Vermont Housing & Conservation Board tells committee rising materials, labor and regulations drive high housing costs; tax credits and preservation key to keep‑

Gus Silo, director of the Vermont Housing & Conservation Board (VHCB), and Paulie Major, VHCB policy director, told the House Committee on General and Housing on Feb. 4 that rising construction costs, energy‑code requirements and regulatory delays have pushed total project prices far above pre‑pandemic levels.

“Cost and cost containment is always on our minds,” Silo said, noting the agency’s statutory goal to leverage state dollars and attract private tax‑credit equity to make projects financially feasible.

Why it matters: VHCB officials told lawmakers that although some projects have high total development costs, the state’s net subsidy per unit can be reduced when projects bring historic tax credits, low‑income housing tax credit equity, private debt and philanthropic fundraising to the table. They warned that addressing permitting delays, energy incentives, infrastructure availability and appeals processes is essential to contain costs and accelerate production.

VHCB presented data showing median total development costs for multifamily rental housing over the pandemic period near $330,000 per unit, with VHCB’s median investment about $135,000 per unit. Some recent new‑construction projects reached $500,000–$600,000 per unit in total cost, although much of that was covered by private equity and tax‑credit investors, Silo said.

The board stressed leverage: VHCB officials said they increasingly use the 4 percent low‑income housing tax credit, historic tax credits and other federal tools to draw equity into projects that otherwise would not cash‑flow. For example, they cited a St. Johnsbury redevelopment where the project’s $14 million price tag included about $2 million in historic tax credit equity and about $415,000 in downtown tax credits.

VHCB also described several cost drivers:

- Material and labor escalation since 2020, including shortages that delayed projects (for instance, elevator deliveries), which raised construction financing costs when loan rates jumped from about 3 percent to 9 percent for a period. Delays and cost escalation can add substantially to project budgets.

- Energy requirements and electrification: VHCB estimated it costs at least about $25,000 per unit to fully exceed current building energy codes and electrify multifamily units. Officials said existing incentives do not always reach multifamily projects in the same way they do single‑family homeowners, and they urged a statewide review of how solar and efficiency incentives are structured for multifamily and low‑income housing.

- Site cleanup and brownfields: Redeveloping contaminated downtown sites can add more than $100,000 per unit in remediation costs, but those projects can also attract historic or brownfield cleanup dollars and create community and tax‑base benefits.

- Regulatory timelines and appeals: VHCB officials said lengthy corrective action plans, permitting reviews and appeals (in some cases 12–18 months) materially increase cost and risk. They urged clearer and faster DEC cleanup processes and consideration of ways to focus appeals earlier in the planning process rather than after permits are issued.

VHCB outlined strategies it uses to contain cost and speed production: value engineering to trim nonessential expenses (from layout changes to small mechanical adjustments), hotel conversions and manufactured‑housing park infill when feasible, prioritizing preservation of at‑risk affordable housing, and coordinating swaps of state funds with federal awards to avoid costly compliance layers such as Build America Buy America (BABA) when that compliance would exceed the award amount.

On energy policy, VHCB urged extending or redesigning a limited exemption that currently allows multifamily projects to use off‑site net metering for solar (the exemption in testimony was said to expire in 2026). Officials argued that off‑site generation is often essential for multifamily electrification and that energy cost‑effectiveness tests should better capture equity and societal benefits for low‑income housing.

Silo and Major emphasized VHCB’s role in preserving long‑term affordability: the agency prioritizes perpetual affordability to avoid repeatedly buying assets back into the affordable portfolio. They also described broad statewide delivery partners — nonprofit and for‑profit developers and housing trusts — who implement VHCB‑funded projects.

Looking ahead: VHCB asked legislators to consider targeted steps to reduce permit and remediation timelines, revisit energy incentive design for multifamily housing, and continue funding strategies that bring tax‑credit equity and private investment into projects that would otherwise not be viable.