VHFA asks for five‑year extension of tax‑credit sales to sustain down‑payment assistance; committee weighs landlord data, short‑term rental tax concerns

The House Ways & Means committee spent a substantial portion of its March 18 meeting on H.479, a housing bill that would extend and modify state tax‑credit tools VHFA uses to finance down‑payment assistance, create a first‑generation homebuyer grant, and make other tax and administrative changes related to housing.

Maura Collins, executive director of the Vermont Housing Finance Agency (VHFA), told the committee VHFA operates a down‑payment assistance (DPA) program funded in part by proceeds from the sale of a multiyear state tax credit. VHFA sells five‑year tax credits on the market (modeled after the federal low‑income housing tax credit); selling $1.25 million in credits generates roughly $1.1 million in cash at current market rates, staff said. VHFA asked the committee to authorize continued sale of the DPA tax credit for an additional five‑year period beginning in FY27 to keep the DPA program solvent and avoid curtailing assistance. VHFA also requested a standing authorization to issue a smaller volume of five‑year tax credits to fund a permanent first‑generation homebuyer grant program; JFO and VHFA testimony described the first‑generation grant as non‑repayable assistance to first‑generation homebuyers previously funded by one‑time appropriations.

VHFA’s data presentation described the DPA product as a 0% deferred second mortgage that is repaid when the property is refinanced or sold. DPA awards are combined with VHFA mortgage products and are intended for first‑time buyers within income and purchase limits. VHFA has increased the DPA maximum over time to match market prices; the agency currently offers up to $10,000 per household in DPA and has used temporary appropriations for supplemental grants for some borrowers (for example, first‑generation grants of up to $15,000 funded by legislative appropriations during the pandemic). Collins said continuing the sale of tax credits for another five years would stabilize the revolving DPA fund and avoid options VHFA would otherwise consider — lowering DPA amounts, tightening asset limits for applicants, or geographically targeting assistance.

Joint Fiscal Office analyst James Duffy summarized the fiscal mechanics and the bill’s revenue effects. In FY26 the first‑generation program as proposed would cost the state about $250,000 in foregone bank franchise tax (the credit reduces bank tax liabilities). The DPA extension does not change FY26 costs because prior authorizations covered that year; if the DPA sales are extended beginning in FY27, the five‑year structure of the credit drives multiyear revenue impacts: new first‑year credits add foregone tax revenue on a rolling basis and peak several years after authorization before phasing down as five‑year credit tranches expire. JFO noted the Ways & Means amendment contains appropriations elsewhere in the companion housing bill that together create a larger FY26 appropriations footprint (JFO quoted a top‑line FY26 gross appropriation number for the bill in committee discussion, largely for programs administered in the Department of Housing and Community Development and the Vermont Housing and Conservation Board).

The committee also considered ancillary provisions in H.479: a revised landlord certificate for renter‑credit administration, and a municipal short‑term rental tax provision. Jake Feldman (tax department) told the committee the redesigned landlord certificate — a single certificate per property with tenant lists and property details — is simple to complete and will give VHFA additional data needed for housing‑market research. The tax department supports the landlord certificate changes and said the renter credit administration has improved significantly since earlier reform efforts.

Will Baker, legal counsel at the Tax Department, raised concerns about a separate short‑term‑rental local tax proposed in the bill. That section would allow municipalities to impose a one‑percent tax on short‑term rentals, using a definition that differs from the statewide rooms and meals tax. Tax Department counsel warned a stand‑alone municipal short‑term rental tax with its own base and exemptions would create administrative complexity and taxpayer confusion, particularly where existing rooms‑and‑meals local option taxes already exist. Counsel pointed to prior municipal stand‑alone taxes that have produced compliance and boundary issues and urged caution; he noted the tax department does not administer the separate short‑term rental tax form as written and that decisions about exemptions and the tax base are not uniform in the draft.

Julie Marks, executive director of the Vermont Short‑Term Rental Alliance, urged the committee to remove the new municipal short‑term rental tax provision. Marks said the proposal unfairly targets small home‑based hosts and local vacation‑rental businesses that employ Vermonters and support local economies. She also reminded the committee that a short‑term‑rental surcharge added to the meals‑and‑rooms tax last year has already been implemented and that reporting on those receipts has not yet been fully available, creating additional regulatory and financial strain on hosts.

Because the DPA tax credit is a five‑year credit, VHFA said it needs authority to sell credits for another five‑year tranche to maintain cash flow that funds DPA loans. Collins described the DPA program as historically revolving — repayments from refinances and sales plus tax‑credit proceeds sustain future awards — and showed that repayments declined as interest rates rose, constraining the agency’s ability to re‑lend. VHFA proposed continuing the sale of $1.25 million in five‑year credits annually (the same volume it sold in prior years) and adding $250,000 of credits to underwrite a recurring $1 million first‑generation grant program. Collins said alternatives — lowering DPA amounts, tightening asset limits (e.g., reducing the $30,000 liquid‑asset cap), or geographically targeting assistance — have downsides she preferred to avoid if authorization were granted.

The committee heard the fiscal summary and directed staff to return with additional details. No final vote on H.479 was taken at the March 18 session; members signaled they would continue consideration at follow‑up meetings.

Ending: Committee members asked JFO and VHFA to provide further fiscal details and implementation plans (including how tax‑credit sales translate to cash available to lenders), and requested additional information for the municipal short‑term rental proposal should it remain under consideration.