by Don Keelan
“What is happening in the housing market is utterly and horribly bad and the economy is worse off for it.” Wall Street Journal writer Justin Lahart wrote this on October 23, 2023 in his article on the national housing crisis.
The same day, VTDigger reported, “Chittenden County falls short of the target to build more housing.” A Vermont story.
If there was a huge shortfall of new home construction in Chittenden County, the most populist and wealthiest Vermont county, what is in store for the rest of the State?
Last year, the goal for new homes and apartments in Chittenden County was established at 1,000; only 594 were delivered. Even more disheartening: the 2022 homeownership interest rate environment was a fourth of what it is currently (7.50%) for a 30-year home mortgage.
Another factor of the dismal picture is the shortage of tradespeople to work on housing development. Is it any wonder that it costs north of $300 per square foot to build today?
The State Agency of Housing and Community Development has not ignored the crisis. However, its solutions resemble placing one’s thumb in the dike.
Over the past several weeks, the DHCD visited five communities: Arlington, Bellows Falls, Vergennes, Middlesex, and Rutland City. The squad of State people, State Reps, and a hired architectural firm from Boston (why an out-of-state firm?) presented a new concept on how the housing crisis might get resolved. Conspicuously missing were developers.
On October 20 and 29, respectively, Susan Allen of the Manchester Journal and Emma Cotton of VTDigger covered the State folks’ local presentations. Received with enthusiasm and hope, the new concept of
“Missing Middle” is designed to see if smaller housing projects, two to four units, can be developed in the denser areas of the above-mentioned towns.
It was also presented that local, to-be-trained ‘developers’ would do the developments.
The State’s new concept is in three phases: first, provide a tool kit to those interested in learning the development business; second, those who are interested attend workshops to develop the necessary skills needed for real estate development; and third, start construction with the possibility of receiving some federal and State grants.
There is an axiom in the real estate development industry: projects are not built by publicity. The State’s promoted concept is flawed and impractical.
A real estate project, regardless of its size, whether from four to 400 units, requires a set of skills. Two are critical: a willingness for significant risk and a substantial amount of available capital.
Just to develop four units will require hundreds of thousands of dollars. Is the recently trained ‘developer’ willing to risk their private capital in such a project? Furthermore, if the project is financed with a construction loan from a bank (assuming it is possible to obtain one), will the ‘developer’ be willing to put all their assets up as collateral to secure the loan?
What was also missing from the State planning coordinator Amy Tomasso’s presentation was what all developers must contend with regardless of a project’s size or type: the next-door neighbor. Notwithstanding the recently adopted, Home Act, for $15 or so, a disgruntled neighbor can tie up a project for years in the court system.
Tomasso’s quote in the Digger piece, “It’s not a big corporation or government coming in and planting a large housing development in the
middle of things,” was revealing to this retired real estate developer. If not them, who will bring the necessary 10,000 housing units online by 2030?
Another housing by publicity was the recent announcement, noted in the Cotton piece by Mayor Mike Doenges of Rutland, of a goal to create 1,000 new housing units by 2030. The mayor must be referring to 1,000 luxury homes to be built at Killington Mountain and not filling “the Missing Middle” in Rutland City.
The author is a U.S. Marine (retired), CPA, and columnist living in Arlington, VT.