Spotlight

Spotlight: Legislature grapples with housing costs, regulations

Developer Ernie Pomerleau presented this flow chart of development regulatory hurdles to the Legislature in 2017.

(Vermont Daily today introduces Spotlight, a new weekly feature in which reporter Jack Borbee and Vermont Daily staff look deeper into serious, chronic problems plaguing Vermont. Today: how Gov. Scott and the Legislature are taking different approaches to solving the worsening problem of lack of affordable housing. – Editor)

by Jack Borbee, Vermont Daily reporter

Legislators are debating how to address the lack of affordable housing in Vermont, coming into conflict with the Scott Administration’s proposals to tackle the problem. While both sides have been keen to invest resources in housing over the past several years, there remains a stark divide over whether or not regulatory burdens need to be reduced in order to lower housing costs.

Regulatory Rumblings

In an effort to streamline Vermont’s permitting processes–which proponents of reform indicate are an impediment to growing the supply of housing–Governor Scott issued an Executive Order consolidating the decision-making process for “Act 250” review. Act 250 is frequently referred to as Vermont’s landmark law governing major permitting processes and land use regulations.

However, senators voted down the Governor’s Executive Order – arguing the legal basis of the order was unsound, a claim which the Scott Administration disputed.

Senator Chris Bray (D-Addison District) and Representative Amy Sheldon (D-Middlebury), the Senate and House Chairs of the Natural Resources Committees, did not respond to requests for comment regarding the Senate committee’s decision, or regarding their take on Act 250 reform and housing costs in general.

Tayt Brooks, the Governor’s Director of Economic Growth Initiatives, suggested that the decision by the Senate panel was unfortunate, as Scott’s Executive Order could have “run in parallel” to other Act 250 changes being contemplated by the Legislature. He also suggested the battle over the Executive Order may not be over yet, as the House of Representatives has not weighed-in. According to Brooks, the Governor’s Office feels that “the Constitution requires action from both legislative bodies, not just one, so in our view it has not failed yet.”

The Senate rejection of the Executive Order comes just months after Scott vetoed Act 250 legislation. In the Governor’s veto message, he argued that the bill–which was advanced by Democratic Majority–creates “more regulatory uncertainty, not less,” going on to suggest, “Nothing in this bill modernizes or improves the Act 250 process.”

According to Scott, the legislation would have placed an undue focus on adding more regulations related to forest fragmentation, while ignoring improvements needed to simplify the regulatory process for the outdoor economy.

The Act 250 conflict represents a contrast in approaches that the Scott Administration and Legislative Leadership have taken to regulatory reform in general, but more specifically as it relates to affordable housing. Democratic legislators have focused on increased funding, while Scott has proposed easing the regulatory burden and improving incentives for affordable housing.

Brooks outlined the Administration’s approach as “focusing on economic growth in all 14 counties,” by “moderniz[ing] Vermont’s 50-year-old land use law.” He referenced specific proposals to reduce regulations in downtowns and villages, enhance economic opportunity for farmers and the forestry sector, and restructure the Natural Resources Board (NRB)–which oversees Act 250–to more efficiently deal with appeals and decisions.

Indeed, Scott had previously proposed an Act 250 package that focused on reducing overlap between various state permits, simplifying the process for farmers and foresters, and exempting state designated centers from Act 250 jurisdiction altogether–if they meet certain enhanced criteria.

Brooks believes the solution to affordable housing in Vermont lies with “a combination of regulatory updates, funding, and incentives.” Scott’s Commissioner for Housing and Community Development, Josh Hanford, echoes these sentiments, noting “It has to be both funding/incentives and reducing regulatory barriers,” to increase access to affordable housing. “Building modest homes without subsidies run into barriers of Act 250 expenses and delays…The incentive and any profit has been lost to permit fees, conditions, appeals, and opposition from abutting landowners.”

Prominent Vermont developer Ernie Pomerleau concurred with Scott’s approach to reduce regulation in designated centers, noting the redundant nature of the current permitting process. Pomerleau provided Vermont Daily with a flowchart he says indicates the confusing and duplicative nature of existing permitting routes.

Don Turner

NRB member and former House Minority Leader Don Turner was more blunt, arguing there is a “direct correlation between the regulatory process and the high cost of housing in Vermont. Every permit or condition of a permit adds time and ultimately cost to a housing unit.” Like Pomerleau, Turner agreed with Scott’s idea to exempt state designated centers (such as designated downtowns and villages) from Act 250 review.

As one countermeasure to regulatory hurdles, the Vermont Department of Housing and Community Development (which Hanford oversees) highlights “Priority Housing Projects” (PHPs) as an effective way to encourage affordable housing through reduced regulatory barriers. PHPs allow for exemption from Act 250 entirely if they meet certain criteria set by the state. In 2017, the Scott Administration proposed greater flexibility for these projects, which they received from the Legislature. However, additional attempts at regulatory reform since 2017 have fallen flat.

Former Republican Governor Jim Douglas was the last elected official to oversee major Act 250 reform, which occurred during his first term in 2004. Douglas indicated to Vermont Daily that his bipartisan reform package consolidated permit appeal routes, which are often cited–including by Hanford–as a reason for the high costs of economic development in Vermont, including for housing-related projects. Since that time, no Act 250 reform has successfully been implemented.

This session, Democratic lawmakers have introduced their own legislation to amend Act 250 by incorporating efforts to address climate change–a move which was contentious in the 2019-2020 legislative biennium. Representative Rob LaClair (R-Barre Town), the House Assistant Minority Leader and a landlord himself, is pessimistic about such attempts, noting it will cause “an awful burden” on developers. Meanwhile, the Scott Administration has indicated their desire to revisit the issue with a different approach–one focused on modernizing the program to “eliminate duplication and reduce costs.”

Funding and Projects

To date, much of the actual investments in affordable housing over the past several years haven’t materialized in the form of regulatory relief, but rather as funding boosts to certain programs or entities. In 2018, the Legislature and Governor agreed on a $37 million housing bond to construct 550 – 650 new homes by drawing down additional federal, private, and non-profit dollars.

Since that time, Democratic lawmakers have continued to push for another bond–coming into conflict with Democratic State Treasurer Beth Pearce, who has indicated the state does not have the bonding capacity to take on another project.

The French Block, Montpelier

The housing bond has spurred recent discussion about the Vermont Housing and Conservation Board (VHCB), a quasi-nonprofit entity that heads up housing projects across the state. Some, including Pearce, have suggested the state fully-fund the appropriation to the VHCB, noting its statutory transfer has not been fully allocated in recent years.

Three years ago, the VHCB helped spearhead the renovation of the historic French Block in Montpelier into an affordable housing project. The final product included 18 affordable housing units; however, at a total project cost of more than $6 million dollars, it cost over $340,000 per unit–much of which was in the form of taxpayer-subsidized funds and loans.

Meanwhile, the Legislature and Governor signed off on $250,000 in tax credits for “affordable housing” and “first-time homebuyer[s]” in the FY2020 budget to act as additional incentives. The funding for these tax credits were part of a miscellaneous tax provision that also reduced the land gains tax and increased medical deductions, while tweaking the capital gains tax and property transfer tax to raise additional revenue.

Where Do We Go From Here?

In his FY2022 budget proposal, the Governor is proposing to provide a one-time $20 million boost to the VHCB for affordable housing efforts, on top of an additional $3 million in miscellaneous housing incentives. These efforts are separate from the Scott Administration’s commitment to try again at Act 250 reform this year.

In contrast, four democratic senators have introduced legislation to leverage additional housing bonds with $4 million in property transfer tax revenue. How the extra revenue will be found has yet to be determined.

Meanwhile, Hanford notes the availability of federal funds for landlords and renters to assist with relief from hardships caused by the COVID-19 pandemic.

For LaClair, the problem yet to be resolved comes back to uncertainty, indicating “a lack of predictability” with the current process. “You can’t get a judgement one way or another,” when it comes to Act 250, LaClair states.

Still, fundamental regulatory reform remains evasive. While continued taxpayer funding of incentives, bonds, and programs is the go-to posture in Montpelier. Whether or not that will change this legislative session remains to be seen.

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