Developer says Middlebury master‑plan shows how regulation and QAP incentives drive Vermont affordable housing costs

Zeke Davison, chief executive officer of Summit Properties, told the Economic Development, Housing & General Affairs Committee on Feb. 5 that Summit’s recently broken‑ground 254‑unit master‑planned community in Middlebury assembled nearly every available funding source — ARPA infrastructure dollars, a Low Income Housing Tax Credit award, BHCB soft sources and other state supports — yet still faces very high development costs per unit.

Davison said the Middlebury project “is the true representation of every possible source of affordable housing,” and described how state and program rules — including how the Qualified Allocation Plan (QAP) awards tax credits and how Act 250 is applied — add time and cost. He told the committee the risk of appeals creates a chilling effect beyond calculable delay or dollars: “the risk of appeals is really what is the silencing, showing effects on those projects.”

Why it matters: Vermont’s deeply subsidized tax‑credit projects are expensive relative to neighboring states, and the state allocates a fixed, limited pool of tax credit equity. Davison argued that policy incentives inside the QAP and local land‑use processes together raise the total development cost (TDC) per unit and reduce the number of net new units built statewide.

Details from the presentation - Funding and scope: The Middlebury development used American Rescue Plan Act infrastructure funding administered through ACCD, a Low Income Housing Tax Credit (LIHTC) award, and multiple state “soft” sources (community development block grant–type funds and other appropriations). Davison said the project was conceived as a partnership with Middlebury College and is intended as a replicable, master‑planned neighborhood.

- Cost comparisons: Davison presented multi‑state comparisons of tax‑credit project applications from Maine, New Hampshire and Vermont (2020–2024). He said Vermont’s TDC per unit for 9% LIHTC projects is about $500,000 to $534,000 per unit, while comparable projects in nearby states are lower. After adjusting for an estimated unavoidable Vermont premium (which PC Construction estimated at about 15% for hard costs because of labor and energy code effects), Vermont still shows materially higher costs driven by other choices.

- Soft costs and permitting: Davison flagged soft costs (legal, engineering, permitting, financing, insurance and pre‑development carrying costs) as a large driver. He said Vermont’s soft costs run roughly twice the share of comparable states and that appeals and permitting requirements contribute directly to soft‑cost escalation.

- QAP incentives and net new units: Davison said the QAP had, in prior years, awarded points for brownfield remediation, complicated infill or amenity‑heavy projects — policies that raise per‑unit cost without necessarily producing more net units. He said the Vermont Housing Finance Agency (VHFA) has responded to industry comments and is proposing changes in the new QAP to introduce competition on cost and reduce incentives that have driven up TDC.

- Perpetual affordability and recapitalization: Davison explained that “perpetually affordable” housing does not cost more at initial construction but typically requires recapitalization and major rehabilitation after 20–40 years. He said policy makers should understand the long‑term “tail” of maintenance and recapitalization for permanently restricted properties when choosing how to prioritize scarce public dollars.

- Middle‑income programs: Davison urged using scarce state dollars where they produce the most net new units. He described middle‑income homeownership and rental programs that require roughly $100,000–$150,000 of state subsidy per unit — far less than deeply subsidized 9% LIHTC projects — and argued that reallocating some scarce resources to these programs could yield more units faster.

Committee questions and examples Committee members pressed on the relative roles of hard‑cost inflation (labor, materials, energy code) versus soft costs and program incentives. Davison and other participants agreed that some cost increases (labor and code) are largely unavoidable today, but that QAP incentives, permitting regimes and reserve requirements are areas the state can influence.

Davison also described two practical, recent effects: 1) a case in Orleans where a manufactured‑home cluster for ownership was derailed amid threats of an Act 250 appeal, and 2) Middlebury’s project, which used a college partnership and multiple subsidy sources to reach financial feasibility. He said those examples illustrated both the risks appeals create and the value of coordinated local partnerships.

What was not decided No formal action or vote took place during the committee session. Davison’s presentation was intended to inform legislators and state housing agency staff about project economics and program choices; he urged lawmakers to emphasize net new unit production when they consider policy or appropriations.

Looking ahead Davison said VHFA’s draft QAP moves toward increased competition on cost and that the legislature can frame appropriations and regulatory reforms with an explicit “net new units” standard. He recommended maximizing LIHTC efficiency while expanding lower‑cost middle‑income tools so scarce state dollars produce more homes statewide.