New Housing Initiatives - Feb 8, 2024

The first witness that the House General Committee heard from on Thursday was Chris Donnelly (Director of Community Relations, Champlain Housing Trust) who lead by saying that “the biggest risk we can take is not acting.” He called for “permit reform, Act 250 reform and more in the form of resources to really help low- and moderate-income people.”

He wanted to show Committee members what Vermont could look like ten years from now. He showed a slide deck demonstrating how the state could achieve 7,360 new housing units over the next decade. This would take $160-180M annually in new capital spending to achieve.

Representative Bluemle noted that the FY2025 budget has “little in it targeting housing” and the Administrations seems to be counting on zoning reform to pave the way for new construction. She wondered if he thought this would assist with the housing deficit.

Donnelly didn’t know yet what these reforms would look like but, with the sheer base cost per unit, even if the Act 250 and zoning reforms saved even 5%, they would still need to find a way to subsidize the rental prices to achieve affordability.

NOTE: Note this may be because his organization is one of the primary beneficiary of rental subsidies in the state. Also noteworthy, some estimates put zoning costs above 10%.

Representative Gregoire chimed in that they need regulatory reform, and that subsidized housing is a temporary solution. They need affordable housing to fix the long-term problem. Donnelly noted that the fixed costs of construction are now inflated due to high material costs.

Chris Winters (Commissioner, Department for Children and Families) was up next. He presented data on the current general assistance housing program.

There are three types of assistance that fall under this program: catastrophic, vulnerable, and adverse weather conditions. Catastrophic currently provides 84 days coverage, under the FY2025 proposal it would be reduced to 28 days, as would vulnerable.

Committee members were reminded that there were massive spikes in program utilization in FY2021 due to Covid – up to $52.5M in expenditure. By comparison, the FY2018 expenditure was $3.2M. They are still about 7-8 times the actual pre-Covid but the ARPA funds have gone away and this is now entirely a General Fund liability.

Some key concerns were voiced about the current motel voucher system, including cost ($131/night), inconsistent access to onsite support services, health and safety concerns, and inconsistent amenities. They see the best practice as moving these people back into shelters, but they need to increase capacity to do so.

There are five emergency shelter projects they have started with one-time funding. These sites include Montpelier (15 units), St. Johnsbury (24 units), Brattleboro (4 units), Burlington (35 units), and expansion of a youth shelter in Burlington (10 units). The Department is asking for additional funds in FY2025 to bring these online.

Chairman Stevens introduced Alex Farrell (Commissioner, Department of Housing & Community Development) who said that they cannot “separate homelessness from the broader housing issue… This is going to have to be a layered approach.” He stated that Act 250 reform alone is not going to solve the problem, same as zoning or repeals reform. In the same way, just state investment or just incentives to leverage private investment are also not going to solve the problem. “You will hear me say we have to do all of them to solve this problem,” he said.

He added that “we are not in danger of overbuilding any time soon… It has taken decades and we have done it to ourselves.” He believes the people most harmed by this underproduction of housing are the “most vulnerable we are talking about today.”

He pointed to the Vermont Housing Improvement Program (VHIP) as a tool that brings units in at lower cost than before. Additionally, the Vermont Housing and Conservation Board (VHCB), the Vermont Housing and Finance Agency (VHFA) community development block grants, and Federal funding streams are all assets in this endeavor.

However, he cautioned that the historic “$500M recent investments still have not gotten us where we needed to be.” The state doesn’t have more resources to throw at the problem, so a “multi-layered approach” is needed.

He is skeptical that mental illness and addiction are the driving factors in homelessness, but they are “complicating factors” that make it a lot more challenging to make sure these folks get into a better place to live. Poverty is also not the driving factor, he believes. Housing scarcity in a region or city is “what drives those homelessness rates,” he claimed. He compared Detroit and San Fransisco and their scarcity versus actual homelessness to illustrate.

Farrell highlighted that most Vermont counties have seen increases in homelessness, but the number of building permits issued has remained stagnant at about 2300 through 2022. However, 2023 was far lower in previous years. Statewide HUD median rent increases have consistently been 5% annually and vacancy rates have stubbornly stayed below the 5% threshold that is considered healthy.

Historically, in the 1980s it was normal for 3900 units to be permitted per year. In the 1990s, the average was 2800 permits per year. By the 2010’s this had fallen to 1600 permits annually.

Reforms – see list above.  If you remove “arbitrary caps” on all these areas of zoning, Act 250, leveraged capital etc. we will see the cost per unit decrease because of scale when developers begin to build to the market rather than be forced to remain below the 9 unit cap etc.  He is preaching these basics of free market entrepreneurial vision.

Representative Wood was “delighted” to hear him say that “Act 250 reform alone will not solve the problem,” and that we “have to look 5-10 years down the road.” However, she was “not delighted to hear because I am not hearing it, is an actual plan…” She was frustrated that they spent $500M and “have not focused sufficiently on people of very low incomes.”

Winters stepped in to say that the legislation they proposed is based on the number of units they feel would address the problem. They agreed with the VHFA estimates between 4700 and 5500 permitted units per year would get us to the vacancy rates desired.

Stevens suggested this was a crisis and pointedly asked if “this Administration [had] the stomach to consider raising $200M per year for 10 years and put their heads down and figure out where we are going to find that money?”

Winters admitted the issue of money is on the table in the budget; but making the proposed changes in structural reforms added to the leverages these monetary investments.

Craig Bolio (Tax Commissioner) outlined the Governor’s housing package in H.719, which would include:

  • Property value freezes for blighted property restoration and new construction. This would forgo taxes on the increased value of a property for five years following rehabilitation.
  • Property Transfer Tax exemption for blighted properties to incentivize renovation and sales.
  • Increases in the caps for the downtown and village center tax credits from $3M to $5M annually. He explained these are a very focused and effective tool to leverage private investment without a lot of overhead.

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