House General and Housing debates CHIPS TIF tool’s location rules and affordability safeguards

House General and Housing continued testimony on S.127 Wednesday as state housing officials and advocates discussed a project-based tax-increment financing device (CHIPS) designed to pay for infrastructure tied to housing development.

The bill, described by witnesses as a financing tool rather than a land-use mandate, drew the most attention on two fronts: whether the statute should include detailed location criteria tied to tiers and Act 250 permitting, and whether the program should require or incentivize a specific share of affordable homes in CHIPS-funded developments.

Alex Farrell, commissioner of the Department of Housing and Community Development, told the committee the bill should avoid trying to solve all land-use problems and focus on financing infrastructure. “Maybe don't try to solve every housing issue with this,” Farrell said, urging lawmakers to view CHIPS as one piece of a project’s funding stack and to rely on existing permitting and local zoning to address land-use concerns.

Farrell recommended removing the bill’s geographic location criteria and replacing upfront Act 250 permit requirements for projects in “tier 2” with a letter from the regional planning commission (RPC) that the project would be consistent with future land use. He said requiring an Act 250 permit before an applicant can seek CHIPS “would be a lot of expense” and could deter developers from seeking the financing. Farrell said projects would still need to complete the applicable local and state permitting and environmental review, and he signaled support for making projects in tiers 1A, 1B and tier 2 eligible in practice.

Farrell also urged the committee to reconsider a 2028 effective-date reference tied to tier 2 mapping, saying the statute could be effective earlier and that referencing a map date far in the future risks creating an unnecessary delay.

Holly Major, director of Policy and Special Projects at the Vermont Housing and Conservation Board (VHCB), urged stronger, explicit affordability targeting in the statute. She said VHCB’s interagency report from Act 181 recommended “project-based tax increment financing for mixed income communities,” and that CHIPS should include measures to steer the tool toward low- and moderate-income homes.

Major suggested a concrete affordability floor of at least 20 percent of a development’s homes reserved for low- and moderate-income households, pointing to an existing “priority housing” provision as a usable model. She described the priority-housing approach’s thresholds: rental units affordable at up to 80 percent of area median income (AMI) and for-sale units up to 120 percent AMI, and gave examples of what those numbers mean in dollar terms. Major said the priority-housing model helped produce affordable units inside larger master developments by creating a regulatory incentive to include subsidized homes.

On project scale, Major acknowledged small, rural projects present a challenge for inclusionary requirements and recommended a minimum-unit threshold — she suggested exploring something in the 10–15 unit range — below which an inclusion rule might not apply.

Committee members and staff discussed administrative questions, including which state body would administer affordability oversight and whether VEPC or another state entity could use existing models to implement inclusion rules. Major said she had submitted draft statutory language and agreed to provide that language to committee staff for consideration.

No formal votes were taken during the testimony. Committee members paused for the legislative floor and scheduled additional witnesses for the afternoon, including a representative from Evernorth and a Chester town official to give local perspective on projects.

The hearing record shows the committee wrestled with tradeoffs between keeping CHIPS narrowly focused as a financing mechanism and adding guardrails to direct public subsidy toward lower‑ and moderate‑income households. Lawmakers asked staff and witnesses for draft language and clarifications to bring back when the committee reconvenes.