Look to buy or rent a home in Vermont today, and it likely comes as little surprise that we’re facing a massive housing shortage.
In fact, Vermont needs to create upwards of 24,000 year-round homes over the next five years to help get the housing market to a healthy state.
That’s according to the recently-released Vermont Housing Needs Assessment, put together by the Vermont Housing Finance Agency for the state’s Department of Housing and Community Development.
Reporter Carly Berlin recently spoke with the department’s commissioner, Alex Farrell, to break down the report. This interview was produced for the ear. We highly recommend listening to the audio. We’ve also provided a transcript, which has been edited for length and clarity.
Carly Berlin: Let’s start by going back in time a little bit. The report says before the COVID-19 pandemic, Vermont already had a shortage of homes affordable to lower-income households. But over the last few years, that shortage has become a lot more severe. So, how did pandemic-era trends shape the housing crunch we’re experiencing in Vermont today?
Alex Farrell: One of the things that was really visible during the pandemic was the increase in households experiencing homelessness. There were a few factors that attributed to that. That was the slowdown of the economy, that was folks that were just barely hanging on for a lot of years and were unstably housed, and the pandemic was just the thing that pushed them into homelessness. But the data also shows us that here in Vermont, we had significant inward migration, and so for the first time in a long time, Vermont's population really increased substantially during one year, particularly 2021, and that was due to a lot of folks having new flexibility, but that also squeezed out some folks in the market that were already trying to find a home to rent or to buy.
Carly Berlin: Migration into the state isn't the only thing driving demand and straining supply, resulting in rising costs, right? So help us understand, what are the other factors that are kind of conspiring right now to make our current housing market so tight and so costly?
Alex Farrell: Yeah. So when you zoom out on a broad scale, what makes housing markets unhealthy or too expensive is if you look at the vacancy rate, and if the vacancy rate of housing sways too far in one direction or the other, away from about 5% which is what we like to see, we know it's an unhealthy market. If the vacancy rate is too high, you've got a bunch of empty structures. In Vermont, we've got the opposite problem, more acutely in places like Chittenden County, where vacancy rates are 1% and some estimates have Burlington vacancy rates around 0.5 or 0.3%. And so when we see that, we know that we have scarcity. That type of scarcity is going to drive up costs — it's going to give a lot more leverage to people who already own properties, and make it a lot more challenging for people who are trying to rent or buy properties.
And so why can't we catch up? Why can't we build enough? There are a few factors, one of which is pretty much universal right now: The cost of building homes is really high. There's not a lot we can do about that in Vermont. There are some things we can do to streamline efforts to make the process easier for builders, easier for property owners, or easier for communities. And you've seen the Legislature and the administration work together on that. Doesn't mean that it's going to happen overnight. And so people are still saying, "Geez, it's really expensive to build. I don't think now's the time."
Carly Berlin: The report is clear that rising rents and home prices have hit low- and middle-income Vermonters hardest. One of the most eye-catching statistics to me was the shrinking number of Vermont renters who can afford to buy a home now. So the report says that in 2021 over a third of renters had the income needed to buy a median-priced home. But that number plummeted to 6% last year. How does that dynamic fit into the overall picture of the gridlock in our housing market right now?
Alex Farrell: Yeah, well, when you look at what the average and median sale price of a home is in Vermont, you know the $350,000, upwards of $400,000 in Chittenden County, that's really unattainable if you think about the household income you need in order to purchase those, you're talking six figures. That's going to put it out of reach for a lot of renters, a lot of households.
What's further constraining this and making it really hard for renters to save up to buy a home, is when you look at the data about the amount of income that renters in Vermont have to put towards their rent, their housing. Half of Vermont renters are spending 30% or more on their housing, and half of those folks are spending 50% or more of their housing. You're not going to be able to save up for a down payment under those conditions. So with rising costs on both sides, these people are put in an impossible situation, and the demographics don't make it easier, either. So we've got a population that, it's no secret, is aging, and that plays into this challenge, too.
A lot of our older Vermonters are in homes that are bigger than they need. They would like to move on to something smaller, but the economics don't work out. They may have already paid off their mortgage, and perhaps they have property tax assistance where they're at. Now to move and buy something — sure, they could sell their home for a good amount right now, sell it to a family that needs the space, but they're still going to have to spend that entire amount, or possibly more, on something smaller. And so there's a lot of disincentives for what we would like to see as natural movement in the market.
We need our housing to catch up right now so that our workforce can catch up.Alex Farrell, commissioner of the Vermont Department of Housing and Community Development
Carly Berlin: Were there any particular statistics, trends or takeaways from the report that really grabbed your attention?
Alex Farrell: I think when I look at the demographics, I get fearful. And that's not necessarily what you want to hear from somebody at the state, because you want us to have a plan and have everything under control. But when I saw what we're looking at over the next 20 years — in terms of the changing of our demographics, as our baby boomers age out of the workforce — we already have a massive workforce shortage, that's one of the things we're trying to catch up on with the housing crisis, in addition to homelessness and folks that are moving to Vermont. If we continue to see this type of a trend, it's going to pull our economy to a screeching halt. And so we need our housing to catch up right now so that our workforce can catch up. That's going to have to happen in the next five or 10 years, or things could get really scary here in Vermont, and we can't afford to let that happen.
Carly Berlin: I want to stay on the future theme here to close us out. Are we as a state making progress and making housing more available and affordable? If you could look into a crystal ball right now, where, where are we headed?
Alex Farrell: I've been asked, “What do you tell people who want to come to Vermont, or who want to stay in Vermont?” And what I tell them is, we're getting there. We're making progress. We made massive investments — the administration, housing partners, the Legislature —we all held hands during the pandemic, and we invested a substantial sum of money, almost $600 million, because it was what we needed. And those investments over the next several years will yield results. We are going to see thousands of units come online, not just in Chittenden County, but throughout the whole state thanks to those investments.
Further, we’ve made a lot of progress in our long-term goals. In 2023 passed the HOME Act, 2024 we passed Act 181, which was a highly contentious but really important bill that dealt with land use and zoning and changed the way state permitting works. The report talks about, we need to build perhaps double on an annual basis what we've been building, maybe even a little bit more. You're going to start to see us climb up towards that. I would anticipate 2025, 2026 perhaps we'll be building 3,000, 3,500 units. Sure, we need to be higher. But that's real progress.
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