Affordable Housing Density Incentives in Maine, New Hampshire, and Vermont

Affordable Housing

Introduction

The affordable housing crisis across the United States has reached critical levels, and the New England region is no exception. Vermont, Maine, and New Hampshire each face a persistent shortage of affordable units, exacerbated by rising construction costs, wage-rent disparities, and longstanding exclusionary zoning practices. In response, state governments have implemented a range of policies to encourage the development of affordable housing. Among the most effective strategies is the promotion of housing density building more units on a given plot of land which reduces per-unit construction costs, makes projects more financially viable, and helps combat sprawl.

This report, titled Affordable Housing Density Incentives, investigates how the affordable housing programs in Maine, New Hampshire, and Vermont differ in promoting housing density. A central question is whether Vermont’s policies uniquely deter density compared to its neighbors.

The analysis focuses on each state’s Qualified Allocation Plan (QAP) the blueprint for distributing federal Low-Income Housing Tax Credits (LIHTC) as well as additional state-level programs like tax credits, zoning reforms, and funding mechanisms. The key finding is that while all three states incorporate density-supportive measures, Maine and Vermont have adopted more explicit, aggressive state-level initiatives, whereas New Hampshire relies on more indirect support. Ultimately, the report concludes that no single state is uniquely deterring density; rather, differences reflect variations in policy design.

Why Density Matters in Affordable Housing

Exclusionary zoning regulations such as single-family-only zoning, minimum lot sizes, complex permitting processes, and mandatory parking requirements artificially limit housing supply and drive up development costs. For example, in Vermont, complying with minimum parking requirements can add 5,000to80,000 per parking space, depending on location. These barriers disproportionately harm affordable housing production.

Affordable housing density incentives directly counteract these effects. Higher-density projects such as townhouses, duplexes, and multi-unit buildings are more cost-efficient on a per-unit basis, benefit local economies, reduce infrastructure costs, and can decrease traffic congestion when located near transit. Critically, density (people per fixed amount of land) is distinct from crowding (people per housing unit). A 2019 Washington, D.C. study found that multi-unit townhouses and condominiums had lower per-unit construction costs than single-family detached homes, with no negative impact on sales prices. In Vermont, similar research shows that projects with higher total units are more cost-effective per unit.

Thus, affordable housing density incentives are not just about building taller or closer together; they are about maximizing the use of land and existing infrastructure to create more homes at lower costs.

Understanding Qualified Allocation Plans (QAPs)

The federal Low-Income Housing Tax Credit (LIHTC) program, created by the Tax Reform Act of 1986, is the primary source of funding for affordable housing development in the U.S. It provides two types of credits: 9% “Ceiling Credits” (for new construction without federal subsidies) and 4% “Bond Credits” (for projects using tax-exempt bonds). Each state must publish a QAP that outlines how it will score applications and award these credits.

While federal rules require preference for projects serving the lowest-income families and those with the longest affordability periods, states have significant flexibility to add their own priorities. These can include energy efficiency, geographic preferences, income thresholds, and, most relevant here affordable housing density incentives. By comparing QAPs, we can see which states explicitly reward denser development.

Maine’s QAP: Explicit Density and State Credits

Maine stands out for combining federal LIHTC with a State Low-Income Housing Tax Credit (SLIHTC). Passed in 2019 and restructured in 2021, the SLIHTC provides $10 million per year for eight years, effectively doubling the tax credit subsidy for qualifying projects. The 2025-2026 QAP requires that 60% of credit units serve households at or below 50% Area Median Income (AMI).

Maine uses a points-based scoring system. High-priority projects receive more points and thus credits. Characteristics that earn extra points include:

By explicitly rewarding projects in growth areas, Maine’s QAP creates strong affordable housing density incentives. Developers who build in dense, service-rich locations are directly advantaged.

New Hampshire’s QAP: Indirect Density Signals

New Hampshire’s QAP distributes only federal LIHTC (9% and 4% credits). It also uses a point system, but the criteria focus more on affordability, project readiness, financial feasibility, and location efficiency. Notably, New Hampshire requires that at least 25% of total units be reserved for households at or below 50% AMI, ensuring a baseline of deep affordability.

However, unlike Maine and Vermont, New Hampshire’s QAP does not explicitly prioritize projects in designated growth areas or offer state-level tax credits. Its density signals are more indirect: location efficiency points may favor sites near transit or services, but there is no dedicated checkmark for urban growth zones. This means that while developers can still build dense projects, they receive fewer explicit rewards for doing so within the LIHTC allocation process.

Vermont’s QAP: Mixed-Income Thresholds and Smart Growth

Vermont’s QAP is the most detailed and prescriptive of the three. In addition to federal LIHTC, Vermont administers state-specific Rental Housing Credits, Homeownership Tax Credits, and Down Payment Assistance Credits. Threshold requirements for all projects include:

A unique feature is the Mixed-Income Threshold for projects with 20 units or more. Developments with 20-49 units must have 5% market-rate units; those with 50+ units must have 10% market-rate units. This inclusionary zoning requirement is intended to prevent economic segregation, though research on its effectiveness is mixed.

Vermont’s checkmark system for Ceiling Credits is highly density-friendly. Projects earn checkmarks for:

These affordable housing density incentives are explicit and powerful: locate in a downtown, serve a mix of incomes, and build near transit, and you will outscore suburban, car-dependent projects. Vermont’s QAP arguably provides the most transparent density rewards of the three states.

Additional Affordable Housing Policies Beyond QAPs

While QAPs shape LIHTC funding, other state-level policies also influence density. The report examines several non-QAP initiatives.

Maine’s LD 2003 and the Affordable Housing Density Bonus

In 2022, Maine passed LD 2003 (the Housing Opportunities Act), which eases zoning and land use restrictions in densely populated areas. It removes some height and density limits, allows multi-unit housing in single-family zones, and requires municipalities to permit increased density or lower minimum lot sizes for workforce housing (households earning less than 220% of AMI). Critically, LD 2003 includes the Affordable Housing Density Bonus: developers who qualify for QAP funding can build more units per lot than local zoning would normally allow, provided they maintain affordability for 30 years for lower-to-moderate-income households. This is a direct, statutory density incentive.

New Hampshire’s Affordable Housing Fund and Bridge Loans

New Hampshire’s Affordable Housing Fund (AHF), created in 1988, provides loans and grants for land acquisition and site development. Projects must meet income targeting (e.g., 20% of units at ≤50% AMI). The Construction and Bridge Lending Program (2017) offers early-stage capital, reducing upfront financial risk for developers. However, neither program explicitly encourages density. They make projects more feasible overall but do not reward higher unit counts per acre.

New Hampshire’s true density innovation lies at the local level: RSA 674:21 allows municipalities to adopt innovative land use controls like inclusionary zoning and density bonuses. Exeter’s Mixed-Use Neighborhood Development (MUND) ordinance (2020) removed density caps for projects with at least 10% affordable units, basing unit counts on building height and parking instead. This local flexibility is significant, but it is not a statewide density mandate.

Vermont’s HOME Act and Act 181

Vermont’s Act 250 (1970) had long required lengthy reviews and restricted units per lot. In 2023, the HOME Act (Housing Opportunities Made for Everyone) provided Act 250 exemptions in designated growth areas, allowing multi-unit dwellings and duplexes where only single-family homes were previously permitted, without density caps. In 2024, Act 181 built on this by establishing a tier-based permit review system. Tier 1A (downtowns, village centers, planned growth areas) and Tier 1B (village areas) qualify for streamlined review and Act 250 exemptions. These acts directly lighten zoning restrictions to enable denser affordable housing in the places most suited for growth.

Comparative Analysis: Which State Encourages Density Most?

When comparing all three states, several clear differences emerge.

First, explicit density rewards within QAPs: Vermont and Maine both grant extra points or checkmarks for projects in designated growth areas. New Hampshire’s QAP focuses more on land efficiency and feasibility, which can inadvertently support density but does not prioritize it as explicitly.

Second, state-level tax credits: Maine and Vermont have embedded state LIHTC programs (SLIHTC and Rental Housing Credits, respectively). New Hampshire does not. These state credits strengthen financing stacks, close funding gaps, and make higher-density projects more feasible.

Third, mixed-income thresholds: Only Vermont mandates market-rate units in larger projects (Mixed-Income Threshold). While this is an inclusionary zoning tool, research is divided on whether such requirements reduce overall unit supply. The report notes that inclusionary zoning combined with density incentives is most effective.

Fourth, recent zoning reforms: Maine’s LD 2003 and Vermont’s HOME Act/Act 181 both explicitly ease zoning restrictions to allow denser development. New Hampshire relies on permissive local options rather than statewide mandates.

Fifth, local government authority: New Hampshire stands out for enabling municipalities to create their own density bonuses and innovative land use controls, as seen in Exeter. This bottom-up approach can be effective but leads to patchwork adoption.

Conclusion: No State Uniquely Deters Density

The report’s central finding is clear: Vermont is not uniquely deterring housing density compared to Maine or New Hampshire. In fact, Vermont’s QAP contains some of the most explicit density incentives checkmarks for downtown locations, transit access, and dense infill sites and its recent HOME Act and Act 181 actively roll back Act 250 restrictions to promote growth in designated areas.

Maine has taken similarly assertive steps with LD 2003 and its SLIHTC. New Hampshire, while providing useful funding programs, offers fewer explicit density rewards at the state level, though its local options are noteworthy.

Ultimately, the differences across the three states reflect variations in policy design rather than any single state deterring density. All three recognize that affordable housing density incentives are a critical tool for reducing costs, fighting exclusionary zoning, and expanding supply. Policymakers looking to replicate successful approaches should consider combining QAP-based density rewards, state-level tax credits, and zoning reforms that prioritize growth in urban centers and transit-accessible areas.

Also Read: 2017 Housing Affordability Response Team (HART) Recommendations