A small city-led homebuilding project in the Upper Valley is on hold for a reason builders don't often see: not enough buyers. Lebanon's plan to build five workforce homes on city land on Barrows Street stalled after only four qualified buyers applied by the deadline, according to a Valley News story republished by New Hampshire Public Radio.
What happened
The Lebanon City Council approved $2.05 million in July to build the five homes. The city opened a buyer lottery in September, took applications through Oct. 5 and tentatively set the drawing for Oct. 7. It needed five qualified buyers to move forward.
"We only got four before the deadline," Deputy City Manager David Brooks said, according to the Valley News.
Brooks said the city is "running out of time this fall to start, and it will only get more expensive in the winter. I don't see prices getting any lower this spring." He said staff will update the council on how to proceed. One applicant told the Valley News that a follow-up email from Brooks said the city would ask the council whether to change the requirements or open the lottery to a wider range of applicants, and that starting over could mean higher costs.
The homes and the price
The plan called for five homes of roughly 950 square feet, each on its own lot. To qualify, applicants had to have lived in Lebanon as of July 15 and show mortgage pre-qualification for at least $425,000 or proof they could pay cash.
The project has a bumpy cost history, the Valley News reported. It nearly stalled in February when estimates put the homes at about $430,000 each. The city redesigned it, and the July funding package was expected to produce homes priced just under $400,000. By September, the target was back up to about $425,000.
The city used a $440,000 grant from InvestNH, a state workforce housing program, for early design and permitting. The project grew out of an April 2022 council "Resolution on Housing" that called for a demonstration project on a visible city-owned parcel.
Why buyers didn't line up
The numbers help explain it. Edward Bidlack, a vice president at Ledyard National Bank, told the Valley News that a 30-year, $425,000 loan at 7.5% would run close to $2,971 a month. Add about $660 in property taxes plus insurance and the payment reaches about $3,800. A buyer would need about $10,000 a month in income, he said, and even that might not be enough. "I would not consider it low income," he said of the price.
City Manager Andrew Hosmer said earlier that interest was lower than expected because many middle-class families questioned whether the homes were affordable.
For comparison, the median sale price of a single-family home in Lebanon was $585,000 through August, according to New Hampshire Realtors data cited by the Valley News. One qualified applicant, a longtime renter, called $425,000 realistic given construction costs but said it would take careful budgeting.
Why it matters for contractors
Lebanon's experience shows how tight the math is for building small starter homes in New England right now. Even with free city land and a state grant covering design and permitting, five 950-square-foot homes still came in around $425,000 each. That says a lot about current construction costs for small-scale builds in the region.
It also shows the timing risk contractors face on public projects. A buyer lottery that falls short can push a start date from fall into winter, when Brooks says costs climb. Builders bidding municipal or nonprofit workforce housing should ask how buyer or tenant commitments tie into the start date, and price in the possibility of a winter start or a rebid.
Finally, it's a reminder that "affordable" is about more than construction cost. Mortgage rates, property taxes and insurance can sink a project's buyer pool even when the build price is controlled. Lebanon's council will now decide whether to loosen the rules or rework the project. Contractors in the Upper Valley should watch that decision, because it will likely shape how other New Hampshire towns approach their own starter-home efforts.