Act 250 Overhaul (H.687) - May 3, 2024

This year’s “major” housing bill, H.687, reached the Senate Floor on Thursday for an informational session. Senator Ram Hinsdale stressed the need for additional housing and the replacement of the 5,000 housing units damaged by the recent flooding.

Senator Bray spoke about the linkage between land use conservation goals with our housing needs. The pathway the bill takes is permit (Act 250) reforms and zoning exemptions for special types of housing. In the short-term, Priority Housing Projects would receive exemptions from Act 250 review if they are within a certain radius of a designated downtown area or a village center. He suggested the bill was “intentionally constructed” from the beginning and addresses a convergence of needs between the aforementioned flood damage, economic dislocations (homelessness), and housing demands. He then reviewed a summary chart showing all the amendments the Senate has made to the bill. It was extensive.

Senator Watson then presented the section of the bill that dealt with the long-term reform of the Act 250 system. The current land use regulation would be replaced with a statewide map with areas that fall into different tiers and utility areas. These tiers would show what kind of development is acceptable, which is intended to offer developers and residents a better understanding of what the rules are for a particular property up-front. This replaces a more “free for all” system where each project has to be evaluated in a vacuum.

After a review of the legal history and process of Act 250 from Senator McCormack, Senator White outlined how Developers see local zoning and the Development Review Boards in the current structure as “barriers.” She reviewed a section of the bill that she views as an anti-discrimination statute in response to zoning barriers that towns erect. She called the new process “exciting,” whereby designated downtown areas and village centers would be created automatically by the tiered mapping process without formal voter involvements. However, additional “more generous benefits,” would be available if the municipality “takes other steps,” (i.e. cooperate with the new designation).

Ram Hinsdale took over again, speaking about how the current programs “oversubscribed” Tax Credits demonstrates that needs are pressing. Tax credits are currently available for any project in a designated area. The tiered mapping program in the bill is expected to expand the number of properties eligible for these tax credits in an effort to increase housing development.

To go along with this effort, the bill would raise additional revenues using a new Property Transfer Tax (PTT) that is applied “one time at purchase” and much of it goes into the General Fund for use by the Vermont Housing Trust and also the Clean Water Fund.

This would apply a 2.5% PTT for residential properties that will not be used as a principal residence, are fit for habitation all year, and are not used for a long-term rental. Ram Hinsdale assured Senators that this surcharge would only apply to second homes and camps. Senator Cummings noted that this would be a 1.25% increase in the PTT for these properties (essentially doubling it) that would yield about $12.85M. However, they needed to allocate some funds to the Tax Department to “mechanically implement” a better definition and guidance for identifying seasonal homes (which are supposed to be exempt from this PTT).

She also covered a variation of a proposal from Scott Administration included in the bill that would levy a property tax freeze during and after renovations of a property for the purposes of rehabilitating a property. This is intended to offer an incentive for owners to renovate properties by exempting the increased value of the property (due to the renovation).

The floor debate commenced the next day with numerous amendments, most of which failed. Of particular note was a debate over the ‘road rule’ provision that the Natural Resources Committee had put back in the bill. This was a provision that triggers Act 250 for a road or driveway over 800 feet in length. Backers of the amendment to remove it called the measure arbitrary. Supporters claimed it was a key part of the compromise they negotiated between committees and special interests.

The bill was ultimately voted out 18-10-2. Governor Scott has threatened to veto the bill if he feels it doesn’t achieve enough housing.

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