Finance committee weighs using part of property-tax buy-down to expand renter credit

At a Finance committee meeting, members explored using a portion of a proposed $104 million one-time property-tax buy-down to expand the state's renter tax credit, asking staff and the Joint Fiscal Office to model how much new funding would buy in benefits for renters.

Jake Goldman of the Tax Department summarized the program's evolution: "there was a renter rebate, which kinda mirrored the circuit breaker part of property tax credits," and reforms in 2021 removed the landlord certification requirement and tied the credit to HUD fair-market rent and family size. Goldman said those changes reduced paperwork for renters but increased administrative work for the tax department and the program's cost pressures.

"It greatly decreased the amount of work that renters need to do and landlords too, but it increased the work that the tax department needs to do," Goldman said, adding that staff will examine program logic "this summer" to address potential fraud risks introduced by removing landlord certification.

Committee members raised constituents' concerns that renters who recently moved into Vermont face higher rents and less generous credits than in other states. One member noted the program includes a per-person cap (discussed in the meeting as $2,500 or as calculated by a percent of area median measures), and that a higher cap and adjusted percentage could make the credit more meaningful in high-rent areas such as Chittenden County.

Members discussed three policy levers: changing the percent of HUD fair-market rent used in the formula, raising the per-person cap, and expanding income-eligibility thresholds. Several members said limited funding likely means the committee would choose only one or two levers to change rather than all three.

On funding, staff confirmed the renter credit is paid from the general fund. A committee member proposed carving a small slice from the proposed $104 million property-tax buy-down—currently intended to benefit property owners—to provide a targeted transfer to renters, who generally do not directly benefit from homestead-focused buy-downs.

The chair asked staff to model a scenario that would achieve a roughly 3.8% average bill change; staff said that scenario would require about $4,000,000 in one-time general fund support. Joint Fiscal Office staff (referenced in the meeting) gave a staff quick estimate that increasing the credit to 12.5% of fair-market rent with an unchanged cap could cost roughly $3,750,000, a roughly 33% increase over the current program budget (reported around $11,500,000).

Members debated whether a property-tax buy-down would lower rents; staff said rents respond with a lag and that other market forces matter, so any pass-through to tenants is possible but not guaranteed. A member asked whether any states separate landlord rental income and landlord property taxes for tax calculation purposes; staff said they could not identify an example offhand and would research it.

Staff and counsel noted S.220 has passed the Senate and that effective-date language was updated in the draft to align with practice: the measures would take effect 07/01/2027 and apply to fiscal year 2028. Several members said they preferred seeing an edited draft before making a motion because the proposal contains multiple moving parts and numerical options.

Next steps: staff and counsel will prepare an edited draft based on the committee's direction and return with model results from the Joint Fiscal Office so members can review specific dollar impacts and whether changes are proposed as a one-year transfer or an ongoing program change.