Vermont housing leaders urge targeting of energy incentives to low‑income apartments as costs rise

Vermont housing officials told the House Energy and Digital Infrastructure Committee on May 1 that rising construction and operating costs are squeezing affordable housing developers and that state energy incentives should be redesigned to make code‑compliant and high‑performance construction feasible for low‑ and moderate‑income (LMI) housing.

Mia Watson, special manager at the Vermont Housing Finance Agency, told the committee, “We’re in the midst of an affordable housing crisis ... one of the highest rates of homelessness in the nation,” and said project costs have climbed roughly 40 percent over the past five years, driving difficult tradeoffs between building more units and investing in higher performance construction.

The testimony centered on three linked problems: (1) low‑income households face substantially higher energy burdens than median households, (2) affordable housing development often shifts utility costs to property owners, complicating incentives, and (3) existing utility incentives pay mainly for savings above evolving building codes rather than for meeting code. Kathy Beyer, vice president of real estate development at Evernorth, urged targeted incentives and said, “as we move forward with our clean energy future, we need to make sure we’re not leaving behind our low and moderate income households and that we’re not increasing their energy burdens.”

Why it matters

Committee members heard data indicating LMI households face energy burdens roughly three times that of median households, with larger gaps in rural areas. Witnesses said roughly 18 percent of Vermont renters live in subsidized affordable housing and that the median income for those households is about $16,800, far below the statewide renter median of about $45,000. Those income profiles make it difficult for tenants to absorb higher utility costs or for developers to rely on tenant payments to service debt on expensive projects.

What witnesses said about costs and incentives

Watson and other witnesses described a wide gap between the estimated per‑unit cost of building to high‑performance standards and the per‑unit incentives currently available. Witnesses cited an adjusted consultant estimate of about $62,000 per unit attributed to energy‑efficiency elements in multifamily construction, while Efficiency Vermont rebates for high‑performance multifamily construction amount to about $3,700 per unit. Watson said the $62,000 figure mixes items that may be standard practice with items that exceed code and that the figure is building‑specific and sensitive to frequent code changes.

Committee members pressed for better citations and granularity. Representative Scott Campbell asked whether maintenance costs attributed to heat pumps are real or driven by added monitoring and access needs; Watson and Kathy Beyer answered that heat pumps can require more frequent filter changes and specialized technicians, and that industry capacity is still developing. Beyer noted industry guidance estimating air‑source heat pumps may be expected to last about 15 years compared with 30 years for older gas boilers, a factor that affects life‑cycle cost calculations.

Policy levers discussed

Speakers recommended several changes the committee could consider or request from other agencies: allow utilities to fund incentives for meeting code rather than only for savings above code (testimony referenced H.81 as trying to adjust thresholds for utility incentives), revisit the public‑interest or societal tests that guide incentive levels, coordinate use of federal funding, and quantify both the incremental construction costs of code changes and the long‑term social benefits, including reduced greenhouse‑gas emissions and health improvements.

Gus (VHCB) told the committee that if utilities limit incentives to above‑code measures as codes rise, the “delta” for incentives shrinks and affordable housing developers will build fewer units; he said, “we need higher level of support from the energy sector.” Witnesses also raised administrative questions such as how to verify eligibility for deeper incentives (income verification vs. categorical qualification) and noted existing housing program infrastructure—state housing agencies maintain income verification data that utilities generally do not hold.

Other technical topics

Witnesses discussed electrification of space and water heating, noting full electrification—particularly domestic hot water—remains a design challenge in some projects. Developers have experimented with geothermal and solar paired with storage, and speakers said covered parking solar canopies or large battery systems could be feasible at some sites but add cost. The Buy America/Build America provisions of federal law and supply‑chain issues were cited as near‑term upward cost pressures.

Meeting context and next steps

Witnesses offered to supply citations and the consultant analyses that produced the $62,000 per‑unit estimate and asked the committee to seek more granular studies from the Department of Public Service or other technical bodies (several members suggested ASHRAE resources). No committee votes or formal directives were recorded during the hearing; the session was a fact‑finding discussion to inform future policy work.

Ending

Witnesses left the committee with two practical requests: (1) better, cited cost studies that separate baseline (code) costs from incremental high‑performance costs; and (2) policy direction to allow incentives or funding that more directly support code‑level and LMI‑targeted efficiency and electrification so that affordable housing projects can both expand supply and meet climate goals.