How much do court battles, restrictions add to home-construction costs?

Editor’s note: In our Aug. 18-31 issue, New Hampshire Business Review explored the effect impact fees on the cost of new-home construction. This issue we look at other issues that may contribute to the cost of housing – and sometimes preventing its construction.

In June 2002, Dover attorney Malcolm McNeill’s client, Endicott General Partnership, received Greenland Planning board approval to build 79 homes at its Falls Way development. More than three years later, the project remains the subject of a legal battle, with McNeill arguing in July before the New Hampshire Supreme Court.

“We were approximately a year before the planning board in Greenland,” he said. “There were three hearings before the DES (Department of Environmental Services) Wetlands Board, two hearings before the New Hampshire Wetlands Council, a hearing before the (Rockingham County) Superior Court and the processing of a permit before the Army Corps of Engineers that took in excess of a year.”

The development was scaled back slightly to 76 units, and more than 90 acres of the 212-acre site was given to the town for wetlands mitigation. But the Greenland Conservation Commission and the Conservation Law Foundation have opposed the project, and four other organizations – the Newington Conservation Commission, the Exeter River Local Advisory, the Lamprey River Advisory and the New Hampshire Rivers Council – have friends of the court briefs with the Supreme Court.

“What I said before the Supreme Court is that if anyone wonders why there is not more affordable housing, they should go to a planning board meeting,” said McNeill. “Or they should read the briefs of environmental organizations which seek more environmental controls. The dilemma presently is that the regulatory process is so difficult, so time-consuming, so adversarial and so expensive, it inevitably drives the cost of housing units.”

The legal dispute is over the interpretation of a wetlands statute by the state Department of Environmental Services. In granting the permit, the DES Wetlands Bureau considered only the “dredge and fill” areas of wetlands crossings, instead of assessing the impact of the entire project, said Tom Irwin, staff attorney at the Concord office of the Conservation Law Foundation. That, he says, is at variance with both the law (RSA 482-A) and past practice of the DES. It also gives short shrift, he contended, to the effect the development will have on Norton Brook and the Winnicut River, which flows into the southeastern corner of Great Bay in Greenland.

“The brook runs right through the middle of the project,” said Irwin, who said this is the only time CLF has opposed a residential development in New Hampshire. “The reason we have been involved with this project is because of the severely degrading effect it will have on wetlands and downstream water bodies. I think if builders go after these sorts of very sensitive resources, they can expect it’s going to be a hard process to get all their permits, and that’s going to cost money.”

Under the plan approved by the town, 10 percent, or eight, of the units were to be “workforce housing” duplexes. They would have sold for somewhere between $175,000 and $190,000 per unit, said Exeter builder Joseph Falzone, a principal of Endicott General Partnership. Today, he said the prices will be “between $200,000 and $230,000 — a big difference for someone in that income stream.”

The detached homes, originally pegged at about $350,000, will have to bring in closer to $500,000 apiece, he said, to make up for the money lost to the delays.

He estimated his legal fees, added administrative costs and increased costs in building materials have totaled “between $1 million and $2 million” over the last three years.

The project, he said, will now cost “between $9 million and $10 million, all to be passed on to the homeowner,” he said. “That’s why people can’t afford to live here.”

Overreaction?

But environmental protections aren’t the only regulatory issues affecting the cost of housing, builders and developers contend.

Zoning regulations and growth management ordinances also are playing a major role. The Weare Landowners Association lost a battle at the state Supreme Court earlier this year on the landowners’ challenge to a moratorium on building permits approved by town voters as an interim growth management ordinance in 2003. Robert Baskerville, a civil engineer and president of Bedford Designs in Manchester, had a 29-unit subdivision application before the planning board when the moratorium went into effect.

“It put my project completely on hold for 16 months, so the board wouldn’t even discuss it from December of ’03 to April of ’05. They wouldn’t even look at it,” he said.

By the time he won approval for the first phase of his development, Baskerville estimated, the delay had cost him “about $5,000 a lot.” Meanwhile, the housing market has softened, affecting his ability to make good on his investment.

He said he thinks Weare voters overreacted to the town’s population growth. “You end up slowing down the growth of schools, but you also end up slowing economic growth in your community,” he said. “It affects home-related sales for lumber yards, carpenters, septic system installers, appliance stores. It’s got a ripple effect that keeps repeating itself on everybody who would sell to a new homeowner.”

The town later adopted a growth management ordinance that limits building permits to 53 a year, with 37 for developers and 16 reserved for individuals building their own homes. The maximum number of permits per developer is five, said Naomi Bolton, Weare’s land use coordinator.

Voters in the town of about 9,000 year-around residents decided to slow development after a dramatic increase in the number of subdivisions, she said.

“We just had an explosion all of a sudden in lots being created,” said Bolton. “It went from 10 one year, to 47 the next, to 250 created in one year.”

Voters during that time had turned down a bond issue for the Weare Middle School, which more than 600 students attend in a 450-capacity building. The town is now building a new $18 million middle school, scheduled to open in 2007.

Rethinking land use

In Goffstown, the planning board’s rejection of a 104-unit multifamily housing plan in 2003 remains the subject of litigation.

The decision, upheld in Superior Court, has been appealed to the state’s Supreme Court by the developer, Brookfield Investment Group of Bedford. The rejection was based on several factors, including frontage requirements and traffic concerns, but Brookfield President Ed Monty claims the plan met all of the town’s requirements and that his company followed the instructions of the town’s own planning department.

“We utilized the direction and information from the town planner,” said Monty. “We didn’t just go willy-nilly into this.”

The need for rental apartments in Goffstown was apparent, he said, with the town showing a vacancy rate of 2 percent. Monty said the units would have been available at a monthly rent “in the $750-to-$800 range.”

Claira Monier, a Goffstown resident who also is executive director of the New Hampshire Housing Finance Authority, said she believes more rental units are needed to overcome a shortage of affordable housing in New Hampshire. But, she said, the blame shouldn’t be placed on zoning laws as much “as the process that is making it more difficult for developers to put in rental housing, which every community needs,” said Monier. “If we’re going to have a growing business sector in New Hampshire, that means we’re going to need jobs. That means people. Where are we going to house them?” asked Monier. “But when the irate mob shows up, the planning board has a hard time standing up to them.”

Planning board member Jim Raymond, who was chairman at the time the Brookfield project was turned down, took issue with that characterization.

“I think our planning board is very good at ‘standing up to the mob’,” Raymond said, adding that the board has approved multifamily housing developments and made a number of unpopular decisions in the past. Along with the need for more housing options, he said, the board has to consider siting, wetlands, frontage, traffic impact and other issues specific to each development.

A new master plan for the town, expected to be completed this fall, will recognize the need for workforce housing, he said, and will include possible zoning changes to accommodate it.

“As housing becomes more expensive, it starts to be priced out of the range of middle-class policemen and teachers,” he said. “If we want these people living in town, and I think we do, you have to different-priced housing options.”

Nashua builder John Stabile also has been in court over regulatory issues, including a battle with the town of Litchfield that is now pending in Superior Court over wetlands protection.

The growing number of restrictions put on land development makes it more expensive to build, he said. “The fact of the matter is yield on land today is substantially less than it was seven to 10 years ago, and the land is the basic asset on which you develop.”

While land-use regulations and growth management ordinances are affecting the cost of land and its development, other environmental and economic issues also are at work, said John Andrews, executive director of the New Hampshire Local Government Center in Concord. Even the rising cost of gasoline may play a role in shaping future planning and zoning decisions, he said.

“It’s going to require things like cluster zoning, smaller lot sizes. That’s going to be the future,” Andrews said.