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Advocates say housing TIF proposal could channel more infrastructure dollars to market-rate projects than to affordable housing
Summary
Witnesses told the House General & Housing Committee that the proposed housing infrastructure tax increment financing (CHIP) uses assessed valuation in ways that may give market-rate developments bigger financing capacity than comparable affordable projects, and offered numerical examples from Winooski and larger master-planned developments.
Nancy Owens, president of Evernorth, told the House General & Housing Committee April 30 that Vermont’s draft housing infrastructure tax increment financing program (CHIP) ties borrowing capacity to assessed property value in a way that could favor market-rate housing over deeply affordable projects.
"Affordable housing is going to be assessed at a lower rate, lower valuation than a similar market rate property," Owens said. "In the case where the lower assessed value of two identical multifamily projects, one market and one affordable, it would mean that the affordable housing project would qualify for less TIF funding than the market-rate project."
Owens, whose nonprofit community development finance organization Evernorth operates in Vermont, Maine and New Hampshire, described how assessors often use an income-based approach: lower rents on income-restricted units produce lower income estimates and thus lower capital valuations. She said that difference can translate into materially different annual tax increments and so different maximum borrowing to pay for infrastructure.
As an illustration, Owens cited two recent Winooski properties she reviewed: a 45-unit affordable project with ground-floor commercial space and a 30-unit market-rate project across the street. After adjusting to a per-unit basis, she said, the market-rate building’s annual tax would be about $117,000 versus about $80,000 for the affordable building. Using a 70% increment capture assumption, she estimated roughly $56,000 per year in increment for the affordable project and about $82,000 for the market-rate project — which, she said, would support roughly $650,000 and $950,000 in borrowing capacity, respectively.
"The infrastructure costs are identical," Owens said. "We're not paying more for a stormwater pond at an affordable project than we are for a market-rate project. So there are some inequities there."
Owens also ran a larger example to show effects at scale. For a hypothetical 200-unit development, she estimated the full increment could generate about $6.3 million for infrastructure. If 20% of those units were affordable and valued at a lower assessment, she estimated the available financing would fall by about $400,000 to roughly $5.9 million — still substantial, she said, but a measurable reduction.
Committee members and other witnesses asked whether density bonuses or other incentives could offset the valuation effect; Owens said density is rarely realized in Vermont to the extent that zoning allows, and that mixed-income rules and other program language could be used to steer benefits to low- and moderate-income households.
Committee chair and members did not take a vote on changes at the April 30 hearing. Several members said they will continue work on taxation and stabilization options, and Owens urged tighter statutory definitions and design features that explicitly steer infrastructure dollars to affordable and mixed-income outcomes.
"I want that public subsidy to benefit affordable housing to the maximum extent," Owens said. "Right now it's actually up to a lower extent. I want to raise that."
