In a tough rental market, local groups are envisioning ways to boost affordable housing options on the Seacoast.

Between rising costs and increased competition, it is more difficult than ever for many families to find an affordable place to live.

The median cost of a two-bedroom rental unit in New Hampshire increased by 3.3 percent from 2011 to 2012, landing at $1,085 per month, according to the N.H. Housing Finance Authority. And Rockingham County is the most expensive region in the state to rent a two-bedroom unit. Here, the median cost is $1,166.

Despite rising costs, rooms are filling up. Currently, only 3.2 percent of two-bedroom rentals are vacant statewide, down from 3.5 percent in 2011. That’s partly because the foreclosure crisis has thrust some former homeowners back into the rental market.

“New Hampshire has traditionally been a place that has a shortage of rental housing, and that’s really no different now,” said Dean Christon, executive director of the N.H. Housing Finance Authority. “We actually see vacancy rates going down, meaning the market is tightening. People looking for someplace to rent, particularly affordable rental units, are really at a disadvantage pretty much across the state.”

And, despite low prices on foreclosed properties, buying a home isn’t any easier. The median sale price of New Hampshire homes has dropped by 20 percent over the last five years. But the average home sale in Rockingham County is still $255,000, which is still out of reach for many families. For those struggling through the recession, it’s exceptionally difficult to save for a down payment.

“Very often we see that folks are shut out of the housing market, particularly close to employment centers like Portsmouth or Dover,” said Lisa Henderson, executive director of the Workforce Housing Coalition of the Greater Seacoast.

According to federal guidelines, an “affordable” place to live should cost no more than 30 percent of a household’s income. The statewide median income among renters is less than $36,000 per year. Only 17.5 percent of the state’s two-bedroom rentals are affordable at that level, according to N.H. Housing.

When large portions of the population can’t afford to live in a particular community, it’s not just bad for those people; it’s bad for the community. Employers have trouble recruiting and retaining workers, and cannot sustain or grow their businesses. Workers often must commute long distances to work, which is harmful to the environment and limits time for civic engagement and recreation.

It’s for these reasons that groups like N.H. Housing and the Workforce Housing Coalition have been working to catalyze the development of income-restricted housing across the state, and particularly on the Seacoast.

“If you’re going to have a vibrant, growing economy, you need a range of workers,” Christon said. And since not all of those workers can afford four-bedroom houses on two-acre lots, providing affordable housing for teachers, firefighters, service workers, public employees and others is vital to making the economy work.

“You don’t want to have only that kind of housing, but you also don’t want to have only housing for upper income people,” he said.

From Oct. 10 to 12, the Workforce Housing Coalition hosted its third annual design charrette, inviting community members, property owners, city officials and planning professionals to examine a couple of specific potential sites for affordable housing developments and draw up concept designs. This year’s charrette considered locations in the cities of Portsmouth and Dover.

The idea, Henderson said, is to get people thinking conceptually about possibilities for workforce housing in the future.

“It’s not to produce a development proposal,” she said. “It’s really a visioning process, a community planning exercise, and it allows for some pre-thinking and collaboration that you don’t always get with a development proposal.”

Although the current market for housing development is weak, the economy is recovering, which makes future planning essential.

“This is the ideal time to be addressing workforce housing, because we are seeing our economy turn around,” Henderson said.

The proposed site in Portsmouth centers around the Rock Street Garage, a municipally owned building used for storage. Two design teams looked at the garage and adjacent parcels and considered ideas for an affordable housing development. Both teams came up with concept designs for multi-use buildings with commercial uses on the ground level and housing on the upper floors. They also proposed more green space and parking areas, as requested by residents of the neighborhood.

An advantage of incorporating the Rock Street Garage is that it is not privately owned, and it has been designated as a brownfield site by the Environmental Protection Agency due to minor contamination, which makes it eligible for restoration funds.

“That really helps the financial equation, because you’re not paying competitively with another market-priced piece of property,” Henderson said.

On the other hand, the property exists in an area of “hodgepodge” zoning, and it’s unclear whether such a use would be allowed there.

The proposed Dover site is at the corner of Central Avenue and Fifth Street, next to the Centrix Bank building. Unlike the Portsmouth site, that area is all privately owned. But an advantage in Dover, Henderson said, is that the city has adopted a form-based code in its downtown district, allowing for diverse uses as long as the buildings have a consistent size, scale and appearance. The design teams there envisioned a multi-story, brick-fronted affordable housing building to anchor the street corner.

The Workforce Housing Coalition will make its findings available to the city and the public, but Henderson does not expect the proposals to advance right away. They require public-private partnerships and will take time. No proposals from past charrettes have produced developments yet, although most are still on the table.

“These are things that have a three- to five-year horizon to even be actively considered,” Henderson said.

The more important thing, she said, is to continue working on the regulatory environment to identify housing challenges and opportunities.

A state law that passed in 2008 requires municipalities to provide “reasonable and realistic” opportunities for developers to build housing that is affordable to people with low or moderate incomes. Since then, dozens of communities have adopted zoning ordinances to incentivize development of workforce housing.

But neither the law nor the ordinances actually mandate that affordable housing be constructed. If no developers are interested, nothing gets built.

“But the community can’t put up barriers that prevent that from happening if all the other conditions are there,” Christon said.

Portsmouth has an ordinance that offers housing developers a 50-percent density bonus if they make a certain percentage of the units affordable. In other words, developers can build more units in a smaller space than is normally allowed, provided some of the units are set aside for middle-income people.

The city approved the ordinance in 2007, paving the way for a proposed affordable housing development in the area of Kearsarge Way. But that development never materialized, and the ordinance has never been used.

“Because (the ordinance) was developed ... for a very specific site, it was only developed for a couple of zoning districts in the city, so it’s fairly limited as to how it can be applied,” said Portsmouth planning director Rick Taintor.

According to city manager John Bohenko, about half of Portsmouth’s housing stock consists of rental units. Of that half, roughly 20 percent is subsidized in some way for people with low to moderate incomes. Of that 20 percent, about 10 percent is for families and the other 10 percent is for senior citizens.

At last count, Taintor said, the city had a total of 1,184 assisted housing units spread across 15 developments, all with income restrictions.

But there are no current plans for workforce housing developments, and the city has little to offer developers in the way of incentives. That’s because the primary incentive for affordable housing is the density bonus, and according to Taintor, Portsmouth already allows higher density housing than most communities.

“So, we haven’t looked at this in a number of years in terms of affordable housing and how to promote it,” Taintor said. “It’s almost as if you’d have to take something away in order to give something.”

Asked if the proposed site on Rock Street might be a feasible spot for an affordable housing development, Taintor said, “It’s a possibility.” But he questioned whether a parcel abutted on each side by a city park, railroad tracks, and industrial buildings is an appropriate location for a residential development.

“That would be the question is, what’s the best use for that site given the particular context? But affordable housing could be one of those options,” he said.

Affordable housing proposals must overcome a number of public stigmas. A chief concern is the belief that affordable housing brings large numbers of children into communities, thereby adding to school budgets and leading to higher taxes. But repeated analyses have proven that notion to be false, Christon said.

“The number of schoolchildren associated with, particularly, rental housing and, for that matter, condominiums and smaller starter homes, is really much smaller than people anecdotally believe,” he said. “We’ve demonstrated that, and I think people are beginning to recognize that that concern is not really a valid one.”

Others worry that affordable housing will bring “unsavory characters” to communities and increase local crime, and that the influx of people will create traffic issues and parking shortages, while increasing the strain on city services.

But none of that has happened in Exeter, where an affordable housing development called The Squamscott Block opened downtown on Water Street in 2007. Town manager Sylvia von Aulock said she is not aware of any problems from the building.

“There’s no parking issue at all. In fact, the apartments could be bigger and I think it still wouldn’t be an issue,” she said.

Aulock said town officials prioritized affordable housing when they realized the town was getting too expensive for their own families to live in.

“The Planning Board realized that the development projects that were coming through town were providing homes that they couldn’t afford, or their adult children couldn’t afford, and their own children were having to move out of town.”

That’s happening in other Seacoast communities, too. But Christon thinks the future is ripe for affordable housing opportunities. Public perception is shifting, and more communities are beginning to recognize the importance of adopting policies that embrace housing for a variety of income levels.

“In this environment where there’s not a lot of development pressure, it’s actually a really good time to be thinking more strategically about those policies,” he said. “We believe that as the rental market continues to tighten that you will see more developers coming forward.”