A plain-English guide to the capital stack, the operating gap, and what Portsmouth can actually do — drawn from our conversation with POAH's Rodger Brown.
It's a fair question. Portsmouth has land. Developers build here all the time. So why isn't someone building apartments that working families can afford?
The core problem is simple: affordable housing costs just as much to build as market-rate housing — but it can only charge a fraction of the rent. The gap between what the building costs and what affordable rents can support has to be filled by grants, tax credits, and subsidies. Assembling that financing is the real challenge — it requires years of applications, multiple funding sources, and every piece arriving in the right order.
$15M
Cost to build a typical 60-unit affordable building in NH today
vs.
$2,800
Market rent per month — enough to repay the loan
vs.
$1,400
Affordable rent per month (60% AMI) — not enough. Gap must be filled another way.
This is what Rodger Brown of POAH — the nonprofit developer behind Portsmouth's most ambitious affordable projects — explained to Progress Portsmouth. Everything in this guide traces back to that conversation.
The four pieces of the puzzle
🏗️
Cost to build
The full tab to acquire land, construct the building, and get to opening day — typically $200,000–$500,000+ per unit in NH today.
🏠
Affordable rents
Rents are capped at a fraction of AMI (Area Median Income). A 2-bedroom at 60% AMI in Portsmouth might rent for ~$1,400/mo instead of $2,800+ at market rate.
⚖️
The gap
Low rents can't service the debt that would fully pay for construction. The difference must be filled by grants, tax credits, and subsidies — not profit.
🧩
The capital stack
The layered combination of money sources — some debt, some equity, some free money — that covers the full cost. Assembling it is the real work.
The Capital Stack — Interactive
Plain English Definition
A capital stack is simply the list of everyone who puts money into a project, ordered from safest to riskiest. Think of it like a building's floors — the bottom layer (the bank loan) gets paid back first if something goes wrong; the top layer (the developer's own money) loses first. In affordable housing, the stack is unusually tall because no single source can cover the whole cost.
A typical POAH-style affordable project is financed from multiple sources. Click any layer to learn what it is and where it comes from.
Typical deal — ~$15M project, 60 units · Percentages are illustrative
Click any layer →
Senior Debt Bank / bond loan21%
LIHTC Equity Tax credit investors26%
State Resources NH Housing / ARPA15%
City / Local Land, loans, TIF11%
Grants / Other Federal, private9%
Developer Equity POAH own funds18%
Debt
LIHTC
State
City
Grants
Equity
☝️
Click any layer in the stack to learn what it is, where it comes from, and how it applies to Portsmouth.
The Operating Gap — Why Rents Aren't Enough
Even after a building is fully financed and constructed, affordable rents generate less income than it costs to run the building well. This is the problem Rodger Brown described most vividly.
What happens to $1,400/mo in rent — approximate split for a 60-unit workforce housing building, NH Seacoast market
Income
Rent (60% AMI, 1BR)~$1,400/unit/mo
× 60 units~$84,000/mo gross
Minus vacancy (~5%)−$4,200
Effective monthly income~$79,800
Monthly Expenses
Management staff~$17k
Insurance~$14k
Real estate taxes~$13k
Water, sewer, utilities~$11k
Maintenance & repairs~$9k
Reserves~$6k
Left for debt service~$9k/mo
The bottom line, in plain English
Only ~$9,000/month is left to repay the loan. At current interest rates, that supports a mortgage of roughly $1.5 million. But the building cost $15 million. The other $13.5 million has to come from grants, tax credits, and subsidies — none of which come automatically, and all of which require years of competitive applications.
This is why Brown said: "You really need that deeply subsidized or free money from the state to cover the cost." Without it, the math simply doesn't work — regardless of how much density a city allows, or how cooperative the Planning Board is.
The Local Toolkit
When state funding is scarce, developers like POAH look to cities to fill part of the gap. Brown named four mechanisms on our call. Click each to expand.
Tax Tool
Real Estate Tax Abatement
The city agrees to assess the property at pre-improvement value, or reduce taxes during the affordability period — lowering ongoing operating costs without spending cash.
Property taxes are one of the biggest recurring expenses for affordable housing — roughly $13k/month in our example above. Reducing that directly improves the project's ability to service debt, which can make or break feasibility.
This doesn't cost the city cash upfront — it's foregone future revenue. But for a developer, it directly changes the operating math.
Brown: "In some places, we're fortunate enough to get relief from real estate taxes — that's one of the things that can help us get project feasibility."
Portsmouth relevance: The City Council's March 16, 2026 work session on RSA 79-E examined exactly this mechanism — temporary tax relief on improved value for properties in productive use. The session was informational; no program has been adopted yet. Adoption would require a City Council vote to designate eligible areas and terms.
Financing Tool
TIF — Tax Increment Financing
The city captures the increase in property tax revenue that a new development generates and redirects it back to help finance that development.
Here's how it works: a vacant lot currently generates $10k/year in taxes. After an affordable building is constructed, the same property generates $60k/year. The $50k "increment" — the increase — goes into a fund that helps repay the construction loan rather than into the general city budget.
TIF is common in NH (Nashua, Manchester, Dover have used it). It requires a formal TIF district designation by the city.
Brown: "Tax increment financing — where you take the increment and put it back in to finance the project — is another tool."
Portsmouth relevance: Not currently in use for affordable housing. A Housing Action Plan item worth examining, particularly for large GNOD parcels where the tax increment would be substantial.
Federal Tool
Section 108 — CDBG Loan Guarantee
Allows cities to borrow against future federal Community Development Block Grant funds — leveraging a small annual grant into a larger loan for affordable housing.
Section 108 is a HUD loan guarantee program that lets cities borrow up to 5× their annual CDBG allocation at favorable rates. It can put millions into a project, but it has constraints.
Brown: "Section 108 is a great tool — if you have CDBG money and you can expand it, it's a great source of subordinate debt."
Portsmouth constraint: Portsmouth's annual CDBG entitlement is $522K (PY2025), fully committed to existing programs. Section 108 also counts against the city's debt limit — Councilor Tabor noted: "Our CDBG money is already heavily committed... Section 108 use also requires we record the loan liability on our balance sheet, so it impacts our debt limit." Not currently viable without a reallocation decision.
Revenue Tool
Real Estate Transfer Tax (RETT)
A small fee charged when a property is sold — proceeds fund affordable housing production.
NH already collects a statewide Real Estate Transfer Tax that is supposed to feed the Affordable Housing Fund (AHF). The problem isn't the absence of a mechanism — it's that the legislature has chronically underfunded the AHF.
Brown: "Some localities have real estate transfer taxes — they create a housing production trust fund. Every time a piece of real estate sells, 1% goes into a fund."
What doesn't currently exist: a municipal RETT that cities like Portsmouth could levy independently. That would require new state enabling legislation.
Portsmouth relevance: The immediate action is advocating for AHF restoration at the state level, not a new local tax. A municipal RETT is a longer-term legislative priority for the Housing Action Plan.
Land Tool
Surplus City Land
When the city contributes land at below-market value or zero cost, it eliminates land acquisition from the capital stack entirely — often the single biggest lever available locally.
Land is "dead weight" in the capital stack — it sits in the cost base but generates no revenue. Remove it, and the project needs to borrow $2–5M less, which has an outsized effect on feasibility.
Portsmouth's ground lease model: The city retains ownership and leases to Portsmouth Housing Authority for 99 years at nominal cost. The developer gets financing security; the city keeps the asset and ensures permanent public control — no risk of market-rate conversion.
Brown: "The effective utilization of surplus property is a brilliant strategy for towns — when you can avoid having to include the basis for land in your capital stack, you're a little bit ahead of the game."
Multiplier effect: Sherburne School's city land (valued at $2–3M+) unlocks ~$12M in LIHTC equity, $625K in CDFA investment, and millions in state/federal grants — roughly $6–8 of total project investment per $1 of city land contribution. The Housing Committee has begun inventorying other city-owned sites that could follow the same approach.
Operating Tool
Section 8 Project-Based Vouchers
Federal rental subsidies permanently attached to specific units — enabling housing for the lowest-income households that workforce rents alone can never serve.
Standard workforce housing targets 60–80% AMI. That still leaves out households earning $20–30K/year — teachers' aides, home health workers, part-time service workers. Project-Based Vouchers (PBVs) fill this gap: HUD pays the difference between what a household can afford and the actual rent, unit by unit.
Portsmouth example: Ruth Lewin Griffin Place (64 units, completed 2022) includes 24 units with PBVs — serving households who couldn't afford even "affordable" rents without help. PBVs are an operating subsidy, not a capital subsidy — they don't help build the building, but they make it financially viable to serve the deepest-need households once built.
Brown: "If you start looking at something that looks more like market, then you're getting closer to something sustainable. But that doesn't really serve the population our mission is devoted to."
Cost Tool
Permit & Impact Fee Waivers
Waiving building permit fees and infrastructure connection fees for qualifying affordable projects — a small but real reduction in development costs.
Every city charges fees that apply equally to market-rate and affordable projects. For affordable deals where margins are razor-thin, these fees punch above their weight. Fee waivers typically save $5,000–$15,000 per unit — on a 60-unit building, that's $300K–$900K.
Implementation is straightforward: an ordinance provision that automatically reduces or waives fees for projects meeting affordability thresholds. It requires no upfront city spending — only foregone revenue on fees the city might not collect anyway if a project didn't happen.
Portsmouth relevance: Not currently in place as formal policy. A near-term, low-controversy administrative action worth adding to the Housing Action Plan.
What This Means for Portsmouth
Based on the Brown call and the financing landscape he described, here is where Portsmouth stands right now — the constraints, the levers, and the open questions.
Portsmouth's Affordable Housing Finance Map
As of March 2026 · Based on POAH/Rodger Brown call, NH Housing LIHTC materials, and Portsmouth Consolidated Plan 2025–2029
⚠ Constraint
State funding is the binding problem. NH's cuts to the Affordable Housing Fund have crippled the ability to produce deeply affordable units regardless of what Portsmouth does locally.
Brown was direct: "severely limited our ability to produce housing, because you really need that deeply subsidized or free money from the state to cover the cost." LIHTC alone can't close the gap without state soft debt behind it. This is not something Portsmouth can fix with zoning — it requires state-level advocacy to restore AHF appropriations.
⚠ Constraint
The operating math is tight at workforce rents. $1,200–$1,500/month barely covers expenses, let alone debt service — especially with rising insurance and maintenance costs.
Brown: "It doesn't go a long way." After management, insurance, taxes, utilities, and maintenance, roughly $9K/month remains to service debt on a $15M building. Market-feasible rent starts closer to $2,500 — which conflicts directly with the affordability mission. POAH's entire 14,000-unit portfolio is under stress right now due to rising operating costs.
⚠ Constraint
Section 108 is constrained at current scale. Portsmouth's $522K/year CDBG is fully committed; Section 108 also hits the city's debt limit.
PY2025 CDBG is allocated across admin ($162K), public facility/ADA improvements, housing rehab in PHA properties ($238K), public services ($101K), and transportation ($50K). The plan's Section 108 line shows $0 — Portsmouth has not used this tool. Per Councilor Tabor: "our CDBG money is already heavily committed... Section 108 use also requires we record the loan liability on our balance sheet so it impacts our debt limit."
✦ Lever
NH CDFA state tax credits are an immediate tool. Christ Church needs ~$195K; Sherburne School needs $625K — no state legislation required, and local businesses can contribute.
Businesses or individuals contribute and receive 75¢ in state tax credits per $1 contributed (effective cost: 25 cents on the dollar). CRA-eligible for local banks. Credits can be spread over 5 years. These are the nearest-term funding gaps Portsmouth can help close right now — before any ordinance changes or Council votes.
✦ Lever
Surplus land is Portsmouth's strongest tool. The Sherburne School 99-year ground lease model is replicable across other city-owned sites.
The Housing Committee has begun inventorying municipal sites. Eliminating land from the capital stack ($2–5M) unlocks ~$6–8 of total project investment per $1 of city land contribution. The city retains ownership through a long-term lease, ensuring permanent public control and preventing future market-rate conversion.
✦ Lever
Tax abatement reduces the operating cost problem. Lower property taxes directly improve debt capacity on affordable projects — and the mechanism already exists in NH law.
The City Council's March 16, 2026 RSA 79-E work session was informational. NH Housing's Wrightsman presented the full menu: traditional 79-E, Residential Property Revitalization Zones, Office Conversion Zones, and Housing Opportunity Zones. No program has been adopted yet. Adoption is a near-term City Council decision that requires a vote to designate eligible areas and terms. The GNOD land transfer mechanism could explicitly attach a 79-E condition — linking density bonuses to both affordable unit production and tax relief during the affordability period.
→ Open Question
Land value capture — what's actually feasible under NH law? The toolkit is narrower than it looks. Mandatory inclusionary zoning is not currently authorized.
RSA 674:21 defines inclusionary zoning as a voluntary incentive — density bonuses, expedited review — that developers can always decline. Portsmouth cannot legally require affordable units as a condition of approval under current law. Legislation to change this is moving through the 2026 session (NHMA-supported) but not yet enacted. What is within current authority: voluntary density bonuses (already in GNOD); affordable unit requirements on city-owned land transactions (Sherburne model); systematizing GNOD payment-in-lieu proceeds to a dedicated housing fund. Everything else — mandatory inclusionary fees, commercial linkage fees, municipal RETT — requires state enabling legislation.
→ Open Question
AHF restoration at the state level. NH's RETT already feeds the Affordable Housing Fund — the problem is that the legislature has chronically underfunded it.
Advocating for AHF restoration is more immediately actionable than pursuing new municipal RETT legislation. State-level advocacy on AHF is a direct Housing Action Plan item — and one where Portsmouth's Housing Champion designation still gives the city some standing, even as that program faces its own legislative challenge.