LEBANON — A nearly abandoned project to build homes on city-owned property off Barrows Street may have new life.
Under the new proposal, the city expects to be able to sell five, two bedroom, one-and-a-half bath modular homes with about 1,000 square feet of living area for roughly $399,000 each, according to an email from Deputy City Manager David Brooks to city, school district and housing authority employees.
The new proposal replaces a plan the council put aside in February because the homes were going to be too expensive.
Removing some of the infrastructure and site work brought the costs down to under the city’s target price of $400,000, Councilor Tim McNamara said.
“It just simplifies everything,” McNamara said of the change.
McNamara, who has been heading up the project along with city employees, plans to present the new proposal to the rest of the Council on Wednesday in hopes of securing approval to move forward with the project.
The project team aims to have the modular homes ready to sell before the end of the year, McNamara said.
The council was ready to walk away or pivot from the small neighborhood development that had been planned for the property since 2024, after the cost of the cottages came out to about $430,000 each in February.
“One of the biggest impediments to the budget before was the site costs associated with the cottage community,” McNamara said. “We just didn’t have enough density to spread that around.”
But after McNamara reported that the project wouldn’t go forward as planned, an outpouring of businesses reached out with ideas to make it work, according to meeting materials.
The development was converted from a “cottage project” — which would have consisted of six cottages built on one lot and included a more complicated system of walkways, shared parking, landscaping and drainage — to each house being built on its own lot under the city’s pattern zoning rules.
The goal of the project all along has been to build housing below market rate, originally with a target price of under $300,000, which later shifted upward to $400,000.
The median sale price for homes in Lebanon in 2026 through April is $535,000, a 33% increase over the same period in 2025, according to data from the New Hampshire Association of Realtors.
Per the new plan, there will be four cottages built on one side of Barrows Street, a short residential road off Hanover Street, and one built across the road.
McNamara hopes the project will move forward quickly to avoid any increases in construction costs and to use a $159,000 reimbursement grant before it expires next summer.
The grant from the New Hampshire Department of Business and Economic Affairs leaves the city on the hook for a 25% match, or about $40,000. The city also has another $440,000 state grant to help fund the project.
The council will have to secure a local construction loan for the project, but the city expects to recoup the costs by selling the houses, McNamara said Monday.
The houses are modular homes that will be built off site, likely by either Blanchard Contracting, or Claremont-based Preferred Building Systems, which each sell a similar two-story home. Site work can hopefully be done simultaneously so the lots are ready to receive the nearly finished homes, McNamara said. The process will hopefully take only five or six months, he said.
Building prefabricated homes and small “cottage” neighborhoods have become popular ways to try to put cheaper housing on the market in the Upper Valley.
In February, Windsor-based Blanchard Construction placed two modular homes on two town-owned lots on National Street in Windsor that will be sold to boost tax revenue. Both units are currently listed on Zillow for $229,000.
Dartmouth College also unveiled a new neighborhood of prefabricated homes for employees in West Lebanon in February.
In Enfield, private developer Adam Grounds has proposed to build a cottage neighborhood of 19 single-family homes on about 18 acres of land off Main Street.
The city sent out a survey to city, school district and housing authority employees to gauge interest in the Lebanon project. As of last week, Brooks said 78 people had responded with 20 expressing interest. If any units are not sold to Lebanon’s public employees they would be available to the general public.
McNamara said the response shows “more than enough interest” for the five homes.
The City Council is scheduled to consider the proposal at its regular meeting at 7 p.m. Wednesday at City Hall.
