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Vermont housing bill gets approval at Statehouse

Would boost home-building, help affordability

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MONTPELIER – It took until late in the day Friday for opposing sides to iron out their differences on this session's housing bill. But by evening, the 15 or so legislators, lobbyists and administration officials responsible for the negotiations were posing for group pictures outside the Senate Finance Committee room where they inked the final version.

House and Senate lawmakers called their compromise bill an important piece of legislation that focuses new development in appropriate places while opening up new housing opportunities to low- and moderate-income Vermonters.

House members conceded some key affordability components, and senators agreed to jettison financial incentives aimed at encouraging municipalities to host new developments. But both sides agreed that the remaining pieces will offer at least small strides toward addressing the housing problem in Vermont.

"I do think we have a housing bill that will do something," House Speaker Gaye Symington said Friday. "We take the next step in smart growth policies to encourage growth where communities have said they want it." The bill seeks to focus development in urban hubs by lifting Act 250 jurisdiction on large-scale developments in designated city and town centers. Though affordability components weren't as complete as some House members would have liked, the bill mandates that at least 20 percent of homes in "Vermont Neighborhoods" be priced at about $250,000 or less.

"I don't think it will do much for what we would call low-income housing," Symington said. "The affordability provision is still 20 to 40 percent higher above what the median (Vermont income) can afford."

Still, affordability aspects rolled into the bill have given advocates some hope that the legislation will ease the housing pinch on some moderate-income residents. At least 20 percent of rental units built in "Vermont Neighborhoods" – a designation available to communities with designated downtowns, village centers or town centers – would have to be affordable to someone making 60 percent of the median Vermont income.

The bill also offers tax credits to people who invest in affordable housing projects – a measure that the Vermont Housing Finance Agency says will markedly improve its access to private capital. Andy Broderick, a developer for the nonprofit affordable housing organization Housing Vermont, said the permit relaxations in designated centers alone will make it easier for operations like his to help meet the affordable housing need.

"There's intrinsically less environmental impact when you develop in those places, so it makes a lot of sense to us to move toward locational permit reform," Broderick said. "It will make it easier to get the projects permitted."

Sen. Vince Illuzzi, R-Essex/Orleans, had initially called for reallocating any new tax revenue derived by Vermont Neighborhoods back toward municipalities. Without that component, Illuzzi said earlier in the session, the bill was a "car without an engine."

But the concept proved a nonstarter among House members and was lifted from the bill. Illuzzi said Friday that the legislation still contains the incentives needed to promote new development.

"It's a great bill," Illuzzi said. "We've provided substantial opportunities to homeowners and lessened costs to developers proposing to develop in Vermont neighborhoods."

Both Illuzzi and Symington said the bill offered important mobile-home provisions that would help lower-income Vermonters. Under present law, mobile homes are treated as a material asset, which means loans taken out to purchase them run around 14 percent. The housing bill would instead treat mobile homes as real estate, qualifying mortgage-takers for the 5- to 6-percent interest rates enjoyed by homeowners.

"We've created affordability for Vermonters with the mobile home inclusions, and hopefully with the creation of incentives for more rental units," said Rep. Tony Klein, an East Montpelier Democrat involved in negotiations over the bill. The conference committee overseeing the issue also folded other bills into the housing legislation. Among them are provisions seeking to remedy lead contamination in older Vermont homes and rental properties, and changes in landlord/tenant laws that would make it easier to evict problem tenants.

The bill also includes a piece of Gov. James Douglas' economic stimulus package that calls on the state's pension board to invest up to $17.6 million in the Vermont Housing Finance Agency. Though the bill doesn't require that investment, it strongly encourages it, and simultaneously authorizes the state treasury to lend VHFA up to $50 million to continue mobile home and down-payment assistance programs in these difficult economic times.

"The stimulus pieces are certainly helpful," said John Fairbanks, communications director for the VHFA. "They help us get capital a little cheaper than the market offers right now."

The House's original version of the bill strengthened Act 250 oversight in rural areas, a kind of tit-for-tat offering to the environmental community in exchange for the more lenient permit oversight in Vermont Neighborhoods. But that proposal was dropped after harsh criticism from developers in the state.

The legislature will instead seek a study to determine whether more stringent standards are appropriate for rural development. Kevin Dorn, secretary of the Agency of Commerce and Community Development, said the bill contained two major components of Gov. James Douglas' "New Neighborhoods" proposal – an idea the governor claimed would spark 400 additional housing starts over the next 12 months. The Act 250 relaxations and designated smart growth areas – both parts of the New Neighborhoods concept – are contained in the Legislature's version.

But Dorn said the lack of the property tax reallocation component may inhibit the proliferation of homes in Vermont Neighborhoods. "I think it's a helpful bill … Without the local incentives in there it becomes a little bit more of a challenge," Dorn said. "We'll have to see how it works out."

Illuzzi said the bill was among the most contentious of the session. "When this bill came to us it was radioactive," Illuzzi said. "We couldn't schedule a meeting for three weeks because people were so upset with each other." Cooler heads prevailed, though, Illuzzi said, and the result is a bill that will build housing stock in Vermont without the kind of sprawl and outgrowth that threaten Vermont's countryside. "I expect to see new activity in these designated areas by next summer," he said.