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Small-scale developer urges easier access to housing funds, warns of tax bills on grant-funded projects
Summary
Fairlee developer Jonah Richard told the House General & Housing Committee that small-scale, for-profit developers face barriers to state and federal funding and described a tax outcome that left him with a large income-tax bill after accepting grant funds for an affordable housing project.
Jonah Richard, a Fairlee-based developer and small-business owner, told the House General & Housing Committee on Jan. 24 that small-scale and for-profit developers need clearer access to state housing funds and more flexible Low-Income Housing Tax Credit (LIHTC) rules.
Richard said his companies have developed more than 30 units since 2020 and have about 60 more in the pipeline. He urged opening Vermont Housing & Conservation Board (VHCB) funds to for-profit developers and said recent changes to Vermont Housing Finance Agency (VHFA) rules could shut out small entrants from LIHTC allocations.
"There is a fairly large chunk of money that VHCB controls in their general fund that is, kept for nonprofit developers. And I think this would be a, could be a really good source to open up to for profit developers," Richard said. He described a VHFA change in the Qualified Allocation Plan that, in his view, raises experience thresholds: "as of 2025, they, issued a new rule, that would make it a lot harder for small scale newer small scale developers to get access to these funds." Richard said the new rule requires prior LIHTC experience for applicants.
Richard also described a tax problem he said nearly sank his business after he accepted $1,000,000 in grant funds for an affordable project. "On a $1,000,000 in grant funds, I ended up getting hit with an income tax bill of half a $1,000,000," he said. He told the committee he and his advisers are exploring structuring grants as loans to avoid creating taxable income but that the tax outcome and its remedies were not straightforward.
Committee members pressed for more documentation and asked Richard to provide written materials. He agreed to share a concise list of barriers and to follow up with the committee staff.
Richard also discussed typical per-unit costs, describing a range for projects built outside tax-credit programs of roughly $250,000 to $300,000 per unit when not using LIHTC or other layered federal financing. He contrasted that with tax-credit projects, which he said can carry higher soft costs and compliance expenses: he cited fees for LIHTC consultants, accounting and legal work and additional environmental due diligence for federally funded deals. He said he was able to complete a Passive House, mixed-use nine-unit project at about $180,000 per unit.
Members asked whether the tax treatment would have been different if a nonprofit had been the developer; Richard said the tax consequences differ and that some grant structures appear to create taxable recognition for for-profit developers that nonprofits may avoid.
The committee asked Richard to forward written details, including a tax-opinion or summaries that could be shared with the House tax committee; he said he would provide material through the committee assistant.
No formal committee action or vote was taken during the testimony; several members said they will seek follow-up information from VHFA, VHCB and other parties.
