in a home longer.

The rural characteristics of the state are also a challenge to seniors’ desire to age in place for as long as possible. With more than three-quarters of New Hampshire seniors living in the suburbs or rural communities, service delivery can be expensive and challenging, and a lack of public transportation limits their mobility.

Most (77%) senior households aged 65 and older in New Hampshire own their home rather than rent. Many of these seniors live in large houses. About 57% of the housing units in the state have three or more bedrooms. Many senior households, which tend to have only one or two people and would be better served by smaller units, will eventually be forced to downsize due to the physical and the financial challenges of maintaining a large home, despite their wishes to age in place.

Beyond Age-Restricted Housing

Most housing that seniors live in is not age restricted and creating more age-restricted housing is a popular option, but it is only part of the solution. Another option is to move forward with “lifetime” housing. Existing housing can be rehabilitated using lifetime design principles to ensure that existing units are not lost to deterioration and so they can accommodate an aging population. Also, new housing can be designed with these features in mind so residents who will become seniors can age in place longer.

Creating smaller housing units is another option that can help seniors age in their communities. Allowing new construction of smaller units, ideally near services or public transportation, can increase options for seniors when they need to downsize. For much of the state, modifying zoning regulations to allow accessory dwelling units, commonly called “mother-in-law apartments,” could be an effective strategy to increase the number of smaller units. Local regulations often inhibit the development of smaller housing units. The result has been a lack of smaller homes and affordable rental units available to the baby boomers as they age or young households as they start out. Allowing accessory dwelling units and smaller new homes can help seniors age in place within their communities.

The state will also have to find creative solutions to the challenges of providing services for seniors, who don’t always live close to services or have access to public transportation. Privately funded service providers will respond to the needs of clients who can afford the delivery of services in a scattered environment. This may mitigate some of the need for age-restricted housing developments; however, publicly funded and nonprofit service providers will likely struggle to meet demand for those on fixed incomes due to funding challenges. Age-restricted housing developments consolidate seniors in order to provide affordable centralized services, but since seniors represent only a portion of the need for smaller units and will age in place as long as possible, there may not be sufficient demand for age-restricted housing to make it economically sustainable in many small communities. So encouraging lifetime housing that is not limited to such a small portion of the market may be the best way to provide housing choice.

Retaining younger residents through creating new, smaller units of affordable workforce housing will also be vital as caregivers are the single largest source of support for aging in place. It is predicted that in the next 15 years, the caregiver ratio will drop from seven potential family caregivers for every person over age 80 to only four.

Although a focus on flexible zoning, retaining people of caregiving age, and providing service-enhanced housing can help seniors age in place as long as possible, seniors will ultimately reach a stage where they can no longer live independently and will need around-the-clock care. New Hampshire’s current nursing home occupancy rate is at 100%, and demand for beds is expected to rise from 7,000 today to over 11,000 by 2025. While additional supports for aging in place may help stem this number, it cannot be ignored that additional long term care and assisted housing options will be a key factor in housing seniors late in their lives.

Rental Market Still a Challenge for Many New Hampshire Residents

New Hampshire’s rental market continues to be challenging for many residents, with fewer vacancies and rents that continue to increase. Data from this year’s Residential Rental Cost Survey, which surveys market-rate units across the state to gauge the condition of the rental market, showed the continuation of a long-term trend of a tightening rental market.

The majority of the state is experiencing vacancy rates below 4%, which constitutes a “landlord’s” market. Most industry experts consider an average vacancy rate of 4% to 5% a balanced market. Currently, only Coos shows a vacancy rate above 4%. Three counties – Belknap, Merrimack and Rockingham – show vacancy rates at below 2%. A rate this low is viewed as just turnover rather than true vacancies. The last time the state’s vacancy rate as a whole was above 5% and therefore considered a “renter’s” market was 1992.

Statewide Vacancy Rate

Vacancy Rate by County

The current low vacancy rates reflect a wider trend away from ownership and toward renting, which was examined in New Hampshire Housing’s 2014 study Housing Needs in New Hampshire. The study, which was performed by the New Hampshire Center for Public Policy Studies and Applied Economic Research, found that young households are holding off on homeownership due to student debt, limited wage growth and difficulties in obtaining financing. With the expectation that aging Boomers, who are currently opting to stay in their single family homes, will eventually downsize, low vacancy rates are expected to continue.

Renters are subsequently seeing an increase in prices. The state has seen almost a 10% increase in rents for two-bedroom apartments including utilities since 2010. More specifically, over the past five years, Grafton and Coos counties have seen a 15% increase, and Merrimack and Hillsborough counties have experienced 9.4% and 11.9% increases respectively. The effects of a tight market are especially evident in the state’s urban job centers, which are experiencing particularly high rents. For the first time, median rents for two-bedroom apartments topped $1,300 in Nashua and Portsmouth. Hillsborough and Rockingham counties as a whole are not far behind, with median rents for two-bedroom apartments at over $1,200.

Statewide Median Rent Map

Portsmouth Median Rent

Nashua Median Rent

The survey also demonstrates that renter household incomes are not keeping pace with the steady increase in rents. A renter would have to earn 124% of the median income, or over $46,000 a year, to be able to afford the statewide median cost of a typical two-bedroom apartment with utilities. Currently, in six of the state’s ten counties, less than 10% of the two-bedroom units in the survey were affordable to the median income renter household. Merrimack and Coos counties ranked the lowest with only 2% of two-bedroom units surveyed below an affordable rent. Grafton and Rockingham counties had the most with 26% and 24% respectively. Housing Needs in New Hampshire found that almost half of renters in the state pay more than 30 percent of their income on rent, and low-income families are particularly likely to be overpaying for their housing.

Another factor influencing these market dynamics is construction. According to Housing Needs in New Hampshire, 40 percent of the state’s housing stock is more than forty years old, meaning that new housing construction will be needed to replace aging units. Even though the market is starting to see some production of new rental units, the cost of land and construction forces these new units to enter the market at a high price point. The result is that building more rental housing is only one portion of the puzzle. Adding supply at the top of the market attracts the most affluent renter households, opening up vacancies in slightly less expensive units. This trickle down effect, while inefficient, eventually opens up units in the affordable end of the rental price range.

For more information about the 2015 Residential Rental Cost Survey or Housing Needs in New Hampshire, visit www.nhhfa.org.

Houses on Hold: How Young Professionals Struggle to Buy

Research shows student debt, high rents, and job prospects delay ownership

The popular narrative about “Millennials,” the generation born after 1980, is that they shun traditional homeownership for more urban living and are perfectly content renting. But is this a true preference or a product of financial circumstances? Research shows their preferences might not be as singular as we may think, and that financial barriers and job prospects can play a strong role in the delay of ownership.

National data has indicated that the desire for the “American Dream” of homeownership is still alive and well among young professionals. According to the Demand Institute’s 2013 Housing and Community Survey, which polled more than 1,000 households aged 18 to 29 about their current living situation, 75% responded that they believe ownership is an important long-term goal, and 60% said they plan to buy. In fact, 24% of those polled already owned a home. As far as where they want those homes to be, 48% said they would prefer a suburban location for their next home.

At the local level, New Hampshire young professionals aren’t overly keen on city living, either. According to Housing Needs in New Hampshire, a study commissioned by New Hampshire Housing and performed by the New Hampshire Center for Public Policy Studies and Applied Economic Research, young professionals in New Hampshire showed a preference for rural living—areas where images of single-family homes come to mind. So with the desire for homeownership still strong, why is there a delay in entering the market?

Currently, low vacancy rates (the latest data indicate only 2.5% of two-bedrooms and only 2.7% of all rental units are vacant) mean property owners can command higher rents. New Hampshire Housing’s 2014 Residential Rental Cost Survey indicated the median gross rent for a two-bedroom apartment was $1,108. These higher rents hinder young renters’ ability to save for a downpayment. Data show that to amass a 20% downpayment for a median-priced home (the amount required to avoid the extra cost of private mortgage insurance) in five years, renters would need to save about $730 per month.

Chart comparing rental cost versus ownership costs

Complicating the path to saving for a home is student debt. Housing Needs in New Hampshire found that 75% of New Hampshire college graduates carry some sort of debt, with the average being about $32,900. This average is the highest in the country. The young professionals interviewed said carrying this debt is a barrier to buying a home due to the high debt to income ratios that result.

While New Hampshire’s economy is continuing to recover from the effects of the recession, young professionals are entering a job market with lower wages, both in terms of dollars and value. Housing Needs in New Hampshire found that the jobs recovered since the recession have lower average wages than the ones that were lost. The wages people are currently earning are also worth less now. Although today’s median income of $64,230 is higher than the peak median income in 2008, when adjusted for inflation this amount is actually worth less than that peak median income in 2008. In other words, New Hampshire workers have not recovered the buying power that was lost during the recession.

Median Household Income in 2013 Dollars

It is also worth noting that for many recent college graduates who are just beginning their career, the state median income may be substantially higher than what they are making, meaning this effect is compounded for them. Job availability is also a concern; while they showed a preference for rural living, they also expressed that rural living may not be as viable an option due to the lack of jobs in those areas of the state.

So what are Granite State young professionals doing to manage housing costs? Housing Needs in New Hampshire found that young professionals do a variety of things to save money on housing, whether that is having a roommate, co-owning houses, or renting or owning far from where they work so they have more affordable options (“drive until you can afford it”).

“To ensure the vibrancy of New Hampshire and its workforce, it’s important that we continue to work to recruit and retain young professionals in our state,” said Kate Luczko, Executive Director of Stay Work Play, an organization dedicated to promoting New Hampshire as a favorable place for young professionals and recent graduates to live and work. “Given our mission and its essential ‘Stay’ piece, affordable and desirable housing plays a critical role in the efforts at positioning New Hampshire for a successful future. If affordable rental and ownership options are limited, our younger workface faces complex decisions about where to live, work and build their lives.”

While it is clear that this generation still aspires to homeownership, a slow start to their careers, combined with high rents and student debt mean their path to a home of their own may be slower and more difficult.