By Don Keelan
Other than in Chittenden County, there are not many workforce residential housing units being developed in Vermont. We hear of the dire need for such housing from federal, state, county and local officials. Housing conferences are held throughout the state addressing the issue.
What is being addressed can be summed up by several statistics that appeared in a June 20, 2019 Rutland Herald editorial:
“Vermont has the sixth-largest affordability gap for renters of any state in the nation.”
“Vermont is the ninth-most-expensive state for rural (non-metro) areas.”
“Vermont is the 16th-most-expensive state in the nations for renters.”
“Seniors and others living on fixed incomes can’t afford housing anywhere in the state without a subsidy.”
One would think that with such a demand for rental housing, the marketplace — in this case residential real estate developers — would be jumping in to satisfy the demand, but they are not. If anything, they are conspicuously absent from any forums or discussions on the subject. Why?
There are a host of reasons and, for starters, it is the cost to develop a housing project — both soft and hard costs. I was recently informed by a local architect that the construction costs in Southern Vermont exceed what he is experiencing at his Connecticut projects, by as much as 30 percent per square foot.
Add to the cost (soft) cost — the time it takes to bring a project through planning, from conception to breaking ground. And to be totally honest, few towns would like to see private multi-family housing in their communities. The fact of the matter is that they prefer not to see affordable public-financed projects either.
A case in point is the recently commenced 22-unit project in North Bennington. It took several years to get this small project through the planning process. It will be developed by the county’s quasi-public housing authority at a total cost of $7,200,000. This translates to a cost of $327,000 per unit. When completed, the units will rent for between $525 and $1,145 (3 bedroom) per month. They have to, as the project is financed through tax-credits, bank loans and grants.
If a two-bedroom apartment in North Bennington is costing $327,000 per unit to build, a private developer would be looking to charge approximately $2,725 per month in order to obtain a 10 percent return on investment. This would translate to over 50 percent of household income for rental expense, for most Bennington County residents — the affordability gap.
Another reason developers stay away from residential rental ownership is what is taking place in Oregon, and more recently, in New York State. Onerous rental legislation has been adopted, limiting what can be charged, how tenants are to be treated and, when necessary, evicted for non-payment of rent. All of which favors the tenant.
From a politician’s standpoint, it makes good sense, a 100-unit apartment house has over 100 votes versus only one from the developer. Vermont, too, is not landlord friendly.
Also, Montpelier is not really motivated to address the housing crises. According to a report in the June 23, 2019, VTDigger, “Gov. Phil Scott’s proposed budget included $1 million to help property owners renovate dilapidated housing stock, but lawmakers did not include the proposal in next year’s spending bill.”
In the same Digger report, the state Senate wanted a bond issue of $50 million to address housing but that was rejected; the state’s bond rating was more important.
Vermont does not have an employment problem with an unemployment rate at 2.5 percent or lower. It has a wage gap that will take years, if ever, to close. That will keep developers away from building private residential rental housing. But what is not discussed is the risk of investing in rental properties in Vermont.
It does not help to read an article in the Washington Post, reprinted in the June 18, 2019, Bennington Banner that notes that our U.S. Senator, back when he was 39 years old, would stiff his landlord in Burlington. I can only guess who he favors.
Don Keelan writes a bi-weekly column and lives in Arlington, Vermont.