BE Home Bill (S.311) - Feb 16, 2024

Chairwoman Ram Hinsdale reminded the Senate Economic Development Committee about the Housing Survey from the HOME Act in order to know “roughly how much housing we are creating through our funding mechanisms.” She preferred to add language to S.311 least referencing a “healthy vacancy rates… about 5% for rental unit vacancy and 23% for home ownership vacancy…”

Ram Hinsdale asked Patrick Titterton (Senior Fiscal Analyst, Joint Fiscal Office) about that work. He answered that they are working on it. She was hoping to see this report around the dates of the last week of crossover, after the bill had gone through the money committees. There was concern about the changes to the Property Transfer Tax (PTT) included in the bill. The current version of the tax has a base rate of 1.25% that applies to the marginal value of principal residences over $100k. Non-primary residences enjoy no exemption on the first $100k. In addition, a clean water surcharge applies on top of the base PTT. For properties less than $100k in sales value, a reduced 0.5% PTT rate applies.

The bill would increase the purchase-assisted exemption to $150K and double the rate on second homes to 2.5%. The additional revenue would be around $72.7M and be distributed as follows:

There was some discussion about redistributing the funds collected by the PTT, but it was decided that it would be best not to mess with this too much (to avoid a budget fight). Ram Hinsdale noted that the increased revenue from 2nd homes would also cover the new exemption for subsidized properties.

Senator Cummings commented that they have been told that a 2nd home tax creates a problem because distinguishing them from rentals and overlapping sales when (purchasing a home then to move in six months later) is difficult. It was also suggested that the assumption that all other properties not declared a homestead at time of sale is a second home was problematic.

Ram Hinsdale suggested they move the conversation on to the Finance Committee. Senator Brock argued that these issues are complex and need to be worked through with the agencies involved to find workable solutions.

They moved on to review the property tax exemption for rehabbed properties that would extend for five years (essentially freezing the grand list value of the property). The fiscal note for this was around $1M for FY2025 and ramps up after that. This was a proposal that the Administration was a proponent of.

Senator Clarkson wanted a review after ten years to assure the bill is working as intended for “rehabbing to bring [housing] online.” Craig Bolio (Tax Commissioner) noted that a dozen or so states already have similar mechanisms, but most create exemptions 10-15 years so the approach here is “conservative.” He added that the goal here is to entice “added private investment on top of the public investment,” because they need a ratio of about 5-6 dollars of private investment for every dollar of public funds.

They have estimated 7-8% lower cost per unit for rehab units that had a property tax deferment. Ram Hinsdale mentioned a statistic from Vermont Housing Finance Agency that 17-18% of housing is blighted but Cummings pointed out that lots of these properties are actually already occupied so it’s not necessarily a potential to “add to the housing stock and… these certainly shouldn’t be lived in by humans.”

Legislative Counsel joined the Committee to review the final draft of the bill. There is a new $10M appropriation for middle income home ownership program in addition to $40M for the Vermont Housing and Conservation Board. The rental registry was struck from the bill and replaced with a landlord certificate that includes aggregated data reporting. New “health & safety” requirements were also added for short term rentals.

New language was added around age-restricted housing and allowing the right-of-first-refusal to be transferrable to a 3rd party, but only for private developments. Publicly subsidized developments would supposedly not be impacted.

After the lunch break, there was some discussion about “location based” language that Cummings suggested would allow Woodside (juvenile offender facility) in a designated downtowns area. She suggested it would not be addressed in the Finance Committee and the Vermont League of Cities and Towns has concerns. Ram Hinsdale deferred, saying Judiciary would have to address that. However, as the discussion continued Brock said that they had taken “no effective testimony here, and the more he reads it the more he is inclined to leave it out… the House can deal with it later.” The Committee ended up agreeing with him.

The big sticking point ended up being the road rule provision that Vermont Natural Resource Council had requested. Brock stated that the Administration is “violently opposed to this” and that he couldn’t support it. Ram Hinsdale suggested that they remove it, knowing that the Natural Resources Committee is likely to add it back in.

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