Posted from VPR, March 2019:

What are the causes of Vermont’s tight housing market — and why aren’t things getting better?

That’s the question that Peter Kerson put to Brave Little State, VPR’s people-powered journalism project. Every month we answer a question about Vermont that’s been submitted and voted on by you, our audience.

Note: Our show is made for the ear. If you are able, we strongly recommend listening to the audio above!

Our brave question-asker this month is Peter Kerson, originally from Middlesex, Vt. He now lives in Virginia, but he and his wife are on the market for a house here.

Peter, who’s 36, grew up in Middlesex, Vermont, and currently lives in Norfolk, Virginia. He and his wife have two toddlers. In many ways, they’re the exact kind of people state leaders like Gov. Phil Scott want to attract to Vermont as the state’s population ages and stagnates. They’re hoping to move here this summer, so they’ve started looking for a house. Here’s what Peter says he’s been finding so far:

“Houses go on the market and then they’re gone within a week. And then there’s a lot of really old properties that are, you know, subpar in a lot of ways … Those are going on the market and getting snatched up anyway.”

Peter says he and his wife want to live somewhere on the I-89 corridor: Norwich, Montpelier, Waterbury. In terms of price, they can go up into the $300,000 range — but Peter says most of what they’re finding is pretty old, from the 1800s and early 1900s. And a lot of it is not in great shape.

“Part of me, I love those older houses and I’m excited about like, ‘Hey, we’ve got this piece of Vermont history,’” he says. ‘And on the other hand I’m like, ‘Hey, you can’t heat that piece of Vermont history.’”

Peter says he’s been hearing about the housing crunch “forever,” and he’s wondering why it’s not getting any better. So he came to us.

“The thing I’m hoping for above all,” Peter says, “is you’re going to find somebody who says, ‘Yeah, these are the problems, and here are the answers, and these are the people working on it.’”


A piece of history

Taryn Haas knows about “those older houses” that Peter is seeing for sale in Vermont. She has her sights set on a home that was built in 1911, in Barre. It’s white with green trim, in a quiet neighborhood on a hill above Main Street.

“It’s a two-bedroom, one-and-a-half bath,” she says. “It’s a little worse for wear on the outside, but the inside is pretty nice, I think?”

It’s a Monday afternoon, and Taryn is standing outside, waiting for her realtor anand an inspector to show up, for a routine property inspection.

“I think it’s a very nice house,” she continues. “We looked at some other ones in our price range, but almost all of them need work. This one needs a little less work than a lot of other places.”

Taryn has this house under contract, to buy it as-is, for about $90,000. That’s quite affordable, as far as Vermont prices go. But it’s still a stretch for Taryn. She’s 29, and she’s got student debt and credit card debt.

“Almost my entire down payment is coming from my dad,” she says, laughing. “Because there’s no way I’d be able to save up enough. And I mean, I make a decent amount of money.”

Taryn works in insurance the next town over, in Montpelier. And the reason she’s trying to buy is that she and her partner aren’t super psyched about renting. For one, they aren’t able to save much.

“We moved from Pittsburgh, and we were paying a little less than $1,000 for like a fully-updated apartment — it had a dog park, a gym, like nice amenities,” she says. “And then we come up here and we’re paying $300 more for a lot less.”

If she buys this house, Taryn figures the mortgage and taxes will actually be cheaper than their rent: “Best scenario is that it’s $850 a month.”

Taryn’s realtor eventually shows up, along with the inspector, a man named Joby McDonald. Inside the house, Joby gets to work testing the kitchen systems — the dishwater won’t start, as the water supply appears to be off — and trying to diagnose a loud hum, likely from the heating system, that was not humming at Taryn’s showing.

Then it’s down to the basement. Joby points out some antiquated or otherwise questionable electrical wiring, some aging plumbing and some signs of water damage.

“Most of the stuff that we’re talking about so far is exactly what I would expect to see in a house built in the early 1900s,” he says, noting some small cracks in the foundation that he says don’t “overly concern” him.

Joby McDonald, right, talks buyer Taryn Haas through a home inspection for a 1911 house that Haas has under contract in Barre.

“We can see that there is some still what my grandfather called snake-skin, or you know, the original cloth-skin romex,” he says, gesturing to some electrical work.

For her part, Taryn seems to be getting a little nervous.

“Just for some perspective, this is my first home,” Taryn says. “And I own a power drill, and I’ve used it twice. So while I feel like I want to be very industrious, I’m not sure how that will pan out.”

It’s not like this will be an impulse buy for Taryn. She’s done her research and compared prices. She really, really wants to take this step. But it doesn’t seem like she’s on solid ground. This of course has everything to do with Peter’s question, about the limited options that buyers feel like they have in this state.


The big picture

To answer Peter’s question, we first need to answer a different question: Is there actually a housing crunch in Vermont? To try to figure that out, we spoke with Michael Moser, the coordinator for the Vermont State Data Center.

Moser’s been on Brave Little State before. He mostly works with data from the U.S. Census Bureau to get a detailed picture of the people and economy of Vermont.

When we reached out to him for this episode, he very kindly compiled some recent data about Vermont’s housing market. The numbers come from two different five-year American Community Surveys, conducted by the Census Bureau between 2006 and 2017.

Does Moser think Vermont has a housing crunch?

“Inconclusive,” he says, and laughs. “I take that back. I think that in some parts of the state there are greater housing pressures than in other parts of the state.”

Well, let’s break that down a bit. First, between the two surveys, the number of housing units in Vermont went up.

“Yeah, a 3.7 percent increase in the total number of housing units between those two time periods,” Moser says.

More housing. Judging just by that number, there’s not much of a crunch. But of course there’s more to the story — Moser notes that 26.7 percent of Vermont’s housing stock is 80 years of age or older.

That means our question-asker Peter’s observation is pretty spot on: a quarter of Vermont’s housing is old. That’s more than double the national average.

A quarter of Vermont’s housing, more than double the national average, is 80 years or older.

Another measure? The vacancy rate. Most vacant houses in Vermont are seasonal and recreational homes, and the vacancy rate is pretty uneven across the state. For example, nearly 47 percent of homes are vacant in Essex County, in the very northeast of the Northeast Kingdom. But just 5 percent are empty in Chittenden County.

And this gets to Moser’s main point:

“You’re going to feel more of a housing pressure in a place like Chittenden County than you are in a place like Essex County,” Moser says. “And because so many more of us live in Chittenden County we may perceive that there is this, you know, housing challenge across the state of Vermont.”

Most vacant houses in Vermont are seasonal and recreational homes, and the vacancy rate is uneven across the state.

Case in point: When we put a call out for stories of people looking for houses and apartments in Vermont, we heard from someone who was having a really positive experience in Rutland County. So, maybe this state doesn’t have a housing crunch across the board. But talk to housing experts in the state, and you’ll get a different answer.

“I do think that we have a housing crisis in the state. And so I think that we need all hands on deck,” says Maura Collins, head of the Vermont Housing Finance Agency. The agency finances and promotes affordable housing for low- and moderate-income Vermonters.

Collins says the so-called “housing crunch” comes down to one central issue: affordability.

Maura Collins, head of the Vermont Housing Finance Agency, says household incomes in Vermont haven’t kept up with home prices.

“There is a joke that all the housing in Vermont is affordable if you were someone who was super rich,” she says.

Collins says the real crunch is around housing for those who aren’t in that upper echelon.

“Why isn’t housing affordable for more of us who earn moderate — sometimes even good — incomes, and we still can’t buy a home and afford our home?” Collins muses.

One reason for that? Collins says household incomes in Vermont have been pretty much stagnant for years.

“They’re not moving up as fast or as high as housing prices have,” she says.

Collins says the rule of thumb in the housing world is, if you’re paying more than 30 percent of your monthly income on housing costs, your housing is considered unaffordable. You’re what’s called “cost-burdened.”

According to Census data compiled by VHFA, 36 percent of all Vermonters are cost-burdened. And when you break that down a bit, 30 percent of homeowners and 51 percent of renters are burdened by housing costs.

So how can Vermont change that? “By building more housing that would be affordable to more people,” Collins says.

Building more housing. We’ll look into some of the tensions around that issue in a bit. Collins says new construction is especially needed in some parts of the state: the White River Junction area, Montpelier, Chittenden County.

“But there are also many communities, such as in Rutland and Springfield and a lot of the Northeast Kingdom, where the quality of the housing means that it’s not fully on the market,” she observes. “And we need to rehabilitate those homes to bring them up to energy efficiency standards and other things to make them be homes that people can really afford to live in and not pay too much for the utilities.”

And there’s another divide. In some areas, the need is new construction. In others, it’s rehabilitation. But wherever you are in the state, there is still plenty of demand for decent housing.


The Burlington market

That demand plays out in different ways. In Burlington, Vermont’s queen city, it puts big pressure on the rental market. Marilyn Tagliavia knows something about that.

Marilyn and her boyfriend live in the city’s Old North End on the second floor of a duplex. It was built in 1900, according to city records. It’s a nice two-bedroom place, but it has its quirks.

“When we first moved in here, the pipes broke under the kitchen and all of the water rushed under the stove,” Marilyn says, laughing, as she points out the slanting floors.

These kinds of oddities might be familiar to anyone who’s rented in one of Burlington’s many older properties. And the kitchen’s not the only room in Marilyn’s apartment with some less-than-ideal qualities. The bathroom is tiny, and the bedroom has a slant of its own.

“We kind of got used to sleeping on a slant here,” Marilyn jokes.

Not long after they moved in, Marilyn and her boyfriend knew they wanted to find a better place. So in order to land a new apartment for this coming June, a co-worker of her’s recommended they start looking in October.

“I understand planning in advance, but the prior year planning is — [it] seems a little bit excessive,” Marilyn says.

But their early start paid off. They found their new place just a block away. She walked Brave Little State over to see her future home.

“This apartment is like a dream for us,” Marilyn says from the street. “There’s rooftop access, and there’s even an elevator inside.”

The grey, boxy, structure was built in 2015. There’s parking, better heat, flat floors — all things Marilyn likes. But it does come at a steeper price.

“I think it’s $1,470 a month, and right now we’re paying $1,330,” Marilyn says.

But, totally worth it, she says. Just a note: The median rent in Vermont, according to the latest U.S. Census survey, is $945 a month.

It’s widely known that Burlington is expensive — and it’s desirable, according to Sandy Wynne. She’s been a realtor in the area since the early ‘80s.

On a snowy February day, she takes Brave Little State’s Henry Epp on a sort of real estate tour of the city. Something you should know about Sandy Wynne: She is a major booster of Burlington. Not in any official capacity, but she loves the place. She has something positive to say about pretty much every corner of the city.

Burlington realtor Sandy Wynne is an unofficial booster for the community, and has something positive to say about almost every corner of Vermont’s queen city.

Sandy drives along Riverside Avenue, above the Intervale area, and praises it as another unique part of Burlington.

“We have a wood-burning chip plant. We have a farm. You’re in a city,” she says with wonder. “Who does that? Burlington!”

As she drives, Sandy can’t really help but slip into realtor mode. A little way down Riverside, she turns into a winding drive up to a newer condo development.

“Just for the record,” she advises, “no pressure, but there’s a market-rent unit for sale here for $150,000.”

At this point in the tour, Sandy has asked the right questions to know that Henry is a renter, in his late twenties, likely to stay in Vermont for the foreseeable future.

“One bedroom, one bath, taxes are $3,000, monthly association fee is $283,” Sandy recites. “That’s relatively affordable if you are a young professional and you want to be close to the university, the hospital.”

So how common is it to find something like that these days?

“On a regular basis one or two come up, but you just don’t get a lot,” Sandy says.

For the record: Henry did not buy that condo. But as of this publication, a sale is pending on the unit, according to its online listing.


‘That’s the crunch’

Some important context here: Vermont isn’t the only place with a tight housing market.

“It is across actually the United States at this point,” says Debbie Jensen. She’s president of the Vermont Association of Realtors, and currently works for eXp Realty.

We called Jensen up to try to figure out what’s unique about Vermont’s crunch.

“We don’t have a lot of inventory below the $300,000 price range for first-time homebuyers or people that are downsizing from very large homes,” she says. “So when something comes on the market in that $250,000 price range, they’re gone — within days, if not hours. So that’s the housing crunch that we’re looking at in Chittenden, Franklin, parts of Washington County.”

We talked to Jensen on Feb. 25. She said in the seven days prior, there’d been 64 new listings in those three counties.

“And those are residential, multi-family, condos, and it includes land also. And the median price is $349,000,” Jensen says. “I can’t tell you that there’s a lot of millennials that can afford that type of price range.”

Millenials like Taryn. She’s the buyer we met earlier, with a budget of $90,000.

Jensen explained the way that higher prices can have a ripple effect through the market. Take seniors, a demographic that’s growing in Vermont. They’re looking to downsize.

“Their concern is first-floor master bedroom, one level, less yardwork, if any yardwork,” Jensen says. “But the problem is that when you’re selling your big four-bedroom, three-bath house to downsize, you don’t want to take your proceeds and buy a $450,000 two-bedroom condo. And that’s essentially what’s happening.”

Jensen says she is seeing these prices for condos in Chittenden and Franklin counties. And she says that’s leading more seniors to stay put, rather than sell their larger homes to, say, young families. Meanwhile, young people who have started out in a condo? It’s hard for them to upgrade, so they’re not selling either.

“That’s the dichotomy here, is that we don’t have that step from the $120,000 condo to the … $275,000 three-bedroom house. So that’s the crunch” Jensen says. “So people are staying and they’re kind of making do. They’re going to stay in their condos, they’re going to stay in their big houses until the market provides that for them.”

And that leaves buyers like Taryn with very few options. We checked in with Taryn a few days after her inspection for that house in Barre, to find out how it all wrapped up.

She said things were looking pretty promising, until the inspector Joby used a drone to check out the roof. One side looked good, but then…

“Then he takes the drone to the other side of the house,” Taryn says, “and he’s like, ‘Well, hang on.’”

The other half of the roof was shot — Joby said Taryn would be lucky to get a year out of it. So that’s the bad news. The good news is that Taryn negotiated $10,000 off the sale price.

“I’m just going to figure out how to get a renovation loan on top of my normal loan,” Taryn says with some exasperation. “There’s this mix of excitement and also trepidation, because it’s like, ‘What I am doing? What am I getting myself into?’ I’ve never owned a house before! And now I’m getting one where I have to replace a roof. Like, this is crazy.”

Taryn’s closing is later this month.


Development & regulation

So, why hasn’t the market provided those mid-range properties that buyers like Taryn, or our question-asker Peter, are after?

“You know, there’s a lot of different reasons for why,” says Erik Hoekstra. He’s the managing partner at Redstone, a commercial real estate company in Burlington. (Coincidentally, they built the apartment complex that Marilyn, the renter we met earlier, is moving into in June.)

“Part of it is that the fundamental cost of producing housing in Vermont is relatively high,” Hoekstra says.

There are several things driving up our prices, according to Hoekstra.

One, Vermont is in a cold climate: “And so we have to do things in terms of insulation, heating systems, things that go above and beyond what’s required in many other climate areas.”

Two, it’s expensive to get building materials here: “We’re kind of the end of the line for the supply chain.”

Three, we’ve got a labor shortage in the construction industry, like many other places. And then there’s permitting.

“So, a lot of people will talk about the regulatory environment in Vermont, our permitting system — Act 250, and local zoning ordinances and things like that,” Hoekstra says.

He notes that this part of the process doesn’t necessarily skyrocket costs, but can be time-consuming and add a lot of risk.

“We have a more complex, more cumbersome, frankly, regulatory system for building in Vermont than most other places in the country. I think the only other places that may be a little more difficult than Vermont to build are, like, California and Hawaii,” Hoekstra says. “So that doesn’t help.”

“Sometimes people think, ‘Oh, this development stuff, all you have to do is find a property and the money and do it,’” Hoekstra says. “Well, it’s not that easy, you know? You have to, as a developer, it’s almost like being like the conductor of the orchestra. There’s like — the string section is a bunch of lawyers, and the percussion section is the builders. And you’re orchestrating all this stuff, with architects and engineers and contractors and regulatory authorities, and you’re facilitating putting all of that stuff together. And all of that stuff takes just a tremendous amount of time and effort.”

A symphony, so to speak, that results in pricey housing. Erik Hoekstra says Redstone projects cost about $250,000 per apartment. And in the for-profit world, in the absence of things like subsidies, those costs inevitably get passed on to customers.

“It’s impossible to produce that quarter-million dollar apartment and be able to offer it to someone at a reasonably affordable rental rate,” Hoekstra says. “And the same holds true for producing that kind of thing for sale — a condominium or a townhouse or a home.”

Hoekstra mentioned Act 250. If you’re not familiar, it’s Vermont’s land use and development law, which reviews projects over a certain size. And if its critics say it slows development, proponents — well, they say it slows development.

“Yeah, we don’t get a lot of speculative housing built,” says Rep. Amy Sheldon, who represents Middlebury in the Vermont House. She also chaired the Commission on Act 250, which recently put out a big report on the law.

We asked whether Act 250 has been a barrier to constructing the kind of housing that might address Vermont’s crunch. Here’s what Sheldon said:

“I mean, Act 250 is in place to review larger developments, so in that regard perhaps it’s been noted that in Vermont we’ve had a slower real estate market, that is in many cases insulated from the booms and busts of other states’ real estate markets.”

But Sheldon sees that as a positive: “Some people say that Act 250 kind of tempers our market.”

And when it comes to affordable housing, Sheldon says Act 250 has actually bolstered certain types of projects.

“I would say one of the biggest outgrowths from Act 250 was the creation of the Vermont Housing [and] Conservation Trust Fund, where we have been investing for over 30 years pretty intensely in the creation of affordable housing,” Sheldon notes. “And I would challenge some of the folks who focus so heavily on Act 250 as a cause of the lack of affordable housing to look to other places.”

Sheldon offers her own theory: the second home phenomenon. She says she’s noticed it in her own community, in East Middlebury.

“You’re seeing an increase in homes that are empty a lot of the year; they’re second homes,” Sheldon says. “So we have these outside pressures that I don’t necessarily think we’ve accounted for, at least not recently.”

According to the latest Census, 15.6 percent of Vermont’s homes are “for seasonal, recreational, or occasional use.” Then you’ve got the the Airbnb phenomenon, with houses being used for short-term rentals.

But back to Act 250. When they wrote their big report, Amy Sheldon’s commission made a bunch of recommendations for the law moving forward. The big focus is actually on mitigating the effects of climate change, but there’s also a move to funnel more development into downtowns.

“We are looking at an enhanced designation process for our downtown areas,” Sheldon says.

Kind of complicated, but the idea is to encourage higher-density building while protecting working landscapes and natural resources.


Upping the density

“Density” is actually a word that we heard a lot while working on this episode.

It’s something many state housing experts point to as a solution, if not the solution, to Vermont’s housing woes.

“There’s discussions happening around using our existing centers, our designated downtowns and growth centers and village centers,” says Josh Hanford, Vermont’s acting commissioner of housing and community development, “and trying to have some more exemptions or some by-right development in those areas. We want people to live closer to where they work and where they shop.”

In Chittenden County, denser private development has started to ramp up in response to that pent-up demand for rental housing we heard about earlier. In 2016, a bunch of regional planners, advocates, developers and government leaders all signed on to a five-year goal: build 3,500 new housing units in the county, 700 of which should be designated as affordable.

“The fact that we all agree on the problem means I think it’s simpler to get to the solution,” says Chris Donnelly, with the Champlain Housing Trust, which manages and advocates for affordable housing.

Donnelly says that big Chittenden County goal is on track so far, “but, we’re falling short in the affordable goals.”

So, a bit of a mixed bag. But it’s not the only recent big effort to build more affordable housing in Vermont. In 2017, the state set up a $37 million bond aimed at building about 600 new affordable housing units.

“It’s just scratching the surface, though,” Donnelly says. “That bond is almost all spent.”

Donnelly argues much more is needed, and that the state has been underinvesting in housing for years. But at this very moment, there’s an effort in the Legislature to issue another big housing bond, though it’s not clear whether that will move forward.


Meanwhile, in the Upper Valley

Further south in the state, in White River Junction, there’s a new high-density project in the works. Wentworth Community Housing, on Sykes Mountain Avenue, will contain 30 units of multi-family housing.

Andrew Winter, the executive director of Twin Pines Housing, a nonprofit developer of affordable housing in the Upper Valley, showed Brave Little State around the job site on a recent snowy morning.

Wentworth Community Housing, on Sykes Mountain Avenue in White River Junction, will contain 30 units of multi-family housing, with some unique income eligibility.

He led the way into the modernist four-story building — three floors of housing above a parking garage. And as soon as you step into one of the units, you notice how warm it is.

“It’s very well insulated, and a lot of time and effort has been spent in ensuring that we minimize the energy loss in the building,” Winter says.

These units will be very energy efficient, which Winter says will result in lower costs for tenants.

“Everything that we’re doing now throughout our portfolio is focused on sustainability,” he says. “Both environmental sustainability, as well as financial [sustainability] for the residents.”

And these units are going to be more affordable for more kinds of renters — namely renters who wouldn’t normally be eligible for housing like this.

“What’s a little bit different about this project than some of our other projects elsewhere in the region is that of the 30 units, nine of those units will be higher-income units,” Winter explains, “so we’ll be able to house a family of four making as much as $88,000, $89,000 a year.”

An architectural rendering of what Wentworth Community Housing will look like upon completion. Twin Pines Housing has a total of 122 units currently in development in the Upper Valley; its executive director says the deficit of units is in the thousands.

And that is because of the way this project was financed. Twin Pines Housing tapped into funds from that affordable housing bond mentioned earlier. Winter says that will allow them to serve some middle-income renters who are still priced out of the Upper Valley market. The rental vacancy rate here is low — as of last fall, it was less than 2 percent.

“It is really, really hard to find housing in the Upper Valley,” Winter says.

Twin Pines Housing is working to address this. And when you learn about their work, and the ambitious goals for Chittenden County, and the effort the state has made to support affordable housing, you can’t really say that people aren’t trying.

But is it enough? Take the Upper Valley. Twin Pines has 122 units in development for this region right now. But Winter says there’s way more demand than that.

“As a general matter,” he says, “we see a deficit of literally thousands of units in the Upper Valley.”


What we need vs. what we want

Given all this, it’s easy to see why higher-density development is such an appealing solution.

And it sounds great in theory. But in practice, it can be a tough sell.

“Vermont is not a very dense state. And when we encourage density it gets a lot of people nervous real quickly,” says Maura Collins of the VHFA.

“If you live close to that village center or downtown things may look different in the future, and change is hard for all of us,” she says. “There’s still a lot of neighborhood opposition to housing development. They want more affordable housing, but not necessarily if they have to look at it or experience it.”

Michael Moser, the state data expert, points to ongoing research conducted by the Vermont Natural Resources Council, through the Center for Rural Studies, looking at Vermonters’ preferences for where they’d want to live. He says even if density is what housing leaders want…

“Most people that are in Vermont want to have that rural part of Vermont. You have fewer people that want to live in condo complexes in the state of Vermont, and more people that want to live out near a mountain or with a nice large backyard,” Moser says. “And those are conflicting things that need to be taken into account.”

As for our question-asker Peter Kerson? He and his wife are looking for the best of both worlds.

“So we don’t want to be too far out. We like, obviously, the idea of having some land or space, but the priority would be on some connection with the local town,” he says. “So we probably wouldn’t be in downtown Burlington or Montpelier. But close — you know, accessible.”