Laura Collins, executive director of the Vermont Housing Finance Agency, told the Senate Economic Development, Housing & General Affairs Committee that federal tax credits and state-directed bonding have become central to creating new affordable rental housing in Vermont.

"Both types of lie tech, both types of tax credits build the same house. The, it's rental housing. It is for people earning under 60% of the median income," Collins said, explaining the mechanics and distinctions between the 9% and 4% low-income housing tax credits (LIHTC). She said 9% awards generate roughly twice the equity of 4% awards and are competitive, while 4% credits are effectively unlimited but generate less equity per project.

The nut graf: Collins and other presenters described how a mix of federal LIHTC equity, private activity bonds, and state grants together form the capital stacks that make deeply affordable rental developments possible. They emphasized that recent one-time state and federal resources expanded the ability to use 4% credits for new construction — a change that may reverse if those funds are not sustained.

Collins walked the committee through how private activity bonds interact with LIHTC: when a project finances at least half of its development with tax-exempt private activity bonds administered by VHFA, it typically becomes eligible for automatic 4% tax credits. "So the more we can use these boring bonds for multifamily housing, the more 4% tax credits we can use," Collins said, noting that VHFA's private activity bond lending for multifamily rose from about $82 million (2015–2019) to roughly $270 million since the pandemic — a roughly 230% increase.

Jenny Hitzloff, director of housing for the Vermont Housing & Conservation Board (VHCB), described how state investments leverage additional private and federal resources. "For the last 10 projects that we did using tax credits program that Laura's talking about, we've taken a $152,000 per unit in state resources, including ARPA. And with those funds, we've leveraged more than $350,000 in other resources, non state resources per unit," Hitzloff said. She added that tax-credit-funded units routinely serve households with very low incomes — she estimated LIHTC tenants often earn around $17,000 a year — and that permanent affordability requirements are a key policy priority.

Kathy (last name not specified in the transcript), a developer/syndicator speaking about deal structure, summarized how investors convert LIHTC awards into upfront equity through limited partnerships. "That limited partner is going to get 99.99% of the tax credits, the tax depreciation, the tax write offs … The investor says, well, I'll give you $4,000,000 today if you deliver that stream of tax benefits over the 10 year period. And that's the basics of how you translate the low income housing tax credits into equity to get into the building," she said. Kathy described the difference in equity share between 9% and 4% deals: 9% projects often have 60–70% of the capital stack filled by tax-credit equity, while 4% deals may see roughly 30% equity, leaving more of the capital stack to be filled by grants, debt, and other sources.

Speakers also highlighted policy trade-offs. Collins described a tension between raising award standards for 9% credits (for example, prioritizing downtown sites, homeless set-asides, historic preservation and high-performance energy standards) and keeping projects feasible: higher scoring requirements can raise costs and reduce the number of viable projects. "When you raise the bar that high and ask for a development to do so much … maybe have fewer projects. Price goes up and we have fewer projects," she said.

Both Collins and Hitzloff credited one-time state investments — including ARPA resources allocated through VHCB — with enabling 4% credits to be used for new construction in recent years. Collins warned that if state-directed resources "drop off a cliff," Vermont would likely revert to pre-pandemic patterns in which 4% credits were used mainly for preservation rather than new construction.

The presenters described typical downtown development cost drivers (complex sites, first-floor commercial spaces that do not net market rents, remediation, constrained staging and logistics, and historic preservation) and how those factors can materially increase per-unit costs. They also noted variations by project type: shelter beds, hotel conversions and manufactured-home preservation are financed differently and generally cost less per unit than new multifamily construction.

No formal votes or committee actions were recorded in the transcript excerpt provided. The session continued with questions from committee members and additional presenters.

Ending: Committee members acknowledged the complexity of housing finance and indicated they would continue to weigh priorities across affordability, speed of production, and the kinds of project standards (downtown, energy, homelessness set-asides, historic preservation) Vermont will require to allocate limited 9% credits.