New Hampshire housing advocates say they largely support Gov. Chris Sununu’s recent proposal to divert federal dollars meant for rent relief and other housing aid toward creating new affordable units.

That plan, which requires U.S. Treasury Department approval, would help ease a serious housing crunch in the Granite State, reduce the cost of rent and boost economic growth, they say.

In a May 4 letter, Sununu asked Treasury Secretary Janet Yellen to let New Hampshire use funds from the state’s $200 million Emergency Rental Assistance (ERA) program to help build affordable housing. That program, which opened in March, offers cash aid for past-due and future rent, utilities and other housing-related costs — including Internet and relocation expenses — caused directly or indirectly by the COVID-19 pandemic.

Sununu argued in his letter, however, that federal officials have been “overly restrictive” in defining those other housing-related costs.

“This narrow interpretation ... is hindering the State’s ability to use the funds to ensure our more vulnerable populations have access to safe and affordable housing,” he wrote.

New Hampshire had a rental vacancy rate of 1.8 percent last year, according to the independent state agency N.H. Housing — well below the 4 to 5 percent that experts consider healthy and which they say has caused rental costs to surge. In Cheshire County, the vacancy rate was 1.9 percent.

Noting the low statewide rate, Sununu told Yellen that to properly address issues of housing affordability, New Hampshire must boost its stock of affordable units, in addition to helping renters cover their housing expenses. With more flexibility, he said the state could invest ERA funds in public-private partnerships for new housing, among other ways to encourage those projects.

“While those able to access rental units will benefit from the ERA, absent the ability to increase available rental units, the program will fall short,” he wrote.

Treasury officials had not yet responded to the governor’s proposal as of Thursday, according to Sununu spokesman Ben Vihstadt.

Josh Meehan, executive director of Keene Housing, applauded the proposal, saying the local housing shortage is more severe than he recalls at any other time over the past decade. He said Keene Housing clients, who get rental assistance from the organization, have struggled to find homes in the area, often spending three to four months looking for an available unit.

The limited housing stock has also raised rental costs, Meehan said, making many properties unaffordable to them. (N.H. Housing estimated last year that the state would need to add 20,000 units to create a balanced market.)

“From our perspective, the number one problem we’re seeing is a lack of affordable apartments in the region,” he said.

Keene Housing has encouraged clients to apply for ERA relief, if needed, but Meehan said he doesn’t think many have utilized that aid because their rent is already subsidized.

The program had administered more than $12 million as of May 21, mostly for rent assistance, according to an online dashboard run by the Governor’s Office of Emergency Relief and Recovery (GOFERR). Cheshire County residents had received $524,000, it reported.

That spending has easily outpaced a similar federally backed program that issued $13.3 million to New Hampshire renters over six months last year, in an effort to reduce housing instability during the pandemic.

But with a federal windfall tied to the ERA program, Housing Action N.H. Director Elissa Margolin said she supports funneling some of that money into affordable units — especially because state support for those projects has typically been insufficient, she added.

Margolin, whose organization is a policy-advocacy group that includes developers, housing providers and tenant advocates, said expanding the housing stock would help keep rental costs down and also attract workers and students to New Hampshire.

“I think we all have a concern about the extreme lack of stock,” she said. “… It’s an issue now not just for low-wage earners, but for everyone. It’s affecting someone who’s going to choose where to do their residency after medical school, as well as a single mom who’s working a low-wage job.”

The federal housing aid has helped renters pay their bills and also kept landlords financially secure, according to Margolin, even as many tenants can’t be evicted for nonpayment of rent due to a federal eviction moratorium. She said, however, that it’s unlikely the state will drain its ERA funds, noting that a stimulus bill Congress passed earlier this year designated another $152 million for the state’s housing relief program.

“I honestly don’t see New Hampshire spending down $352 million in rental assistance,” she said.

Many tenants are still waiting on that housing aid, as nearly three in five requests remained under review as of May 21, according to the GOFERR dashboard. (State officials have approved nearly every application that has been considered so far.)

GOFERR spokesman Alex Fries said it usually takes about four weeks to process those requests, since the five community action agencies administering the ERA program — including Southwestern Community Services, which covers Cheshire and Sullivan counties — must gather various documentation and review applications for several types of aid.

Elliott Berry, who leads the Housing Justice Project at N.H. Legal Assistance, said it’s unlikely the state will distribute all of the federal rent relief. Still, he said he would prefer that the state tap other resources to encourage residential development — like the $1.25 billion it was awarded as part of the most recent federal stimulus bill — before cutting into ERA funds.

“That’s a very meaningful amount of money and has provided important assistance to tenants all over the state,” he said.

Berry said he supports Sununu’s effort in principle, though, echoing the other advocates that New Hampshire has “an extreme shortage” of homes available to renters of low and moderate incomes.

“Part of any solution to that problem is the creation of new units,” he said. “Anything we can do to increase the supply of affordable housing is a really important thing to do.”

But with the federal eviction moratorium scheduled to expire at the end of June, Berry said demand for rent relief could jump dramatically. He urged state officials to be patient before acting on the governor’s proposal, if it’s approved.

“It could be a very constructive measure, but I really think we ought to monitor for another five or six months to see how much demand there is going to be for the emergency relief program before we start diverting it to other purposes.”

Caleb Symons can be reached at 352-1234, extension 1420, or csymons@keenesentinel.com. Follow him on Twitter @CalebSymonsKS.