It’s no secret that New Hampshire is grappling with a housing shortage. Although this issue is sometimes presented as a recent problem, it has been an issue in the state—and nationwide—for several years now.
According to a report by the New Hampshire Business Review, New Hampshire was fourth among states where the need for owned and rental property had accelerated in 2023. The New Hampshire Housing Finance Authority estimated the state had a shortage of 23,500 housing units that year, according to the New Hampshire Fiscal Policy Institute.
Lawmakers have proposed several bills aimed at addressing this issue over the years. Some of them passed, introducing substantive changes to housing in the state, while others either failed or were watered down by the time they became law.
This year, New Hampshire lawmakers have proposed multiple bills to address New Hampshire’s housing shortage. All of them are worth reading, but the one homeowners and homebuyers should pay the most attention to is House Bill 577.
About New Hampshire House Bill 577
HB 577 aims to expand the rights of property owners to build accessory dwelling units (ADUs) by allowing them to be detached from the main house. This is a change from the current law, which requires ADUs to be attached. It also allows residential construction in commercial zones, opening the possibility for more mixed-use buildings in the state’s towns.
Accessory dwelling units are small dwellings built on the same property as a primary residence. They can be used for various purposes, such as housing family members, tenants, or caregivers.
The bill also seeks to limit the ability of towns to impose additional requirements on ADUs, such as lot sizes and aesthetic requirements.
This is to prevent towns from designing review requirements beyond what is required for a single-family dwelling without an ADU. New Hampshire property owners gained the right to build ADUs by right in 2017, but they still had to be attached to the primary dwelling on their property.
By simplifying regulations for ADUs and expanding residential options in commercial areas, the bill aims to increase the state’s housing supply and improve affordability. This approach aligns with broader efforts to make housing more accessible and affordable for New Hampshire residents.
Arguments For and Against the Bill
Representatives arguing for the bills, including HB 577, say they will be important tools for expanding housing availability in New Hampshire. That’s according to a recent article in the New Hampshire Bulletin. Some also believe the new law will make it more difficult for towns to keep people from moving there on principle, something Representative Joe Alexander refers to as “snob zoning.”
“It’s not zoning,” Alexander said at a recent hearing.
“It’s about keeping people out, and it’s been a tactic used in our municipalities to preserve the status quo and exclude those who can’t afford to buy into the existing system.”
Meanwhile, some lawmakers and the New Hampshire Municipal Association have opposed the law. They argue that voters in towns should be able to decide what rules to apply to ADUs and that some of the laws’ changes are impractical.
Jennifer Madden Discusses What Homeowners Need to Know About HB 577
At the time of this writing, the bill has not been passed, nor has it become law.
Jennifer Madden, Principal Owner and Managing Broker of Madden Group in Rye, believes it will, but she also thinks it will have either a mixed or indirect impact on the New Hampshire housing market.
“I believe the law will get through the Senate,” she says, “but I think its impact on available housing in New Hampshire will be minimal, at least at first.”
“If only twenty out of fifteen hundred households build a new ADU, that might not be enough to tip the scales.”
Nonetheless, the law “could create some much-needed movement in the market,” says Madden.
“If a household builds an ADU so their elderly parents can move out of their current home and be closer to the family, that puts another house on the market.”
Homeowners who see their neighbors building an ADU or selling their homes may also be inspired to do the same.
“Sometimes, it’s about perception,” Madden says. “HB 577 might not directly impact our housing stock all that much, but it could create more properties for sale, which may change the perception of the stalled market we’re experiencing now.”
More Options for New Hampshire Property Owners
Madden also believes the law is mostly good news for homeowners.
“If you have enough space and you can support it, you could build an ADU so your parents can live with you, or market it as a rental to earn extra income,” she says.
“The most important thing to remember if you plan to rent out your ADU is that the rightful owner of the property must reside on the property, and they must only collect income from the dwelling they don’t occupy.”
This rule is to prevent homeowners from building an ADU, vacating both the primary and the secondary residences, and renting out their single-family homes like apartment buildings. Nonetheless, if many homeowners decide to build ADUs, they could create more opportunities for renters to live in locations they may have been priced out of before.
“People will relocate if there’s more supply,” says Madden. “Availability is how you get to affordability.
Key Takeaways for Current and Prospective Homeowners in New Hampshire
For buyers and sellers in coastal New Hampshire, this law doesn’t immediately change much about their prospects. However, there are a few things that they should consider now that the law has changed.
Building an ADU Will Be Easier
With HB 577, homeowners might find it easier to build detached ADUs, which can increase property value and provide additional income through rentals. This could be particularly appealing for families needing extra space or for those looking to offset mortgage costs.
This Law Impacts Local Zoning
Homeowners should stay informed about how local zoning regulations might change if HB 577 or HB 459 is passed (disallowing minimum lot size requirements in many circumstances). These will be game changers, affecting property values, community density, and how some communities develop in the future.
Understanding these changes is crucial for making informed decisions about property investments.
ADUs Could Change the Character of Some Communities
HB 577 could alter the character of neighborhoods by allowing more detached ADUs to be built as rental units. Homebuyers should consider whether these changes align with their preferences for their prospective community’s aesthetic and social environment.
Some communities permit short-term rentals, and this may be carried over to ADUs, depending on how the local ordinance is written.
However, keep in mind that anyone who owns a home can build attached and detached (if HB577 passes) ADUs by right.
“If your concern is that your neighbors might build one, just know that they might,” says Madden.
There may be more important factors to consider when deciding whether to buy or sell.
Keep Track of Legislation and Local Ordinances
Keeping track of the bill’s status and any amendments can help homeowners prepare for potential changes to zoning laws and housing regulations.
“If you want to build an ADU, remember that this law is just one piece of the puzzle,” says Madden.
“You also need to meet the requirements of any local ordinances.”
Other bills in the state legislature could alter the housing landscape. For example, according to a report by Fast Democracy, HB 342 would allow property owners “to construct buildings on their property without the need for a variance regarding minimum lot size or lot coverage, provided that the proposed density aligns with that of the surrounding neighborhood.”
Essentially, the bill would allow anyone who owns property to build buildings on their lots, even if the size of their lot is too small by local standards. They’d only need to ensure the building aligns with the density and character of 51% of the properties around them and meets the requirements of other laws.
Final Thoughts
HB 577 offers a potential tool for addressing New Hampshire’s housing challenges by streamlining ADU construction and expanding the scope of commercial spaces for residential use. If enacted, this bill could lead to a more efficient use of existing properties and infrastructure, ultimately contributing to a more affordable and sustainable housing market.
Since the ADU construction is voluntary, the impact of the bill on the state’s housing shortage will depend on the property owners themselves. Still, it could result in some movement in the market, and that could create new opportunities for both buyers and sellers. If you’re interested in buying or selling a home in the coastal New Hampshire area, stay informed about this and other laws that could affect you. Contact us at Madden Group to learn more about accessory dwelling units, the housing market, and what opportunities are available!
