House committees review H.775 package to spur rural housing with tax stabilizations, credit facilities and modular pilot

Members of two House committees convened a joint hearing on H.775 on Jan. 30 to review a multi-part package of tools intended to accelerate housing production in Vermont’s small towns.

Cameron Wood, legislative counsel, told the House Committee on Commerce and Economic Development and the House General & Housing Committee that Section 1 would create a rural housing finance pilot administered by the Department of Housing and Community Development (DHCD). "This is a joint hearing on H.775, which is really an act that focuses on rural housing production finances," the chair said when opening the hearing. Under the draft, DHCD may authorize tax stabilization for up to 300 housing units in eligible communities during a three-year application window and work with partners including the Vermont Housing Finance Agency and the Office of the State Treasurer to implement the pilot.

The draft sets underwriting and location limits aimed at small municipalities. Counsel said proposed projects must be sponsored by municipalities with populations under 5,000 and must not be located in a tax-increment financing (TIF) district or a defined housing development site. Proposed developments would be "primarily residential," with a residential cap of 16 units and a commercial cap of 5,000 square feet. The draft requires that at least 15% of units, or a minimum of two units, be preserved as affordable housing, and that affordability covenants last for at least 15 years.

Counsel explained how the proposed tax-stabilization contracts would work. Municipalities could contract to fix the valuation of selected properties in the grand list for a 10-year period: years 1–7 at the predevelopment value, then a phased transition in years 8–10 (25%/50%/75% of the property value change) before moving to full valuation. Members asked for clearer drafting on how "preparation of the property for development" and "redevelopment value" are determined and why the bill ties a 10-year tax benefit to a 15-year affordability covenant.

The package contains several financing components. Counsel walked members through a Title 32 provision that would permit the State Treasurer to use a portion of the state’s cash balance as a credit facility for housing investments and to retain interest on loans in a new Vermont housing special fund. The draft would raise the treasurer’s existing authority from 10% of the state’s average cash balance to 12.5%, and—when combined with a separate 2.5% climate facility—could reach 15% of average cash balances in total.

The Vermont State Treasurer (unnamed in the hearing record) said the increase would add roughly $30 million in lending capacity and described conservative underwriting practices the office uses when investing in housing projects. On typical below-market lending terms, the treasurer stated: "If it's a really short loan, like 5 years or less, it's 1%." He said the office prioritizes risk controls and often works through intermediaries such as VHFA, the Vermont Economic Development Authority, community banks and credit unions.

John Gray, legislative counsel, also detailed a revenue-bond tool linked to municipal special assessments. Under the draft, municipalities could issue revenue bonds payable solely from special-assessment revenues — not general obligation debt — and sale conditions would require a commitment letter, a minimum credit rating or a qualified institutional buyer certification to improve marketability.

Michael Gaughn, executive director of the Vermont Bond Bank, told the committees that special-assessment revenue bonds are a common financing tool in other states and can help fund infrastructure — like water or sewer work — that enables denser housing. "The users of the infrastructure pay for the infrastructure," Gaughn said, supporting the inclusion of guardrails to limit speculative issuance.

Separately, the bill proposes changes to the Vermont Rental Housing Improvement Program to allow DHCD partner organizations to advance grant or loan funds up front, easing cash-flow needs for small rehabilitation projects. The package also includes a modular-construction "accelerator" pilot that would study bulk purchasing, create preapproved modular designs, explore loan-loss reserves and align permitting processes so manufacturers will consider larger production runs.

Samantha Sheehan, municipal policy and advocacy specialist for the Vermont League of Cities and Towns, testified in support of the bill’s municipal financing elements and highlighted the draft’s focus on rural communities: "We support the bill, encourage you to take it up, and to pass it with a few tweaks," she told the committees.

The hearing produced detailed drafting questions — on population measurement, program definitions, valuation timing and the alignment of benefit and covenant durations — but no formal votes. Committee members asked counsel and witnesses to return with clarifications and possible language fixes ahead of markup. The joint hearing was adjourned with plans for follow-up work.