VHFA asks House committee to extend sale of state housing tax credits to sustain down-payment assistance

Maura Collins, executive director of the Vermont Housing Finance Agency, told the House Committee on General & Housing on Feb. 7 that VHFA needs the Legislature’s permission to keep selling a portion of the state housing tax credits for an additional five years so the agency can maintain its down-payment assistance (DPA) program.

Collins said the request would allow VHFA to keep selling the same volume of tax credits through a five-year credit structure rather than curtailing sales when a statutory sunset arrives. "What I'm here to do is to ask you to... consider allowing VHFA to sell the same number of tax credits for an additional five years for the same program with no changes," she told the committee.

The ask matters because VHFA uses proceeds from annual tax-credit sales plus repayments on prior DPA loans to fund the program. Collins said repayments have fallen sharply since mortgage interest rates rose, reducing the program’s revolving funds. She said that dynamic, which she described as a decline in repayment “velocity,” has forced VHFA to lower its maximum DPA award this summer from higher pandemic-era levels back to $10,000 unless statutory authority is extended or other program changes are made.

VHFA described how the DPA works: borrowers who qualify for a VHFA mortgage may receive a 0% deferred assist loan that covers down payment and closing costs and is repaid only when the borrower refinances, sells the home, or reaches the loan term. The program has used several funding sources: sales of state housing tax credits specifically authorized in statute, VHFA’s own funds, and layered grants such as the legislative First Generation Homebuyer grants. Collins said VHFA contributed $2,000,000 of its own funds to the DPA program and that the Legislature has provided a total of $3,000,000 in first-generation homebuyer grants over recent years.

Collins walked the committee through the program’s history and mechanics: the state tax-credit authority was expanded in 2015 to support down-payment assistance alongside rental and homeownership construction credits; the DPA credits VHFA is allowed to sell for this use total $250,000 in yearly credit authority, structured as five-year credits that translate into roughly $1.1 million in upfront cash when sold. She told lawmakers the statute currently limits and schedules those sales and that, without extension, the authority to sell at the current scale will drop after the statutory sunset dates in the coming years.

Committee members probed several program levers Collins said VHFA is considering if the Legislature does not extend credit sales: reducing the maximum DPA award per borrower, lowering the asset test from $30,000 to prioritize those with fewer resources, or applying geographic targeting. Collins said VHFA is weighing those options to stretch limited funds if tax-credit sales cannot continue at the present scale.

Collins also proposed making first-generation homebuyer assistance permanent by using a continued tax-credit sales mechanism to fund an ongoing grant stream for that population. She told the committee she would seek $250,000 of tax-credit sales dedicated to a permanent first-generation grant program; unlike a deferred loan, grants would not revolve and therefore would require an indefinite revenue source to sustain them.

No formal vote or committee action was recorded during the session. Committee members asked clarifying questions and discussed the program’s relationship to other state housing initiatives such as VHFA’s middle-income starter-home financing and first-generation grants.

Collins closed by noting the program’s market dependence: repayment inflows are sensitive to mortgage-rate-driven refinancing and household mobility. She urged the committee to consider statutory authority that would allow VHFA to continue selling credits at current levels while the agency manages program design and targeting.

Details at a glance: - Program model: VHFA issues 0% deferred DPA loans that are repaid only on refinance, sale, or at loan maturity. - Historic DPA award levels: originally up to $5,000; briefly increased to $7,500; pandemic-era increases reached $10,000 and $15,000 for the lowest-income tier; VHFA reduced the maximum back to $10,000 starting in summer 2024 due to funding constraints. - Asset limit for DPA eligibility: $30,000 (as stated in statute and discussed by VHFA); VHFA is considering whether to lower that limit to better target scarce funds. - Tax-credit mechanics: DPA tax credits are sold as five-year credits; VHFA may sell $250,000 of DPA credits in a given sale cycle, which converts to roughly $1.1 million upfront when purchased by private investors. - VHFA direct contribution: $2,000,000 (agency funds) toward the DPA program; Legislature-provided first-generation grants totaled $3,000,000 over recent appropriation cycles.

No bills were voted on during the presentation. Committee staff and members were provided draft statutory language discussed during the hearing that would extend VHFA’s authority to sell the tax credits for additional fiscal years and to permit an ongoing $250,000-a-year tax-credit stream dedicated to first-generation grants.