Vermont Business Magazine Housing developers, business leaders, smart growth policy experts and poverty advocates joined together Wednesday to call on the Legislature to pass a $35 million housing bond. The housing bond was recommended by Governor Scott in his budget proposal. The advocates, who gathered at a State House press conference, said it would address a significant need for affordable housing in Vermont, help to alleviate homelessness, house the workforce, and provide expanded homeownership opportunities for Vermonters. Business has also supports it, as it would bring more development activity to downtowns. Legislators, however, have balked at the $2.5 million cost associated with the bonding. A plan in the Senate to use a $2 per night hospitality occupancy fee to pay for the bonding met with widespread objection. The original bill (S100) called for the funds to come from the property transfer tax. The bill is now languishing in Senate Appropriations.
“Every night, our shelter, just like shelters across the state, is full of people who need and deserve a home,” said Sara Kobylenski, Executive Director of the Upper Valley Haven, based in White River Junction. “We have allowed ourselves to slide into an alarming housing deficit, and the most vulnerable people in our communities are suffering for it. It’s time to support a $35 million housing bond.”
The $35 million housing bond would also act as a stimulus package, generating millions of dollars of economic activity through the creation of hundreds of jobs and the purchase of goods.
“Housing construction is critical piece of our economic engine, and this proposal promises to create hundreds of good paying jobs. It’s also vital to employers who say time and time again how hard it is for their employees or prospective employees to find adequate, affordable housing,” said Tom Torti, President and CEO of the Lake Champlain Regional Chamber of Commerce.
“Housing investment has the ability to revitalize communities, and that’s just what Rutland needs,” added Elisabeth Kulas, Executive Director of the Housing Trust of Rutland County. “We’re looking forward to continuing to move our community forward and this $35 million housing bond will make our neighborhoods more livable.”
The housing bond, as proposed, would be issued by the Vermont Housing Finance Agency, which would deposit the proceeds into the State’s Housing and Conservation Trust Fund. At least 25% of the homes built would need to be targeted at the lowest income Vermonters, and at 25% would be used to develop homes affordable to households earning 80% - 120% of median income. Statewide, median income for a family of four is $70,200. The bond would be repaid over 20 years.
VHCB Report to Legislature on the Housing Revenue Bond
Approximately $35 million for the development and improvement of ownership and rental housing for very low to middle-income Vermonters – protecting the most vulnerable while creating new homes for workers.
The Vermont Housing & Conservation Board will review applications and fund projects for the construction and rehabilitation of multi-family rental and single family housing with an emphasis on creating new homes to ease Vermont’s housing crunch.
The funding source is the proceeds from a housing revenue bond to be issued by the Vermont Housing Finance Agency. Revenue bonds are payable from and secured only by a specific source of revenue and are not a general obligation of the state. The proposed revenue source is the dedication of $2.5 million in annual property transfer tax revenue for the payment of debt service on the bond for 20 years, through 2038. The proposal does not affect Capital Bill bonding under the Debt Affordability Cap.
VHCB’s annual state appropriation comes primarily from property transfer tax receipts. (Statute provides for 50% of PTT after 1% for the Tax Department.) The Governor’s FY18 budget recommends $12,304,840 for VHCB from the PTT and an additional $4,000,000 from the Capital Bill. This represents a $1 million increase from FY17 and is linked to the payment of the bond.
New construction. Rehabilitation of existing homes. Multi-family apartments. Single family homeownership. Revitalization of blighted or historic properties in community centers. New neighborhoods. Public-private development and ownership partnerships.
VHCB estimates creating and improving approximately 550-650 units of housing. This assumes current funding of state and federal housing programs. Leverage is anticipated at 2:1 with the goal of reaching 3:1. In other words, the bond will help secure an additional $70-100 million.
All bond proceeds will be used for housing affordable to households at or below 120% AMI.
- At least 25% of the housing will be targeted to very low-income Vermonters (households at or below 50% area median income)
- At least 25% of the housing will be targeted to middle-income Vermonters (households at or between 80 and 120% of area median income)
- The balance will be based on community needs, applications received and the availability of resources for leverage.
Statewide median income for a household of four is $70,200.
- 120% of median for a household of four is $84,240
- 80% of median for a household of four is $56,160
- 50% of median for a household of four is $35,100
Varies by county
In areas targeted for growth and reinvestment statewide.
Revenue bond to be issued in FY18. Proceeds to be committed to projects over 2-3 years.
Linked to $1 million proposed increase in VHCB FY18 budget over FY17. $2.5 million needs to set aside in a bond reserve at time of issuance to assure bondholders, make bonds competitive in the market and maximize yield.
In addition to the current pressure on Vermonters from the tight housing market, bonding now makes sense due to low interest rates, uncertainty of federal funding and rising construction costs.
Need for Housing
Vermont has a very limited supply of affordable and available housing that has been documented recently by a number of studies and which informed the bond proposal.
• Vermont Futures Project of the Vermont Chamber of Commerce set a growth target of 5,000 new and improved housing units annually.
• Roadmap to End Homelessness calls for 180 new units for permanent supportive housing and 1,251 new homes affordable at 30% of median or below over the next five years.
• 2015 statewide housing needs assessment by Bowen National Research found the largest gaps in housing affordable to households below 30% of median and between 85% and 120%, although need was across the income spectrum.
The dedication of property transfer tax revenue needs to be made clear in Title 32 as well as language saying the state will not adjust the property transfer tax rate to yield less than $12 million. (FY18 estimate is $41.9 million.) The Administration, State Treasurer, VHCB and VHFA, have developed and submitted this language after consultation with financial advisors and bond counsel.
February 27, 2017