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Housing Action Plan — Context Module 7

Permanent Affordability:
The Tools Available to Portsmouth

New Hampshire's Dillon's Rule constraints eliminate several tools other states use to create permanent affordable housing. This module explains what is off the table and which tools Portsmouth can actually deploy.

The core challenge: "Affordable housing" created through market incentives or one-time subsidies reverts to market-rate when restrictions expire. Permanent affordability — housing that stays affordable for decades or in perpetuity — requires a different set of tools that separate land value from housing value or bind future use through covenant.

In New Hampshire, several tools commonly used elsewhere are legally unavailable. Understanding what's off the table clarifies what the Housing Action Plan can realistically accomplish.

New Hampshire's Dillon's Rule Constraints

NH is a Dillon's Rule state: municipalities have only the powers expressly granted by the state legislature. Several affordability mechanisms that cities in other states use are not available to Portsmouth without state enabling legislation.

✗ Not available

Mandatory inclusionary zoning (requiring affordable units as a condition of approval)

✗ Not available

Commercial linkage fees (developer fees tied to commercial square footage to fund affordable housing)

✗ Not available

Transfer taxes on real estate transactions dedicated to housing funds

✓ Available

Voluntary incentive programs: density bonuses, fee waivers, and expedited review in exchange for affordability commitments

✓ Available

City land disposition policy: conveying surplus city land via ground lease or at below-market value with deed restrictions

✓ Available

Resale covenants under RSA 674:60: deed restrictions on subsidized or city-assisted units that preserve affordability at resale

The available tools

Ground Lease

Land ownership separated from building ownership

The city (or a CLT) retains ownership of the land and leases it to a developer or homeowner for a long term (typically 99 years). The lessee owns the building; the ground lease controls what can be built, how it can be used, and what happens at resale.

How affordability is preserved
Land is removed from the speculative market permanently. Building value can appreciate; land value cannot be extracted by the occupant.
Portsmouth application
City-owned surplus parcels disposed via ground lease rather than fee-simple sale. POAH and similar partners are structured to work in CLT/ground lease frameworks.
RSA 674:60 — Affordable Housing Covenant authority

Community Land Trust

Nonprofit stewardship of land in perpetuity

A CLT is a nonprofit organization that acquires and holds land, then leases it to homeowners or developers. The CLT's governing structure typically includes community representation. CLTs enforce resale restrictions through long-term ground leases.

How affordability is preserved
Resale formula in the ground lease limits how much a homeowner can profit at sale — keeping units affordable for the next buyer without ongoing subsidy.
Portsmouth context
No CLT currently operates in Portsmouth. A city land disposition policy favoring ground leases can function similarly without requiring a formal CLT to exist first.
No NH-specific enabling statute required; CLTs operate as standard nonprofits

Resale Covenant

Deed restriction limiting appreciation at sale

A deed restriction recorded on an assisted property that limits the price at which it can be sold. Typically allows a modest equity gain tied to CPI or AMI changes while preserving affordability for the next buyer. Can attach to rental or ownership housing.

How affordability is preserved
Resale price formula prevents extraction of full market appreciation. The subsidy "stays in" the unit across ownership transfers.
Duration
Can be structured for 30, 50, 99 years, or in perpetuity. Longer terms require stronger monitoring and enforcement infrastructure.
RSA 674:60 — Affordable Housing Covenant

Density Bonus / Incentive Zoning

Additional development rights in exchange for affordability

The city voluntarily offers additional height, density, or reduced fees in exchange for a developer voluntarily including affordable units. Because participation is voluntary, this is not mandatory inclusionary zoning — and is permissible under Dillon's Rule.

How affordability is preserved
Affordability covenant recorded at time of permitting, tied to the density benefit received. Duration is negotiable but typically 30–40 years minimum.
Limitation
Incentive must be calibrated to actually offset the revenue lost from affordable units — otherwise developers simply won't participate.
HAP item Z-6 (Density Bonus Program) · I-17 (Density Bonus for Accessible Units)

Comparing the tools on key dimensions

Tool Permanence City control Upfront cost NH feasibility
Ground lease
Perpetual if structured correctly
High — lease terms set conditions
Land must be city-owned or acquired
Fully available; no state law barrier
CLT
Perpetual by design
Shared with CLT board and community
Requires land acquisition + org capacity
Fully available; no state law barrier
Resale covenant
Term-limited (30–99 yrs typical)
Requires monitoring and enforcement
Low — attaches to any city-assisted unit
Authorized under RSA 674:60
Density bonus
Term of covenant (typically 30–40 yrs)
Moderate — voluntary participation
Low — zoning tool, no direct subsidy
Permissible; requires calibration
Mandatory inclusionary
Would be permanent if allowed
Would be high
Zero upfront cost
Not available — Dillon's Rule

Housing Action Plan items that deploy these tools

HAP items that create or operationalize permanent affordability mechanisms in Portsmouth.

PL-1 + PL-2
Public land inventory + Public land RFPs for housing
PL-1 inventories city-owned parcels with housing potential. PL-2 structures the RFP process for their disposition — and is the vehicle for establishing a preference for ground lease structures that preserve long-term affordability over fee-simple sales that maximize short-term revenue.
Z-6
Density bonus program
Creates a formal voluntary incentive framework — additional density in exchange for affordable units with recorded covenants. Requires careful calibration to be effective; if the density bonus doesn't cover the revenue gap from affordable units, developers will not participate.
Z-30 + I-22
Workforce housing ordinance + Shared equity and permanently affordable homeownership
Z-30 operationalizes the RSA 674:58-61 workforce housing framework, including covenant authority. I-22 is the HAP's direct vehicle for shared equity and permanent affordability — identifying partners and building the policy framework for resale-restricted ownership housing in Portsmouth.
I-22 + PC-2
Shared equity & permanently affordable homeownership + Nonprofit housing developer engagement
I-22 is the HAP's primary vehicle for permanent affordability — identifying partners and building the policy framework for shared equity and resale-restricted housing. PC-2 engages mission-driven nonprofit developers (including POAH and potential CLT sponsors) for city-assisted or city-land projects where ground lease structures can be built into partnership terms.

For triage: When a HAP item promises "permanent affordability," check the mechanism. Term-limited covenants expire. Density bonuses require voluntary participation and calibration. The only truly durable tools are ground leases and CLT structures — and both require the city to either own land or acquire it. Public land inventory and RFP policy (PL-1, PL-2) is therefore a prerequisite for any serious permanent affordability strategy.