Upper Valley employers team up to fund workforce housing loans


Valley News Staff Writer

Published: 06-03-2022 10:12 AM

LEBANON — In a step toward alleviating the Upper Valley’s chronic shortage of affordable housing, eight major Upper Valley employers have banded together to set up a $10 million fund that will loan money to developers and other entities to build apartment buildings targeted at renters with moderate incomes.

The newly created Upper Valley Loan Fund will be managed by Evernorth, a Burlington-based nonprofit that facilitates financing for moderate-income housing projects in northern New England. The fund will be tapped to build 260 apartment units — the vast majority of them renting at below-market rates — according to the plans revealed for the first time Thursday at Vital Communities’ annual morning breakfast meeting on the state of the Upper Valley housing market.

“We desperately need to create more housing stock. We know our employees need it. We know our employers need it. And this fund is an innovative way to address the problem,” said Clay Adams, chief executive of Mascoma Bank and chair of Vital Communities corporate council who has spent 18 months spearheading the initiative.

Adams said that regional planners estimate that the Upper Valley will require at least 10,000 more housing units by 2030 to keep up with population growth projections, but only a fraction of those new units are being built annually.

The gap hits especially hard low- to moderate-wage earners whose incomes are no longer sufficient to afford fast-rising “market rate” apartment rentals. Workers are forced then to live ever farther away — with grueling commute times to boot — from where they are employed in the Upper Valley job centers of Lebanon, Claremont, Hanover and Hartford, he said.

“Average rent has increased to over $1,500 in Grafton County, 25% higher than the affordability limit for a family of three in this area,” Sarah Jackson, executive director of Vital Communities told the packed audience at the Hilton Garden Inn in Lebanon as she ticked off a list of grim housing statistics.

“Simply put, the region’s workforce cannot afford the cost of housing in the Upper Valley,” she said.

The eight employers who so far have signed up toward capitalizing the loan fund are Citizens Bank, Hanover Co-op, Hypertherm, King Arthur Baking Co., Dartmouth Health, Dartmouth College, Bar Harbor Bank & Trust and Mascoma Bank, said Deb Flannery, vice president of lending at Evernorth, which will manage the fund and work with developers.

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After years of drip-drip levels of development, housing construction in the Upper Valley has picked up — but much of what is being built remains out of reach for average workers.

More than 1,000 units are currently under construction, permitted or in the permit pipeline in Lebanon, Hartford, Hanover and Claremont, a study by Evernorth estimates. That’s the good news.

The bad news? Only 70 of those units will be affordable to the 6,600 renters in Grafton and Windsor counties who are identified as “rent-burdened,” Evernorth estimates.

Flannery said the fund aims to build apartments for people earning from $15 to $25 per hour with household incomes that can afford rents of $1,200 to $1,600 per month.

In comparison, the current average market rate for apartments in Grafton and Windsor counties is running from $1,500 to $2,200 per month, she noted.

“So you can see considerable savings there between what the market is producing versus what we’re hoping to accomplish by using these employer dollars,” Flannery said.

(Generally, renters are advised to budget 30% of their post-tax income for rent, although that level has become unrealistic for many renters in recent years as the rise in the value of residential real estate has far outpaced the rise in household income.)

Investors in the Upper Valley Loan Fund have agreed to accept a 1.5% return on capital with a maturity of 15 years, considerably below current commercial financing terms, which will lower the cost of development and allow the savings to be passed along to renters in the form of lower rental rates.

In addition, the $10 million fund can be leveraged by tapping other sources of financing, such as federal or state housing finance programs or capital from the developer, allowing the dollars to stretch further, Flannery pointed out. She estimated that accessing those other sources, some of which are enabled by tax credits, could yield as much as $67 million in additional financing.

Under the Evernorth plan, 243 of the 260 units would be “restricted,” with 96 of them set aside for renters earning 60% of the “area median income” (AMI), 77 set aside for renters earning 80% of AMI and 70 units for renters earning 70% of AMI.

Seventeen of the units would be “unrestricted,” meaning they would be eligible for market-rate rents.

The apartment buildings are typically envisioned to be 30-unit to 50-unit structures, meaning they could be built at different locations in the Upper Valley, she said.

The lack of affordable housing in the area is one of the reasons Dartmouth Health, which operates Dartmouth-Hitchcock Medical Center in Lebanon and affiliated facilities in New Hampshire, is struggling to fill 1,900 open positions, according to Carolyn Isabelle, director of workforce development at DHMC.

“We’re seeing when it comes to housing is that candidates are accepting offers and then withdrawing that acceptance when they start to look around for housing … it’s a minimum of 30 to 60 minutes away and with the price of gas recently that commute is becoming less and less feasible,” Isabelle said.

Isabelle painted a picture of the daunting economics facing young families who want to live and work in the Upper Valley.

A family of four with the parents earning just under $78,000 would have after-tax income of $4,375 per month, she noted. If they budget 30% of their income for housing, that means they can afford rent or a mortgage of $1,700 per month.

Then subtracting expenses for day care, car and health insurance, and groceries leaves only $875 per month of disposable income – a thin margin that leaves little room for unexpected expenses or the ability to plan for a secure future.

“The reality is that securing housing for $1,700 a month is unlikely in the Upper Valley,” Isabelle said. “So as those costs increase, disposable income decreases. There’s very little left from the extras like car repairs or any kind of contingency funds or retirement savings.”

Contact John Lippman at jlippman@vnews.com.