Regulatory, labor, materials, supply chain problems contribute to inability to meet demand
by Guy Page
Editor’s Correction: the median monthly cost of a Vermont one-room apartment rental is $848, not $2500 as stated in yesterday’s edition. $2500 is the maximum monthly rent for projects covered under the new state housing initiative. Also, the Invest in Vermont program, described in yesterday’s edition as a creation of ‘recent’ legislation, was created by the 2014 Legislature.
State Treasurer Michael Pieciak announced Wednesday, September 13 his office will invest $55.5 million in state funds into in-state housing development loans.
Pieciak and other state officials at Gov. Phil Scott’s press conference yesterday said the loan initiative is an effort to stimulate new housing growth.
Even with this latest infusion of investment capital, new home construction faces high hurdles – notably a shortage of skilled workers.
“What came first, the chicken or the egg?,” Scott asked rhetorically. “We need workers to build the housing, and we need housing to attract the workers.”
Apart from the well-known demographic of aging Vermonters – the average age of a Vermont homebuilder is 47, above the national average – Vermont also faces serious contractor workforce regulatory, pay, and skills development problems, a recent Vermont Business Magazine report stated. Specifically:
- The State’s new contractor licensing law is slowing contractor involvement in the work of flood repair
- New, young trainees aren’t yet performing at peak capacity yet still must be paid unprecedented high wages needed to draw them into the labor force.
It’s fair to ask just how ‘affordable’ new construction will be. Home construction costs rose 34% last year, Vermont Housing Finance Agency chief Maura Collins said.
In addition to materials, labor and interest increases, Vermont home developers have been delayed by supply chain problems. An Alburgh project took longer than expected because a statutorily-required elevator just wasn’t available. Over in New Hampshire, the troubling national shortage in grid transformers delayed the opening of a housing development, Collins said.
Sen. Kesha Ram-Hinsdale (D-Chittenden) said at the press conference she believes the summer flooding and growing housing shortage may induce the 2024 Legislature to expand the Act 250 new housing construction exemption beyond the urban core areas established this year by S100.
Details on the Pieciak Plan – The Treasurer’s office invests tax, fee and interest revenue to provide a safe, profitable return into the state’s coffers. The $55.5 million sum represents about 2.5% of total “cash on hand” in state government accounts.
The 2014 Legislature’s Invest in Vermont program allows Pieciak’s office to invest up to 10% if cash-on-hand in Vermont projects. Thanks to increased federal and Vermont taxes and fees since the pandemic, current cash-in-hand is at an all-time high: about $2.1 billion.
The $55.5 million will leverage $340 million in private funding and will assist construction of 1100 units.
Some of the State’s new housing revolving loan funds, supported by transfer tax payments, have an extremely poor record of payback. How will you avoid that, Pieciak was asked.
“Vermonters can be assured their tax dollars will be well protected,” he said. “It [the loan] needs to be paid back,” Pieciak said. “That’s our most important requirement.” The loans aren’t going to prospective homeowners, but to established builders with strong balance sheets.
Housing Commissioner departs – Scott announced that Housing Commissioner Josh Hanford will be leaving soon to join the Vermont League of Cities and Towns. Hanford hss been a strong advocate for new housing construction.
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