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VHFA asks for extension of tax-credit sales to keep down-payment and first-gen programs running
Summary
The Vermont Housing Finance Agency told the committee that rotating state tax-credit sales fund a revolving down-payment assistance loan pool. VHFA asked to extend the sale authority so the program can continue while repayment flows slow as refinancing and moves decline.
The Vermont Housing Finance Agency asked committee members to extend the state tax-credit sale authority that funds two house-buying programs: the VHFA down-payment assistance program and a newer first-generation homebuyer grant program.
Why it matters: VHFA’s down-payment assistance (DPA) program provides 0% repayable loans to eligible buyers through participating lenders; the program is funded by proceeds from five‑year state tax credits that lenders buy. VHFA said repayments have slowed because of low refinancing and fewer homebuyers moving, which has reduced the revolving fund’s cash flow. Without extending authority to sell credits, VHFA warned, the program will wind down.
What VHFA told the committee
- Mechanics: Since 2015 VHFA has sold state tax credits in five-year blocks and used the proceeds to fund a revolving pool of DPA loans. Each block allows the issuer to sell $250,000 of credits per year over five years (a $1.25 million upfront sale under current practice). Borrowers receive a 0% second mortgage that becomes due on sale, refinance or payoff.
- Recent changes: Median home prices and buyer needs have risen since the program began; VHFA increased DPA levels over time (from $5,000 to $7,500 to $10,000–$15,000 depending on income tiers). The agency said the borrowers helped by DPA have lower incomes, lower credit scores and higher student‑loan burdens than typical buyers.
- Request: VHFA asked the committee to extend statutory authority for the tax-credit sales so the DPA fund remains at roughly the same annual level of tax-expenditure liability in the near term and so the first-generation homebuyer program (previously funded by annual appropriations) can be shifted to a tax-credit sale model if lawmakers choose.
What opponents and fiscal concerns raised
- Fiscal exposure: Committee auditors and staff noted that tax-credit sales create a multi-year tax-expenditure liability and that the state’s forgone revenue should be weighed against other budget needs. The committee discussed whether to continue both programs, fund one, or adjust eligibility to stretch limited proceeds.
- Implementation choices: Lawmakers asked whether the DPA program could be narrowed (geographic targeting or lower asset limits) if proceeds become limited. VHFA said it would consider such limits if funding is constrained.
Ending
VHFA asked the committee to preserve the revolving DPA funding mechanism as the best way to keep serving moderate-income and first-time buyers while repayments slow. Members said they would weigh the request alongside competing budget priorities and returned questions to staff for more fiscal detail.
