This story, by Report for America corps member Carly Berlin, was produced through a partnership between VTDigger and Vermont Public.
When lawmakers arrived in Montpelier in January, most could agree on one thing: addressing Vermont’s crushing housing shortage — and homelessness crisis — would be a priority. As the 2024 legislative session nears its finish line, though, their preferred tactics for tackling the problem appear in conflict.
Earlier this month, the House passed an ambitious spending bill that creates new revenue streams for a wide range of housing programs, from bolstering shelter capacity, to eviction prevention, to boosting affordable rental housing production. With a stated intent to invest $900 million in housing initiatives over the next 10 years, H.829 has been lauded by its supporters as a long-overdue plan to transition Vermonters out of homelessness – and reduce the state’s reliance on motels for shelter.
But as that bill arrives in the Senate, it faces headwinds. Members of the upper chamber have expressed a lack of enthusiasm to continue spending on housing programs to the degree the state has over the last few years, when federal pandemic relief funds made over $500 million in investments for housing and shelter creation possible.
With other top priorities competing for a limited slice of the post-pandemic budget pie, and a lack of appetite to raise taxes, key senators say this is the year to focus on easing regulations that impede housing development – not continuing to spend.
“We should see how much that half a billion dollars benefited us in the next couple of years before we decide that the path forward is more money,” said Sen. Kesha Ram Hinsdale, D/P-Chittenden Southeast, who chairs the Senate Committee on Economic Development, Housing and General Affairs. “My focus this year is on regulatory reform because that unties the hands of the rest of our housing developers and providers to provide lower-cost housing for all Vermonters.”
‘We felt we needed bold action’
The proposed spending in H.829 is relatively modest for the coming year. The bill directs around $17 million toward housing initiatives in fiscal year 2025, including programs to represent renters in court and help them pay back-rent when facing eviction, and efforts to build up homeless shelter and service capacity.
Yet the larger project of the bill is to set up new revenue streams to shore up housing investments in coming years. The bill would create a new marginal personal income tax bracket with a tax rate of 11.75% on income earned above $500,000 for married households, plus increase property transfer taxes for property purchases exceeding $750,000, well above Vermont’s median home price. It would also lower the property transfer tax threshold for the purchase of lower-value homes.
Those tax changes are intended to funnel new revenue into housing programs over the next 10 years. The bill sets an intent for the Legislature to spend $900 million through 2034 “to fund programs that advance a long-term solution to Vermont’s housing shortage.”
Rep. Emilie Kornheiser, D-Brattleboro, an architect of the proposed tax changes, said that long-term intent is meant to allow housing players outside the Statehouse to adequately plan projects. While the goal isn’t binding, Kornheiser said that “by putting it in that intent language, we are asking the public to hold us accountable to this promise.”
Lawmakers envision this 10-year spending commitment as a path to transition away from depending on state-subsidized motel rooms to shelter the bulk of Vermont’s unhoused population. While lawmakers have voted time and again to extend the stays of Vermonters in the motel program, they have yet to come up with a long-term plan to stop depending heavily on it. Proponents of H.829, including housing advocates, say the bill finally provides such a blueprint: As more shelter space and affordable units come online — along with greater support services — the state can move more Vermonters out of motels.
“It’s a bonafide plan — something that we haven’t had,” said Rep. Theresa Wood, D-Waterbury. “Is it bold? Yes, it’s bold. But we felt we needed bold action in this time.”
In late March, the House advanced a bill that relaxes Act 250’s reach in some municipalities, allowing new development to proceed without triggering the state land-use law. To Wood, focusing solely on updating Vermont’s development regulations won’t provide a track out of homelessness. More money is needed to do that.
“This trickle-down notion of regulatory reform only creating housing — it’s just a false narrative,” she said. “That’s not going to create sufficient housing on its own in order for us to stem the tide on this homelessness issue.”
‘Our resources, they are finite’
Leading senators have expressed skepticism about H.829’s approach — both the fact that it makes major taxing and spending asks outside of the budget and its attempt to direct future lawmakers to dedicate new revenue to housing programs for years to come.
Beyond their concerns about the legislative process, though, lies a more fundamental choice about the tools lawmakers have at their disposal to take on the state’s housing woes. They can direct public money to housing programs, subsidizing the cost of a rental or a home when a household’s income won’t cover it on its own. And they can loosen regulatory hurdles to building more housing overall — increasing the supply of housing and therefore easing pressure on rentsand home prices that have skyrocketed in Vermont in recent years.
Shane Phillips, housing initiative project manager at the UCLA Lewis Center for Regional Policy Studies and an expert on housing affordability, said he often sees regulatory reform and increased housing subsidies get pitted against each other. But both are critical to addressing housing affordability.
“Having more subsidies makes it easier to build affordable housing, obviously,” he said. And having less restrictive land-use rules make it possible to build more housing overall — which keeps housing prices from rising, and allows subsidies to go further, he said.
“I think we really just need to move beyond this idea that it’s one or the other,” Phillips said. “It really does need to be both.”
Ram Hinsdale acknowledged the need for affordable housing investment. But she noted that pandemic-era federal funding is gone, Vermonters aren’t ready for new taxes, and flood recovery is taking up some of the available budget. This is the year, she said, to tackle regulatory reform, including updating Act 250.
“Developers have been asking for that opportunity to get out from under the mountain of permits that they’re required to have, and to make housing more affordable for everyone again,” Ram Hinsdale said.
A separate housing bill advanced by Ram Hinsdale’s committee earlier this session, S.311, focuses on regulatory reform. It also includes $40 million for affordable housing and homeless shelter creation, and investments to rehabilitate rundown rental housing and upgrade manufactured housing communities.
Gov. Phil Scott’s administration has consistently called for reducing regulatory barriers to lower the costs and speed up timelines for housing growth — and to encourage more housing development from the private sector. His administration has also emphasized that the large direct investments of the last few years cannot continue.
“We’re lucky that we had that additional investment, because now it gave us a little bit of a boost during a time that we needed it. And we’ll keep feeling that boost for these next few years,” said Department of Housing and Community Development Commissioner Alex Farrell, noting that some of the funds allocated in recent years have not yet been spent.
“But if we do the right things on the regulatory front, and then are really, really tactical with the smaller investments that we can still make now that our budget shrunk back down to normal levels, we can continue to feel the benefits,” Farrell said.
Sen. Jane Kitchel, D-Caledonia, who chairs the Senate Committee on Appropriations, acknowledged the pressing need to address Vermont’s housing capacity — and particularly to transition away from the expanded, pandemic-era version of the motel shelter program, which she described as “very expensive.” But when discussing how to proceed, as her committee takes on the House’s budget proposal, she emphasized that funds are limited.
“Our resources, they are finite,” Kitchel said. “People forget, we’re a very small state – our tax base is relatively small. And so what’s realistic, and sustainable, is really something that is very much on our minds at this point.”
Mission not accomplished
Chris Donnelly, a spokesperson and lobbyist for Champlain Housing Trust, helped draw up the underlying spending plan of H.829, at the request of lawmakers. He agrees that the Legislature must change rules that have subjected development projects to risks and delays.
But when it comes to funding, he said, lawmakers should keep in mind that permit costs for new development are dwarfed by the rising cost of materials and labor. He pointed to a current Champlain Housing Trust project in Shelburne at the site of the Harbor Place motel. The trust plans to build a mix of rentals and homes for sale. For just the rental portion, the estimated cost is roughly $37 million — and the Act 250 permit came in at about $100,000.
To him, a departure from continuing, large-scale investments would be akin to declaring victory too early.
“That springs to mind to me when George Bush stood and said, ‘Mission accomplished,’ and then we had another eight years of war in Iraq,” Donnelly said. “I really don’t think we are at that point. I think we really need to continue to invest in creating the housing that working Vermonters need.”
Zeke Davisson, chief operating officer of Summit Properties, which develops both affordable and market-rate housing, has been vocal about the ways in which Act 250 throws cold water on housing development in Vermont. Rents for affordable housing projects are capped based on income levels, Davisson said, which means that when construction prices rise, developers have to rely on more public subsidy dollars.
Construction prices have doubled in the last five to seven years, Davisson said. That means if funding is stagnant, affordable housing construction will slow down.
“Without a big new appropriation, we’ll just have to be comfortable with the fact that we will be building less affordable new construction,” he said.
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