A disagreement over the extent to which Act 250 has impeded the construction of affordable housing in Vermont has fueled an intensifying debate in Montpelier over proposed overhauls to the landmark statute that has governed development in the state for more than 50 years.
The Vermont Senate last month stripped its major housing bill of controversial provisions that would have, among other things, mostly eliminated Act 250 jurisdiction over projects that involve fewer than 25 new units of housing.
But the push for Act 250 reform has percolated anew in the House of Representatives, where lawmakers are at odds over the law’s role in a housing “crisis” that’s put the dream of homeownership — or even a decent rental — on hold for tens of thousands of low- and moderate-income Vermonters.
Asked this week whether she thinks Act 250 bears any responsibility for the housing shortage, Middlebury Rep. Amy Sheldon responded, “I don’t.”
“I think that Act 250 is often the easy target,” said Sheldon, a Democrat who serves as chair of the House Committee on Environment and Energy.
“Act 250 adds time, it adds money, and particularly for the smaller developer, that can be a huge impediment.”Sabina Haskell, chair of the Natural Resources Board
A bipartisan coalition of House lawmakers, however, has arrived at a very different conclusion. And though land-use regulations might not be the sole or even primary cause of the slow pace of development in Vermont, Craftsbury Rep. Katherine Sims, a Democrat, said evidence of Act 250’s influence on developers’ decisions has become too compelling to ignore.
“The intent of Act 250 is to protect sort of the environmental integrity of our landscape, and yet unfortunately in some cases it is kind of discouraging the smart, environmentally friendly development that we want to see,” Sims said.
Developers make their case
Sims’ and other lawmakers’ assessments of the situation stem largely from the stories of people such as Zak Hale, a 29-year-old real state developer in Bennington.
Hale is part of family business, called Hale Resources, which has about 200 rental units in its portfolio, most of which it acquired by buying and redeveloping old properties in and around downtown Bennington.
“And we like to buy those and then find resources to redevelop them and make them quality units for people to live in,” Hale said.
Hale was recently looking to purchase and redevelop a vacant property with boarded windows on Pleasant Street. The structure needs serious work, but Hale was optimistic his company could renovate the home and turn it into a four-unit apartment building.
But because Hale had already done similar projects nearby, the Pleasant Street project would have triggered what’s known in the Act 250 universe as the “5-by-5-by-10 rule.”
When a single developer constructs 10 new units of housing within a five-mile radius in a five-year time frame, Act 250 kicks in no matter the size of the project that exceeds the 10-unit threshold.
Because Hale has converted other buildings nearby the Pleasant Street property in the last five years, this particular project — even though it’s not substantively different from previous ones — would trigger Act 250 review.
“We’re not increasing the building’s footprint. We’re not increasing the number of people who can live in this building. We’re not really doing anything but just putting up a wall, adding a kitchen and a bathroom, and making it so two separate households can live in that space but separately,” Hale said. “And we’re kind of running up against a wall of not being able to do that anymore because we’re going to have to start doing an Act 250 for every single one. I don’t have the capacity to do that for a small project.”
Hale said he would have used a grant from the Vermont Housing Improvement Program to help fund the project, which means he would’ve have had to give priority to renters at risk of homelessness.
“To take a $50,000 to $100,000 project that is going to increase just one unit to our portfolio, I just couldn’t justify spending all the time and energy to go through that Act 250 process,” Hale said.
Rutland resident Andy Paluch is a commercial real estate agent with Manchester-based TPW Real Estate.
Paluch said he’s been working for years on potential deals to develop empty tracts of land on Route 7 in and around Rutland.
“And there’s always this back and forth between the buyer and the seller of who is going to bear the risk of the time it takes to get the project permitted,” Paluch said. “And a purchaser doesn’t want to close on a property without having it permitted to do what they want to do. A seller doesn’t want to tie up a property for what could be a year or more while the Act 250 application is put together and submitted.”
“I drill down and say, ‘Okay, we got a housing crisis. What are the causes?’ And I can tell you one thing – Act 250 ain’t a major cause. Nobody has any proof of that."Ed Stanak, former Act 250 coordinator
Paluch said he’s watched that dynamic quash exciting prospects for potential housing developments.
“I think there’s huge potential to open up some of those deals happening that aren’t right now, if you can dial back the barrier,” Paluch said. “It’s just sort of the bogeyman that is Act 250."
Unintended consequences?
Ed Stanak worked for 30 years as a coordinator at the commission that vets Act 250 applications in 35 towns in Washington and Lamoille counties.
Stanak said in his experience, Act 250 was “very user friendly,” both to developers and members of the public that wanted to weigh in.
“It can be done in an extremely timely and efficient manner,” he said.
Stanak said that under his tenure, the vast majority of projects that submitted an Act 250 application ultimately won approval from the commission. And according to data from the state entity that administers Act 250, called the Natural Resources Board, the success rate among Act 250 applicants is high: Of the 404 Act 250 applications submitted on average in recent years, according to the NRB, an average of one is denied, and more than 90% of applications are approved without a hearing.
Supporters of regulatory reform say success rate is a deceptive data point, because it doesn’t reflect the projects that would have moved forward if developers weren’t worried about the time and expense associated with the Act 250 process.
Josh Hanford serves as commissioner of the Department of Housing and Community Development under Gov. Phil Scott, who’s been pushing lawmakers to adopt more aggressive Act 250 overhauls.
Hanford said developers have told him that Act 250 can add $2,000 to $6,000 to the cost of each new housing unit. He said it also prolongs the development process.
“It’s hard to quantify an expense that builders try to avoid,” Hanford said.
Stanak said the “anecdotal horror stories” that might be leading to Act 250 avoidance don’t justify gutting a law that has, by all accounts, helped preserve the natural resources and character of the state.
“The fact is that there is no proof that Act 250 has any major role in the current ongoing housing crisis, which I acknowledge we’re having a huge crisis,” Stanak said. “And there is never going to be a solution to a problem if one is not addressing the causes.”
If lawmakers want to look for root causes, Stanak said, they might start by looking at the fact that Vermont has more second and vacation homes per capita than almost any other state in the country.
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Nearly 20% of Vermont’s housing stock is considered “vacant,” according to U.S. Census data. And according to estimates by the American Community Survey, 75% of those “vacant” homes are being used only for “seasonal, recreational or occasional use.”
“I drill down and say, ‘Okay, we got a housing crisis. What are the causes?’” Stanak said. “And I can tell you one thing — Act 250 ain’t a major cause. Nobody has any proof of that. And yet that’s what everyone is going after.”
Act 250 came into being in 1970, at a time when the arrival of interstates and the growth of IBM and an influx of back-to-the-landers were fueling concerns about sprawl and overdevelopment.
“And Vermonters were concerned that that change was going to result in the loss of things that were important to the state — to the ability of our communities to service the new growth, with the ability of farmers and foresters to continue with their livelihood … to be overwhelmed with traffic, to lose our water quality and other natural resources,” said Brian Shupe, executive director of the Vermont Natural Resources council.
Shupe said Act 250 has done its job well. He said the VNRC agrees that the law needs to up modernized and updated to better reflect the 21st-century landscape.
But he said largely eliminating Act 250 jurisdiction over developments involving fewer than 25 housing units, which is one of the more popular proposals among reform hawks in Montpelier, would be akin to “pretty much blowing open the barn doors with Act 250.”
And Shupe said the proposal would do nothing to ensure that new housing is within financial reach of low- and middle-income Vermonters who so desperately need it.
“Allowing 25 housing units anywhere without being subject to Act 250, whether it was on a … prime farm field, on steep slopes … that would have said high-end housing can just go unfettered throughout the landscape,” Shupe said.
The debate rages in Montpelier
The housing bill that previously contained more substantial Act 250 changes passed the Senate late last month. Since then, it’s been sitting in the House Committee on General and Housing, where Starksboro Rep. Caleb Elder earlier this week tried to reinsert provisions that had been stripped in the Senate.
Elder’s amendment would have effectively eliminated Act 250 jurisdiction over projects involving fewer than 25 units in municipalities that already have permanent zoning and subdivision laws.
The housing bill includes more than $60 million in new funding for a range of affordable housing initiatives. Elder told fellow committee members that developers won’t be able to convert that funding into actual housing if lawmakers don’t simultaneously alter the regulatory regime. And he said his support for the Legislature’s signature housing bill of 2023 hinges on at least one meaningful change to Act 250.
“I’m certainly not voting for this bill if we don’t touch Act 250, on principle. We can do one thing — one thing — I‘ll vote for it,” Elder said. “If we do no things, there’s no way I’ll vote to put it out, because what’s the point? What’s the point in throwing $61 million at programs that have no place to land?”
Though several committee members expressed support for Elder’s amendment, committee chair Rep. Tom Stevens, a Democrat from Waterbury, said he wouldn’t allow a vote on it. Jurisdiction over land-use regulations, he said, belonged to the House Committee on Environment and Energy.
The chair of that committee, Amy Sheldon, expressed concern this week about whether small municipalities have the capacity to appropriately vet housing projects of up to 24 units, whether they already have zoning bylaws or not.
“I think that most folks who want to see increased opportunities in our smaller towns would also agree that we need to stand up better local and regional planning in those areas,” Sheldon said. “If we can do those things and make sure that the local communities have what they need to make sure that they don’t sprawl, then I’m open to it.”
If significant Act 250 overhauls don’t make it into the housing bill during the committee process, an unusually bipartisan coalition of House lawmakers may attempt to buck leadership by introducing amendments on the House floor.
Study, study, study
In the absence of consensus around what to do about Act 250, lawmakers have included language in the housing bill that calls for a study of the law and how it might be changed.
Sabina Haskell, chair of the Natural Resources Board, said her office is eager to begin the conversation.
Haskell, who was appointed to the chair position by Scott in late 2021, said Act 250 is one of the most important laws the state has ever enacted.
“It’s part of who we are,” she said. “It’s part of who Vermont is.”
But Haskell said that as chair of the body that administers that law, it’s become evident to her that updates are needed.
“Do I think it’s still working? I think it works mostly well,” she said. “But it was written in the late 60s on typewriters, and we don’t live like that and it needs to be updated.”
And meaningful progress on the creation new affordable housing, Haskell said, will require changes to Act 250.
“I can’t say what would be built if there was not Act 250, but is it fair to say more would be built if there wasn't? Yes,” she said. “Act 250 adds time, it adds money, and particularly for the smaller developer, that can be a huge impediment.”
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