Evernorth witness tells committee rising hard-construction costs, supply-chain delays are throttling multifamily housing

Kathy Beyer, vice president for real estate development at Evernorth, told the House Committee on General and Housing on Feb. 4 that rising hard-construction costs, supply-chain delays and regulatory complexity are the principal factors driving up the total development cost (TDC) of multifamily housing in Vermont.

"An elevator is $200,000 a pop," Beyer said, pointing to fixed mechanical costs that fall more heavily on smaller projects. She described multifamily buildings as inherently more complex than single-family homes because they require more kitchens and bathrooms per square foot and often need elevators, different framing or commercial energy-code compliance as they rise above certain heights.

The stakes, she said, show up in project budgets. Beyer gave two recent examples: Riverwalk Apartments in White River Junction, a 42-unit project that opened in summer 2024 at a little under $400,000 per unit, and Kelly's Field 2 in Hinesburg, a 24-unit 4% tax-credit transaction that closed in 2024 at about $465,000 per unit. She attributed much of the unit-cost variance to scale, added site features such as parking garages and to layered financing and reporting requirements.

Beyer identified several acute cost drivers: late delivery of specialized electrical "switchgear" that prevented certificates of occupancy and elevator operation, concentrated increases in mechanical/electrical/plumbing (MEP) pricing, volatile lumber and wood prices, and higher construction wages. She said one project experienced a multi-month delay waiting for switchgear manufactured in Mexico, a delay she described as adding several thousand dollars per unit in carrying costs and loan interest.

Using per-square-foot comparisons, Beyer illustrated a recent jump in hard-construction pricing: a two-bedroom apartment (roughly 750 square feet, or about 975 square feet including common areas) built at about $207 per square foot in March 2022 would cost roughly $345 per square foot by July 2024 — a hard-cost increase she estimated at about $135,000 per unit between those dates.

Beyer also described administrative and procurement burdens tied to federal funding. Evernorth projects that use federal funds must comply with Davis-Bacon wage reporting and HUD Section 3 hiring documentation, she said, which can reduce bidder interest among subcontractors and increase bid prices. She said contractors sometimes decline to bid on federally assisted projects because of the extra paperwork.

On energy policy, Beyer said Vermont has one of the more aggressive energy codes and noted a statutory change last year that altered the update requirement from "shall" to "may" every three years. She suggested pausing further code tightening while the state evaluates practical outcomes and enforcement, noting that her firm’s Kelly's Field 2 performed "50% better than passive house" on a blower-door test and is near net-zero — yet the project received roughly $3,700 per unit in energy incentives while the developer spent more than that per unit to exceed the base code.

Beyer offered mitigation ideas that she described as imperfect but useful: reuse and rehabilitation of existing buildings in small communities, panelized construction and modular elements for smaller projects, and strategic land strategies (such as building on previously acquired land) to reduce acquisition costs. She cautioned that modular construction has delivered mixed results for larger, double-loaded-corridor multifamily buildings and that panelized or prefabricated walls and trusses are more commonly helpful.

Committee members asked clarifying questions about which costs were included in Beyer’s analysis (she confirmed labor is part of hard costs and soft costs cover architects, lawyers and permitting), the threshold where wooden framing gives way to steel (she said typically above five stories), and the relevance of underground parking to the residential-story count for energy-code classification (underground parking does not count toward the residential-story total).

No committee vote or formal action on policy changes followed the testimony; the session consisted of Beyer’s presentation and member questions.

Ending: Beyer closed by reiterating that supply-chain constraints and construction-price inflation have substantially reduced the number of housing units that current public and private financing can deliver in Vermont communities, and she urged consideration of targeted strategies rather than one-size-fits-all code changes.