House backs omnibus housing bill, creates CHIPS tax-increment tool after floor debate

The Vermont House on May 23 voted to propose to the Senate amendments to S.127, an omnibus housing bill that creates a Community Housing Infrastructure Program (CHIPS) to fund infrastructure for new primary-residence housing. The motion to propose the House'recommended amendments passed on a roll call, 100-36.

The bill is presented by the House General and Housing Committee as a strike-all replacement for the Senate bill and includes a range of housing measures and financing tools. "We have a housing emergency in this state. There's not enough housing, and what's available is beyond the reach of most Vermonters," the member from Calais (Representative Mahali) told the House as he introduced the committee report and the CHIPS provisions.

Why it matters: CHIPS is intended to make it easier for municipalities and developers to finance the infrastructure (water, wastewater, roads, sidewalks and similar improvements) needed to create housing that serves Vermonters as primary residences. The bill couples new financing tools with programmatic investments and studies aimed at manufactured housing, mobile home parks, modular housing, and brownfields remediation.

Key provisions and mechanics

- Program purpose and definitions: CHIPS is defined as a targeted tax-increment financing tool to encourage the development of new primary residences for households of low, moderate and middle income, with a later amendment replacing the term "middle income" with "mixed income" to emphasize a range of household types. The House'passed language requires a housing infrastructure agreement between a municipality and a project sponsor and an application process to the Vermont Economic Progress Council (VEPC).

- Floor-area and housing-share thresholds: The House committee language includes a requirement that at least 65% of a project's gross floor area be devoted to housing use. The bill as amended preserves discretion for VEPC rulemaking on measures such as how to count floor area in reuse projects (for example, whether a gymnasium counts toward the denominator).

- Mixed-income incentive: Developments that commit to mixed-income housing (defined in the bill as developments in which at least 20% of units qualify as mixed-income) qualify for a higher percentage of education property tax increment retention.

- Tax-increment retention caps and mechanics: The House amendment sets an aggregate annual approval cap tied to lifetime education property tax increment retention of $40,000,000 (the committee said this equates to a much larger level of private investment over a program lifecycle) and includes a process to increase that cap by $5,000,000 through an executive request process (mirroring an existing statute used for other incentives). The Ways and Means report discussed retention percentages that differ by project type: a lower retention percentage (60%) for projects that do not meet the mixed-income threshold and a higher retention (up to 80%) for qualifying mixed-income projects.

- "But-for" test and guardrails: The Ways and Means Committee argued for a "but-for" test to screen projects (i.e., whether the housing development would not occur or would occur in a materially different, less desirable way but for the incremental tax revenues). That test remained central to the Ways and Means rationale and was kept in the 5-member compromise amendment that the House ultimately adopted. Supporters said the test protects the statewide education fund from foregone revenue on projects that would have been built without public subsidy; opponents called it an administrative hurdle.

Floor amendment fight and outcome

A rural caucus amendment (offered by the member from Dover and cosponsors) would have removed the "but-for" test from the bill, expanded eligible "improvements" to explicitly include electric utilities, and lowered the housing share threshold to 51% so that substantial rehabilitations of public buildings (for example, a school with a gym) could qualify. Supporters said those changes would make the program usable in smaller towns and enable reuse of large, existing public buildings; opponents said removing the but-for test risked subsidizing projects that would happen without public funds and could divert education-property-tax revenue away from schools.

On a roll-call vote on the Dover amendment to the Woodstock (5-member) amendment, the House declined to amend the Woodstock amendment, 53-86. After further procedural steps the House amended the Ways and Means report as offered by the member from Woodstock and then proposed the amended bill to the Senate; the final vote proposing the House amendments to the Senate was 100-36 in favor.

Committee work and testimony

Multiple committees worked the bill: General and Housing, Ways and Means, Commerce & Economic Development, and Appropriations. Committees reported various votes on committee recommendations (for example, the General and Housing Committee reported the underlying strike-all as a bipartisan 10-1-0 vote; Ways and Means reported favorably on a complex strike-all and then offered further revisions). Witnesses and stakeholders cited in committee work included developers (for-profit and nonprofit), the Vermont Housing Finance Agency (VHFA), Vermont Housing & Conservation Board (VHCB), Vermont League of Cities & Towns, regional planning commissions, lenders, the Department of Housing and Community Development, VEPC staff, and housing advocates.

Funding and related budget context

The member presenting the General and Housing report said companion funding provisions in the conference budget provide $65,000,000 in funding for housing programs that interplay with the CHIPS financing tool. The Ways and Means report also described a separate Vermont Infrastructure Sustainability Fund and initial bond bank programs intended to support smaller projects and local infrastructure.

What did not change

The House removed the separate CHIPS review board proposed in earlier drafts and instead added additional housing expertise to VEPC by creating two VEPC voting seats for housing agency/executive directors and a nonvoting seat for the commissioner of Housing and Community Development. Location criteria that had been included in earlier drafts (for example, proximity to designated centers or compact settlements) were removed by amendment; the House'passed version leaves location and land-use approval to existing local land-use rules and state law (including Act 250 where applicable).

Outlook and next steps

The House vote sends the amended S.127 back to the Senate for concurrence or conference. Supporters framed the bill as a necessary, if imperfect, set of financing tools and programmatic investments to address the state's housing shortage; opponents warned guardrails must remain to protect the education fund and avoid subsidizing projects that would proceed without state tax increment retention.

Ending

Lawmakers said further refinements will be possible in conference committee and through VEPC rulemaking should the program be enacted. The House recorded extensive floor debate and a roll-call record for key amendment and final votes.