Vermont has a housing crisis.
Insufficient quantity and inadequate quality of housing stock; skyrocketing real estate prices; high rental prices driven higher in some markets by units being sold and flipped or turned into short-term rentals; increasing land, building materials, and labor costs that drive up development prices; permitting hurdles that both slow the construction process and drive up costs; and, incidentally, ever-increasing property taxes.
We have all heard stories, we have the data, the need is well documented, and virtually every legislator is running on a platform promising to address the housing crisis.
In this, VLCT's final 2022 Municipal Action paper, we provide information on the state of housing in Vermont, where to find the data you need to inform decisions, and the role local governments play in facilitating housing development and redevelopment so all Vermonters, whether they have been here five minutes or five generations, can work, play, learn, and build community in the places they love.
So, where are we? Since 2020 the state had invested $338 million in housing, a previously unheard-of amount for this small state. That funding breaks down as follows, with the named organizations administering a bewildering array of affordable housing programs:
- Vermont Housing and Conservation Board: $281,464,190
- Vermont Dept. of Housing and Community Development: $39,499,711
- Vermont Housing Finance Agency: $2,125,000
- Total Partner Programs: $15,000,000
As well, funding was committed or increased in Acts 182 and 183 of 2022 to provide:
- Grants to municipalities to update their zoning bylaws to facilitate housing development totaling $870,000, of which $650,000 must be used for bylaw modernization grants
- A consultant assessment of the Designated Areas Program (designated downtowns, new neighborhoods, designated village centers, new town center, and neighborhood development areas) ($150,000)
- Creation of the Community Partnership Pilot Program to demonstrate new models to support development of homes in inclusive, smart growth neighborhoods
- Creation of a Community Recovery and Revitalization Grant Program – for eligible municipalities to make infrastructure improvements, and to attract, expand, and retain businesses and non-profits, and create new jobs with a preference for projects in communities with declining or stagnant grand list value – with funds totaling $10,580,000.
Much of the federal funding used to pay for housing programs will no longer be available in the next two years. Vermont will need to determine how we pay to support affordable housing programs (or any of a host of newly created programs) going forward. This must be a major focus of the legislature in the next biennium. At the same time the federal Infrastructure Reduction Act (IRA) provides incentives for low and moderate income households to electrify their homes, replacing fossil fuels based appliances, heating and cooling, with a total appropriation of $4.28 billion for Federal Fiscal Year (FFY) 2022. That legislation also provides tax credits for residential energy efficiency and solar panel and battery installation.
New Housing Units
The highest number of building permits issued in Vermont was in the late 1980s, with almost 5000 units of housing permitted. In 1980, incidentally, Vermont’s population was 511,456.
In 2020 after decades of steep declines in permits issued, the numbers began to increase and approximately 2300 housing units were permitted – a number that despite being much reduced from the 1980s, was cause for celebration. Vermont’s population was 624,340 in 2020. According to the Department of Housing and Community Affairs, nearly 2100 new affordable housing units were built or preserved since 2020, with approximately 1/3 of those set aside for those experiencing homelessness.
The statewide average growth in number of households was six percent over the last decade, centered in Chittenden, Franklin, Grand Isle, and Lamoille Counties, and the size of households has declined to an average of 2.28. The census estimates that almost 5,000 people moved to Vermont between 2020 and 2021, the highest rate of population growth in a decade.
It is worth noting that in the last few months, reports nationwide have recorded a slow down in the housing market as potential buyers re-evaluate the affordability of home prices, higher mortgage interest rates, the uncertain economy, and record inflation. Potential sellers are likewise re-evaluating the market, as reported by Fannie Mae (see "Housing Activity" article below).
Planning, Zoning, and Act 250
The combination of factors contributing to the current housing crisis in Vermont is daunting. The interplay of Act 250; local zoning; Agency of Natural Resources permitting for water, wastewater, and stormwater; and Agency of Transportation permitting for curb cuts where applicable, creates a morass of expensive and time consuming requirements.
Several amendments need to be made to Act 250 to eliminate unnecessary processes that are duplicative to local processes in designated area such as downtowns. Legislation also needs to eliminate jurisdictional requirements that fill no meaningful purpose in the current extreme housing environment, such as claiming jurisdiction for housing projects that are within five miles of each other within five years.
Clearly, there is a piece of the picture where local governments can act to improve if given statutory authority to do so, and those are largely around the local permitting process. The Bylaw Modernization Grants are designed to help towns address provisions in their bylaws that may have been enacted many years ago to address the then paramount issues related to sprawl, a car-centered culture, resort area development, and maintaining the unique and vibrant character of our communities. The guide for updating bylaws is the publication “Enabling Better Places: A Zoning Guide for Vermont Neighborhoods”.
Bylaws can be amended to reduce lot sizes, provide for more units per lot in different zoning districts, and revisit setbacks, parking requirements, building heights and other standards that have been in place for years. With permission from the legislature, local boards could revisit the way in which new housing to address the need is incorporated into the character of an area. The legislature needs to acknowledge and respect the hard work that volunteer boards undertake to implement their communities’ visions and assure that those volunteer officials have the authority, tools, and flexibility to meet housing and development needs within their jurisdictions.
VLCT Legislative Policy Priorities for Housing
- committing funding and reforming regulatory tools to increase the number of available housing units through the construction and rehabilitation of “missing middle” and affordable housing;
- directing housing incentives and programs to designated downtowns, village centers, new town centers, growth centers, new neighborhoods, and other areas designated in municipal plans;
- policies that encourage high-density, multi-unit housing;
- providing transitional housing and integrated support services to alleviate homelessness.
- A few necessary actions to implement housing policies are outlined below.
- Eliminate Act 250 jurisdiction in designated downtowns, new town centers, neighborhood development areas, growth centers, and in municipalities with robust zoning and development capacity.
- Eliminate the language in Act 250 that establishes jurisdiction based on “construction of housing projects…constructed or maintained on a tract or tracts of land, owned or controlled by a person, within a radius of five miles of any point on any involved land and within any continuous period of five years”. (10 VSA 6 001 (3)(A)(iv)). Likewise, amend section (19)(A)(i) for purposes of housing, to remove the language regarding “within a radius of five miles of any point on any lot, or within the jurisdictional area of the same District Commission within any continuous period of five years.”
- Authorize municipalities to establish vacancy taxes for residential properties in town centers that have been unoccupied for an extended period of time and allowed to fall into disrepair, so those residential units are taxed at a higher rate than the rate charged to occupied residential buildings (effectively the converse of tax stabilization agreements).
- Eliminate 24 VSA 4465 (b)(4), the threshold for any ten persons to establish eligibility to appeal a municipal permit. This section of statute assures that municipalities and individuals in the area with an interest.
- Disallow appeals that seek to reduce the number of units below the number allowed in the local zoning ordinance or bylaw. Affirmatively allow parties to an appeal who seek to support construction of affordable, owner occupied, and missing middle housing.
- Allow the municipal bylaws to provide for administrative officer approval of minor subdivisions for residential purposes.
- Eliminate Agency of Natural Resources permits for connections to municipal water and wastewater facilities.