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VHCB outlines cost drivers: labor, materials, historic reviews and permitting slow projects
Summary
Board staff told the committee that rising materials and labor costs, elevator delays, historic-preservation requirements and permitting appeals are major drivers of higher development costs and proposed several policy and administrative reforms to lower costs.
Vermont Housing & Conservation Board presenters told the Senate Economic Development, Housing & General Affairs Committee that multiple factors are driving up the cost of building affordable housing and that some can be addressed through policy or administrative changes.
The issue matters because rising construction costs reduce the number of units that state funding can produce or preserve and raise the per‑unit subsidy required to complete projects.
Board presenters listed the main cost drivers they see: higher material costs and inflation since the pandemic; labor shortages that increase wages and extend schedules; supply-chain problems and delays for key components such as elevators; additional costs tied to historic‑building requirements and site cleanup; and potential effects from federal Buy America provisions and tariffs.
Majors and other presenters said delays on items such as elevators can be costly: they described a building that was ready to open in June but whose elevator did not arrive until October, creating carry costs while construction financing accumulated interest. "When you are building a project, you take out a construction (loan)… if you're carrying $15,000,000 of debt, at 9% or whatever, every month that adds up," Majors said.
Panelists discussed potential reforms that could reduce cost or speed projects: streamlined permitting and appeals processes (including the idea of specialized housing appeal panels like New Hampshire's board of appeals), targeted infrastructure assistance to reduce developer site costs, and more flexible historic‑preservation reviews where federal requirements do not apply. Majors also relayed a suggestion from a former colleague, David White, for a sales‑tax exemption on building materials for affordable housing projects as one possible cost‑containment tool.
Presenters cautioned that not all costs are avoidable; some preservation or accessibility requirements produce long‑term community value or enable federal tax credits and equity. They urged the committee and administration to focus on where standards or processes add disproportionate time and expense and to align state energy and equity policy to better support affordable housing.
