VHFA renews push for $30M to expand middle‑income homeownership and rental programs

Maura Collins, executive director of the Vermont Housing Finance Agency, told the House Housing and General Committee on Feb. 21 that the agency is asking the Legislature to include $15 million for a middle‑income homeownership program and $15 million for a middle‑income rental program in the committee bill — $30 million combined — to revive and expand programs the agency has run in recent years.

The request builds on earlier funding that VHFA used to support 125 modest starter homes with $24 million for homeownership and $10 million for a middle‑income rental pilot. Collins said the governor included the two $15 million requests in his budget and asked the committee to fund them in the bill under consideration.

The programs are designed to fill a gap between deeply subsidized affordable housing and unsubsidized market housing. Collins said VHFA lends subordinate financing — typically up to about 35% of a project’s capital stack — to lower developers’ borrowing costs and thereby reduce rents or sales prices for households who do not qualify for traditional low‑income programs but still need assistance. “The governor put us in for $15,000,000 for 2 different programs, so 30,000,000 total,” Collins said.

Why it matters: employers and builders described the local effects of the shortage. Laura Lee Fester, executive director of the Northeast Kingdom Chamber of Commerce, told the committee that workforce shortages across the region are often caused by an inability to find housing for people hired to fill jobs. “Workforce is the biggest challenge,” Fester said, describing employers who recruited staff but lost hires when prospective employees could not find housing.

Builder Peter Khan of Sienna Construction described a Vergennes project, Playbrook, as a case study of market dynamics the programs intend to address. Khan said Playbrook began in 2016 as a 50‑lot single‑family project intended to serve the middle market; the first sale closed at about $292,000. He said construction and labor costs rose sharply during and after the pandemic, pushing new move‑in prices for the homes into the high‑$600,000s or into the $700,000s. “We used to be able to sell a house with not a huge profit, but with a profit that made it worthwhile to do the project. The cost to build a house now is more than that,” Khan said.

Khan said those price increases changed the buyer profile: recent buyers of his single‑family houses have tended to be older, out‑of‑state purchasers able to sell higher‑priced homes elsewhere. To reach younger local workers, Khan pivoted to smaller multifamily rental buildings. He described a 10‑unit rental building developed with help from a state subsidy that included a COVID era reimbursement grant through the Agency of Commerce and Community Development and a VHFA rental revolving loan that lowered interest costs. Two units are income‑restricted and rent for just over $1,000 per month; the rest were offered in a workforce band Khan described as roughly 80%–120% of area median income and priced in his example between about $1,800 and $2,400 per unit depending on size and bedroom count.

Khan credited the VHFA rental revolving loan fund and local contributions with changing the project’s feasibility. Under conventional bank financing he said debt service at current market rates (roughly 6.5%–7% at the hearing) made projects unaffordable to the households he wanted to serve. He described the VHFA program as reducing borrowing costs in his project to about 2% and thereby narrowing required rents. “So in straight up numbers, 7% … and we’re at 2% with the rental revolving loan,” Khan said.

Collins and others emphasized the programs are not deep subsidies that replicate Low‑Income Housing Tax Credit projects. Instead, VHFA’s products are intended to fill market gaps so projects can move forward with private bank lending, municipal or employer participation and a VHFA subordinate loan or grant to cover specific gaps — for example, the difference between construction cost and a first appraisal on day one (the “value gap” in VHFA’s description). For homeownership projects VHFA has used a shared‑equity structure in many awards so that affordability remains with the house: the homeowner benefits while the subsidy is tied to the property and reduces resale proceeds for later buyers by the amount of the initial subsidy.

Collins and committee members discussed timing and implementation details. VHFA offered to provide an interim progress report on off‑site modular construction and bulk‑purchase exploration by Nov. 1, with a final report in mid‑January, to allow any resulting legislation to reach the Legislature’s floor early in the next session. Collins cautioned that state contracting timelines mean a July 1 appropriation would likely not fund consultant contracts and allow full program activity until September; she said VHFA can “front” some work but that contracting with the state typically delays implementation.

Committee members asked technical questions about program structure, prior appropriations and the mechanics of loan write‑downs versus reimbursement grants. Collins said the homeownership program originally used $24 million (a $9 million initial appropriation plus a $15 million follow‑up appropriation) to support 125 modest homes, and VHFA received a $10 million appropriation for the rental program in the prior funding cycle. She described the current request — $15 million per program — as what VHFA seeks in the committee bill and said the agency prefers flexibility to allocate between rental and homeownership according to demand, though the governor’s budget quoted separate $15 million lines.

No formal vote or legislative decision was taken at the hearing; the testimony will be considered as the committee drafts language. The committee was advised the bill would be on the House floor calendar the following Tuesday, Feb. 25. VHFA said it would share draft study language and other housekeeping edits for an off‑site modular construction position the committee discussed.

What’s next: VHFA asked the committee to include the $30 million in the committee bill or otherwise provide comparable funding; the agency pledged to return with specifics and to provide interim reporting timelines if the committee requests further study of off‑site construction and bulk purchasing.