Affordable Housing – Addressing the Problem
When housing is limited, it becomes less and less affordable regardless of other considerations. Hence, increasing the gross number of housing units is a necessary first step where housing is in short supply. Equally important in many areas of the state is renovating existing substandard housing while keeping it affordable. But assuring that units are affordable is a complicated knot to untangle. Problems to address can be divided into several distinct parts. These include having a viable concept or plan, a willing developer, access to capital, the regulatory structure (local and state permits) and land on which to build.
The legislature rarely has an opportunity to address each of these issues at the same time. Even when times are good, affordable housing is often a hard sell. When budgets are lean, as they are at present, everything become more problematic and solutions usually require the coordination of many parties.
As noted in Part One, active players include for profit builders, non-profit housing developers and community land trusts, state and regional housing agencies, charitable foundations, community action agencies, financial institutions, the federal government and when appropriate, the legislature.
While it may appear that we address the problem in a piecemeal fashion, incremental steps do add up, and often it takes a number of years to build a coalition sizable enough to win the day. Each of the above is generally addressed as follows:
A Plan and a Willing Developer
Interest in affordable housing is ever present. Each of Vermont’s non-profit housing organizations for-profit builders to erect or rehabilitate the structures. The question, as always, is can the builder turn at least a modest profit while bringing the project in on budget. To do so, builders rely on their management expertise and the skill of their workforce. But builders are not financiers. They rely on the sponsoring organizations to put the entire development package together. That is a skill in itself.
Access to Capital
As 501(c)3 corporations, or rarely (c)6s as the case may be, non-profits sponsors often have access to money unavailable to the private sector. Federal programs and tax codes enable non-profits to use grant and other tax-exempt funds. In turn, the non-profits dedicate themselves to fulfilling their public mission. One of the tools available to the Vermont legislature is to make changes to the state tax code favorable to housing. These reduce costs in several ways. Among them are: 1. limitations on property taxes where affordability restrictions reduce the value of the property, 2. “shared equity” homes that appraise at lower value, and 3. favorable treatment on sales taxes on building materials and credits when older housing in designated downtowns is brought up to code.
Housing sponsors frequently rely on many different sources to bring a housing project forward. A typical project might include non-amortizing loans from the Vermont Housing and Conservation Trust Fund, the federal HOME Program, and the Vermont Community Development Program, a low interest loan from a bank, several federal and state tax credits, energy efficiency incentives, and contributions from a local municipal revolving loan fund.
No project goes forward without both state and local permits. These will necessarily include some combination of the following: a local zoning or building permit, environmental permits such as fresh water, sewage discharge, air discharge, storm water runoff, and of course Act 250. While these often seem cumbersome, Vermont’s record or permit administration has resulted in well designed and solidly built projects that stand the test of time. Unfortunately, neighborhood resistance, known as NIMBYism, sometimes causes extreme delays and adds an incredible amount to the cost. In Woodstock, nearly interminable litigation over a well planned project added 9 years and as much as $43,000 to the cost of each unit. Now completed, Safford Commons’ attractive and energy efficient units fit neatly into the surrounding community.
Since my election to the House, the legislature has substantially rewritten chapter 117 of Title 24, streamlining the local zoning process. We revised the Act 250 appeal process and, subject to budget constraints, provided adequate Natural Resources Agency staff to handle state permit applications on a timely basis. Complaints about Act 250 are more often than not the result of problems with a local permit, not Act 250. Despite ongoing frustrations with permits, it turns out that the single biggest factor in receiving a favorable outcome is for the applicant to do his/her homework and fill out an application correctly in the first place.
Perhaps the biggest problem is simply land availability. There isn’t much close to village centers, work places or that wouldn’t involve a long commute. That’s because Vermont communities have traditionally been located along water courses that served as transportation arteries since colonial times and before. Further, land outside population hubs often was and still is farm land that we don’t want to give up lightly. Abandoned land may be a brownfield (i.e. contaminated with industrial waste) and contain dilapidated buildings that need to be removed.
While all land comes with a price, grants from the Vermont Housing and Conservation Trust Fund, regional housing trusts and, occasionally, outright grants from altruistic benefactors often help. In some cases, such land transfers from individuals may provide a tax write off to the benefactor.
Over a year ago, I met with a group of Dartmouth students and faculty advisors at the Dartmouth to explore new ideas. The students researched and wrote a report outlining several practices in other states. Two of the most promising were pursued this biennium in the House. Rep Alison Clarkson introduced H.234 and I introduced H.635.
H.234 would assure that affordable housing developments financed with public money would be granted expedited permitting review.
H. 635 would require each town to include at least a modest percentage of affordable housing within its total housing mix. The percentage of affordable housing per town would ramp up over time.
The Ways and Means Committee successfully increased the funding for weatherization of our older housing by restructuring the Gross Receipts Tax on home heating fuels. While this action will not increase the number of units, it will make weatherized housing far more affordable to heat.
Ways and Means also extended the Down Payment Assistance Program through the Vermont Housing Finance Authority. The program makes available up to $5,000 to first time lower income families purchasing a first home.
The Legislature appropriated $15.2 million for the VT Housing and Conservation Trust Fund
We provided funding for an array of programs that help alleviate homelessness, including the Vermont Rental Subsidy Program ($1 million), Housing Opportunity Grants ($4 million), Emergency Housing ($3.3 million), and Family Supportive Housing ($84,000, a $240,000 increase)
S.123 passed and establishes standard procedures for public notice, public meetings and decisions on applications for permits issued by the Department of Environmental Conservation
Each of the steps outlined above is a part of the solution, but only a small part. To affect the big picture, we need substantial capital investments targeted directly to affordable housing or to improving sewer, water and transportation infrastructure beyond metropolitan areas such that affordable housing becomes available to more Vermonters. The lack of sufficient affordable housing affects all of us, whether we are students, new hires or new families trying to start a life, employers who need new workers and ofcourse the elderly. Perhaps the biggest take away is that this is a problem we need to address collectively. The future of our youth, our employment base and those approaching retirement all depend on a common sense solution.