InvestNH’s one-year application window opens in June

Kevin Lacasse, CEO of New England Family Housing, hopes he is both one of the first in line and one of the last in line when he applies for some of the $100 million available in the state’s newly announced InvestNH Housing Fund.

First in line, because he’s almost ready to apply for funds when the program starts in June to renovate an old school in Berlin into housing units. Last in line, because it’s not clear he’ll be able to submit an application by the time the application window closes in June 2023 for his far bigger project, which will cost as much as $300 million, to turn some 95 acres of riverfront land in Concord into an urban village with 600 units of housing. After all, he only signed a deal to buy the land from the Concord Monitor on May 11, a week after the Executive Council approved the program on May 4. And it was the official approval of the program, he said, that influenced his decision to make a go of it.

“It’s knowing that there politically was going to be a source for this kind of thing, whether it is this fund or something else. That the state considers this a crisis and was willing to act on it,” he said.

With the Executive Council vote, the race is officially on for developers to secure this “once-in-a-generation opportunity,” in the words of Elissa Margolin, executive director of Housing Action NH.

The words echo those of Gov. Chris Sununu who told the Executive Council before its vote, the one-time investment was “our best opportunity in a generation to address this crisis.”

That workforce housing is a crisis has become a political mantra. Those in the industry and housing activists have long stressed this.

The latest salvo was a NH Fiscal Policy Institute blog that noted that, while there is less than a month of single-family home inventory on the market, the situation is even more dire for the three out of 10 households that rent. Some 40 percent of them are on the edge and nearly half of those (or about a fifth of all renters) are paying more than half their income in rent. But they don’t have much choice. The rental vacancy rate in New Hampshire has been less than 1 percent, compared to 5.8 percent nationally.

New Hampshire lawmakers have considered numerous bills to address workforce housing, but many have stalled — including this session’s Senate Bill 400, which would give incentives for good municipal behavior — or, if enacted, have failed to make a dent in the problem.

So now the governor wants to throw some serious federal money at the problem.

He isn’t just supported by housing activists. Sununu was joined at his InvestNH press conference by groups that included the Business and Industry Association and the NH Lodging and Restaurant Association as well as executives from factories, hotels and ski areas around the state, all arguing that businesses can’t attract employees who can’t afford to live near where they work.

Federal money

No one has ever put anything close to this amount of money into building housing in New Hampshire before. Every year it seems lawmakers agonize over whether to spend another $5 million or $10 million into the state’s Affordable Housing Fund, which provides revolving loans to developers. InvestNH, however, is offering grants, not loans.

The federal government has put a lot of money into housing in New Hampshire recently: $250 million to help tenants and $50 million to help homeowners stay in their homes.

When money was slow to get out the door — so much so that the state ended up losing $19 million of it — Sununu asked the federal government to shift some of it into housing construction. His waiver was denied, but the federal government did provide more flexibility in spending guidelines.

One big change was that one of the eligibility requirements for tenants — that their financial difficulties had to be pandemic-related — broadened to include the pandemic’s wider impact on the economy, such as supply chain issues and inflation, said Rob Dapice, CEO of the NH Housing Finance Authority, which administered the program. Add that to efforts by Community Action Groups and landlords to get the word and money out, and the state has now $150 million in rental assistance funds helping some 15,000 tenants and 7,000 landlords.

But so far, the state has only handed out $250,000 to help hard-up home owners to pay their taxes and utility bills.

Mortgages are more difficult, because they involve a lot more paperwork, but NH Housing will be issuing the first payments during the next few weeks, said Dapice.

InvestNH is different. It is not about people staying in their home but building more homes, or rather more rental units. And the American Rescue Plan money gives the state the flexibility to use it for that purpose.

About $50 million will go to developers on projects that are nearly ready to start, with conditional permitting and most financing in place. The program will provide gap funding to developers of affordable housing, with a 50 percent match and a maximum of $3 million per project.

The idea is that there are a lot of projects out there (the Department of Business and Economic Affairs, which will be administering the program, says it knows of at least six), that are in that situation because of a sudden rise in the cost of materials and labor.

The money would go for “hard-cost” construction — infrastructure upgrades, but not engineering or land acquisition. Awards, which will have to be approved by the Executive Council, will be issued every six to eight weeks, with the first couple of batches specifically reserved for projects developed by nonprofit organizations.

Some $10 million would go to NH Housing to augment its ongoing programs.

Some $30 million will go mostly to reward municipalities that permit new multifamily rental housing within six months of application at $10,000 a unit with the maximum of $1 million per municipality. Another $5 million will be used to incentivize communities to revamp zoning regulations to increase housing stock, and $5 million will go to the demolition of vacant or dilapidated building that which can’t be made into housing, if that action can improve the housing situation.

Executive Council concerns

InvestNH started out as a bit sparse on details, but that was somewhat by design, since Sununu wants the flexibility to get money out the door quickly, but it gave executive councilors pause, or rather the lack of details caused them to pause, and they tabled the funding request on April 20.

Some wanted “guardrails” to make sure the money didn’t go to build luxury townhouses or short-term rentals, in addition to the document’s promise that the program “will demonstrate a preference for projects that address the shortage of affordable housing.”

On April 29, Business and Economic Affairs Commissioner Taylor Caswell added some of these guardrails. Projects with over 15 units or $3 million in total development cost will have to have other funding; units would be “available” to those that have incomes of 80 percent of median income; and 20 percent of units will be reserved for people with limited incomes as defined by the municipality. Smaller projects will have to make sure the rent is “affordable” for those at 80 percent of median income and that the rent has to be maintained for five years.

Councilors still weren’t totally satisfied.

“Why limit it to five years?” said Councilor Cinde Warmington, D-Concord, concerned that rents would go up afterwards. “And how could the income guidelines be enforced if they already have the funding?” Caswell said they needed the flexibility, and other funding often has longer than five-year requirements on rents. He also said the grant contract will be enforceable.

For Councilor Joseph D. Kenney, R-Union, the issue was parity for the North Country. “Each district should get $20 million.”

“If the demand isn’t there, you have unspent funds,” replied Sununu.

As other objections were raised — how could you be assured that the workforce housing doesn’t mainly serve people working in Massachusetts? how do you make sure this just doesn’t go only to large developers? — Sununu replied, “If you qualify everything to the last i and t” it becomes so unwieldy that you might lose a large project tied to a large employer. “There will be no flexibility to move if you really tied your hand.”

The councilors approved the project on a voice vote, but that still left the BEA with a lot to do.

The agency has to hire a director to run the program along with two other staffers. It has to further clarify income eligibility and how to make sure there is some geographical balance without instituting quotas. What qualifies as conditional permitting? How much financing must be in place? What exactly constitutes gap funding? How do you separate the affordable part of the project from the commercial part? In addition, an application has to be developed and a web portal created.

One added task will be setting up criteria to reward municipalities for upgrading their zoning laws.

SB 400, known as the “community toolbox” bill, would have done that by creating a “Housing Champion” certificate, but the House tabled that bill. The Senate resurrected it by attaching language to House Bill 1661, a bill that the House wants because it includes funding for a dedicated Concord garage, thus tying the need for workers to find a place to live with the need for lawmakers to find a place to park.

Whether the House and the Senate will agree to a compromise that will allow both, and whether both chambers approve that compromise won’t be known until after NH Business Review’s deadline.

But Caswell and others stressed that the InvestNH program is not dependent on SB 400’s passage. “It’s designed to be more supplementary,” Caswell said.

The major question going forward is how many developers will be able to fit the criteria during the one-year application period.

Lacasse, of New England Family Housing, thinks it will be able to convert that 1853 Brown School building in Berlin (which closed in 2019) by breaking it up into at least 20 units of housing, 75 percent reserved for low- and moderate-income tenants. Most of the financing, which includes nearly $500,000 in Community Development Block Grants, is already in place, but then the original estimated if between $1 million and $1.5 million rose to over $2 million, money from InvestNH could fill that gap.

It is the Concord project that he isn’t sure about, since it is just in the preliminary stages and hasn’t even been presented formally to the city. The project’s 600 units equals all the units he has built so far in New Hampshire, in places like Berlin, Claremont and Franklin, though he also has proposed some large projects outside the state, including one in Houston.

Of those, 120 units would be classified as affordable. He would also build 82 condos for sale and an apartment complex housing 200 and another 250 market-rate apartments over the shops in a 110,000-square-foot urban village. The land is between the Merrimack River and Interstate 93 near the Concord Monitor building (the building itself is not part of the sale). Because the housing is relatively dense, it will leave more room for greenery and walking trails, he said.

Although the funding decision influenced his decision to purchase and develop the land, it isn’t about the money.

He isn’t even sure that he will complete an application in time. (While the application must be in by June 2023, he would have until September 2024 to expend the funds.)

“It’s a heavy lift to get planning and zoning approval in place. Hopefully, we would able to do it in 12 months,” Lacasse said.

The main thing is that “politically, in the grand scheme of things” the state is recognizing the need for this kind of development.

“We know the need,” he said. “In the units we own, the vacancy rate is next to zero. We have people coming to us all the time. And we just don’t have anything available.”

InvestNH is not about people staying in their home but building more homes, or rather more rental units.