Like other big issues facing Vermont, the shortage of housing in the Green Mountain State was understood to be a problem before the COVID-19 pandemic hit. In 2019, the state floated a $37 million bond to address that problem.
But the pandemic has worsened the state’s housing shortage, as prices rise, preventing renters from becoming home buyers and apartment-hunters from finding housing. It’s affecting employers who must now contend with whether new workers can relocate — from across the state, or across the country.
“We’re definitely hearing from employers really across the state,” Housing Commissioner Josh Hanford said.
“When [employers] find folks to move within Vermont or to move into Vermont, barriers to finding acceptable housing is one of the first things they find is a challenge,” he said. “That affordable house is nowhere to be found. We’re not seeing new supply come onto the market fast enough.”
The average price of single-family homes stood at $393,521, a 45 percent increase over May of 2020, according to the Vermont Association of Realtors. A 20 percent down payment at that price would be $78,704.
“A tremendous contributing factor to shortage of new workers moving here is absolute lack of housing. I hear that from virtually every employer I speak to,” said Charles Martin, the government affairs director for the Vermont Chamber of Commerce. “Workers just can’t find more housing, making out-of-state recruitment a nightmare in some instances,” he said.
And without workers, growth is difficult at best — a fact Vermont employers already knew before workers became scarce.
“Every day an employer can’t find someone to hire is a day they have to question if they can deliver goods and services to their customers,” Adam Grinold, the executive director of the Brattleboro Development Credit Corp., said. “It’s hard for an employer to maintain a level of business, let alone grow.”
The state’s housing non-profits, and the federal dollars that help fund their work, are largely geared to helping low-income households and people transitioning out of homelessness find housing, and stability. Given a massive federal infusion from the American Rescue Plan Act, the Legislature allocated millions of those dollars to sheltering the homeless, helping them transition into permanent housing, and building new housing units.
But non-profit programs and federal funding for moderate-income housing — sometimes referred to as workforce housing — are where local and state experts have said inventory is lacking. The steep rise in prices has put such homes out of reach, at the same time that a national study revealed the rental market is also out of reach for minimum wage and lower-income workers in Vermont.
A piece of Gov. Phil Scott’s housing proposal would have allocated $42 million to the so-called “missing middle” housing problem. The Legislature didn’t include those funds in the fiscal 2022 budget, but Holler said VCHB has used $3.4 million in general fund dollars that goes to new affordable homes and providing down payment assistance to households that qualify financially.
The program includes a “shared equity” provision that assures the initial owner retains equity, but the home remains affordable for the next buyer.
But the use of ARPA funds for moderate income housing remains a complication, as interim guidance from the U.S. Department of the Treasury says that’s not a permissible use. Holler said VCHB submitted formal comments to the Department of the Treasury, urging a change in rules.
“In Vermont, the pandemic has created such a hot housing market and put so much housing pressure on prices that it’s had the effect of putting home ownership more out of reach for people,” Holler said. “Until people currently renting can move up into home ownership we’re never going to create more space for those trying to move into those apartments.”
With Scott’s veto of S. 79, a bill creating a rental housing registry and inspection program, there’s been attention on apartment housing and what policies would help promote more units on the market. The money for a provision in the bill — a program to help landlords bring out-of-code units back to the market — was in the FY 22 budget, and the administration is working to stand up the program despite the veto.
But even the existing programs for apartment houses come with complications, said Zak Hale of Hale Resources LLC, which manages 200 properties in greater Bennington.
Currently, Hale’s company is working on the rehab of an 11-unit building at 219 Pleasant St. in Bennington. Once finished, half its units will be earmarked for lower median income renters, and half at market rate.
But the real estate market doesn’t work the same for commercial properties as it does for single family homes. Hale said he bought 219 Pleasant Street for $285,000, and is putting $1.5 million into the building, thanks to state and federal tax credits. It’s helping the company develop the property for $150,000 per unit, when it might otherwise cost as much as $400,000 per unit.
But when it’s over, the building will be worth about $425,000 on the market, Hale said. As an apartment building, it’s appraised on its rent roll — the amount of rental income it produces.
WORKFORCE HURDLE
The responses and seriousness of the problem varies from employer to employer and market to market.
But Grinold from the BDCC said he’s aware of two employers in Windham County — whom he said did not wish to be named — that have recently taken steps to acquire apartment buildings of between three and 10 units, “so if they ever do need to recruit, they need a place to land.”
And in Bennington, Southwestern Vermont Health Care, in addition to cultivating existing relationships with realtors and landlords, purchased two units in the Hotel Putnam restoration which physicians can rent until they find their own housing. (The hospital is a partner in the project.)
“They pay for them — it’s not some kind of fringe benefit,” Rick Anair, the hospital’s physician recruiter, said of the arrangement. It’s not ideal for everyone, but “they have come in handy,” he said.
WHERE ARE THE HOUSES?
It’s not for a lack of effort.
Yearly, affordable housing dollars administered by the state support 650 units of housing , according to Hanford. “I have seen that much already under construction in six months [of 2021],” he said.
“We definitely have accelerated the rate of housing production ... projects we were able to fund were already planned and had permits in hand,” Hanford said. “Typically that waits a couple of years. We were able to shortcut a couple years’ wait into six months.”
Future projects, however, still need to go through the process. And housing, unlike other products that can be rushed into reality, takes time to go from concept to construction.
Experts say developers haven’t built new moderate income homes because they don’t provide return on investment. For the same permitting and land acquisition costs, they can build vacation housing and larger, more expensive homes that will sell at premium prices.
For those developers, moderately-priced housing “doesn’t pencil out,” Jennifer Stromsten, the organization’s director of programs, said. “A lot of people who make decisions in our rural places are still thinking the market’s going to respond. We’ve known for decades that it doesn’t. “
The factors are numerous:
• With affordable options unavailable, tenants are staying put rather than moving to a house or another apartment. David Cross, who owns and manages more than 200 housing units in Bennington, said that started with the pandemic. Now, he has a waiting list for every size unit, from efficiencies to two- and three-bedroom apartments. And Zak Hale, whose firm manages 200 units (115 of which it owns) in greater Bennington, said units are finally starting to turn over. “In the beginning of COVID, it was crazy — we had zero vacancies for a while,” he said.
• Some say that updates to Act 250, the state’s land use planning law, are needed to address the shortage.
“Its a fabulous law for protecting the environment, but there are some changes we can make” in the 51-year-old law, said Martin from the Vermont Chamber of Commerce. One such change, which Martin thinks could draw broad support, would enhance the designation for downtowns and village centers, promoting development in those areas.
“We’d like to see when the Legislature discusses Act 250 .. enhancing those designations, potentially making development in areas already urbanized and slightly higher populated easier than it is now,” Martin said.
• Vermont still has older housing stock, much of it with systematic needs that require expensive upgrades. Those 20th century houses were scaled to 20th century farm families, making it a mismatch for current consumers with much smaller families, Grinold and Hanford said.
POTENTIAL SOLUTIONS
Hanford said smaller modern households, such as millennial families and downsizing seniors, are looking for smaller units in denser locations within walking distance of stores and services that meet their needs. They don’t want or need a four-bedroom farmhouse on three acres, he said.
“Vermont’s challenge is the majority of single home family housing stock was built before 1930,” and tend to be large homes on large lots, Hanford said.
A solution, he said, is reducing zoning and permitting barriers to make it easier to revamp existing buildings in town and village centers as housing, or mixed use development. That’s quicker and smarter than “creating whole new neighborhoods out on the edge of town,” he said.
“But it requires new thinking, a change to our growth patterns and zoning laws and a lot of do-it-yourself entrepreneurs to take those small projects on — to convert that space above the coffee shop to two new apartments,” Hanford said. “That is definitely part of our housing solution — places where the new workforce wants to live.”
The employer stories differ depending on the business and their labor needs. For those regularly recruiting outside the area, the initial hurdle is finding an apartment upon arrival.
“What we find, and this is all anecdotal, is that people who are moving here tend to start their search by looking for rentals. They often aren’t looking to buy right off the bat,” said Nick Gault, director of human relations for the Southwest Vermont Supervisory Union.
“The first hurdle is availability. There just is not a large availability of rentals in this area, but people do ultimately find places to live,” Gault said. “I have yet to hire someone for a job here who hasn’t found a place to live.”
That said, finding rentals proves difficult, and listings are either lacking or not helpful, Gault said. “Often times I recommend that new hires drive around the neighborhood and look for ‘for rent’ signs. I have also encouraged them to reach out to realtors to see if any of their sellers would be interested in renting out a space. I think the challenge is finding what’s out there.”
Pam Nemlich, the vice president of human resources at The Orvis Company in Sunderland, said the company was already confronting the housing shortage, though it wasn’t as acute before the pandemic. “The housing challenges in Vermont were there anyway in terms of market and affordability,” she said.
What Orvis learned in the pandemic was which jobs could be handled remotely and which required a physical presence, either here or in the company’s Williston office, Nemlich said. That flexibility has allowed the company to add talent without relocating workers to the Northshire, and yet accommodate “someone in Montana who’s thrilled with that lifestyle wants to stay there,” she said.
GETTING CREATIVE
Earlier this month, the Brattleboro Select Board permanently adopted interim changes to the town land use ordinance eliminating density caps in largely residential neighborhoods, and discarding regulations requiring special permission for developments with three units in certain areas.
Town zoning officials say the rules, implemented on a temporary basis last fall, created more than 20 new housing units which otherwise would not have been permitted.
Brattleboro officials are conducting a housing survey to help the town and its partners create housing solutions. Findings from the survey will be incorporated into a Housing Action Plan that is expected to be completed this fall. (You can find it at http://tinyurl.com/brattleborohousing.)
Larger towns have seen mixed-use projects reclaim or rebuild existing spaces, such as the Brooks House in Brattleboro, a planned mixed-use expansion of the Brattleboro Museum and Arts Center, and the Putnam Block in Bennington. In Manchester, a number of former retail spaces that were part of the town’s outlet retail boom have been converted to housing or office space.
But what about smaller towns? Stromsten said smaller rural communities have lacked the resources and policy tools to promote mixed use in village centers. Sometimes, that leads to single-story replacements that can’t provide multiple uses, or multiply tax revenue.
Stromsten said one solution is for the state to provide new policy tools and technical support to help local planners promote mixed income housing and re-use of unused or vacant spaces in downtown and village centers.
“Act 250 made the bad things hard — you cannot ruin farms,” Stromstem said. “But it didn’t do the other half of the work — make the good things easy. We talk about sustainable communities and infill, but we don’t have strong mechanisms to get that done.”
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