We know that housing development in Vermont has slowed in recent decades and this—combined with population growth, a decrease in household size, and wage stagnation—has led to the cost of buying and renting inching more and more out of reach for over one third of Vermonters. Though the solution will necessitate action from many sources, including federal and state government, municipalities can play a vital role in encouraging development and combating unaffordability.
A new report shares findings of a survey conducted by Vermont Housing Finance Agency in late July, with assistance from the Vermont Department of Housing and Community Development (DHCD). The survey asked town officials about barriers to and incentives for affordable housing development in their community. Key findings from the survey include:
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Constraints in municipal and community water systems are restricting housing development. 55 percent of town officials feel that their municipal water systems are limiting the development of new homes and 60 percent say the same about their sewer systems. These constraints are greatest for middle-sized towns with a population of 1001-3000.
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Vermont towns have high minimum lot sizes. 71 percent of surveyed towns had a minimum lot size of 1/2 acre or larger somewhere in their borders. Only 36 percent allowed minimum lot sizes of 1/4 acre or less. Unnecessarily large minimum lot sizes are incredibly detrimental to the development of affordable homes because the cost of land will ultimately be passed on to the buyer or renter.
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There is a divide in the maximum density allowed in each town. Over one-quarter of Vermont towns restrict the maximum allowed density to fewer than three units per acre while another quarter allow a residential density of 20 or more units per acre. Artificially limiting density creates a large barrier to affordable development because it eliminates the economies of scale needed to keep costs per unit down. Like infrastructure constraints, density changes with population. Over two-thirds of towns with fewer than 3000 people have a maximum density of three units or fewer per acre. Only 14 percent of towns with over 3,000 people limited residential development to this density. The plurality, or 46 percent, of these towns allowed 20 units or more per acre.
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Most towns allow at least some types of residential development that are more likely to be affordable to low- and moderate-income households. Almost three out of four towns allow multifamily buildings with 5 or more dwelling units to be developed, although the density limits described above may make that challenging in practice. Two in three towns allow rooming/boarding/co-living houses. 87 percent allow manufactured/modular/mobile homes.
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There is room to expand "by right" development. 83 percent of towns allow single family homes to be built by right (without a discretionary review process which adds costs and delays construction, decreasing affordability) and nearly four out of five towns allow accessory dwelling unit development by right. The number of towns allowing by right development decreases as the number of dwelling units in the proposed project increases; only about one in four towns allow a multifamily home with five or more units to be built by right.
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Some towns make use of density bonuses, but few offer other incentives for affordable development. A little under one third of towns utilize density bonuses to encourage affordable housing development. 19 percent of municipalities have relaxed their accessory dwelling unit standards more than the state requires. Over half of towns who responded to the survey do not have specific policies aimed at incentivizing affordable home development.
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Towns are slightly in favor of expanding their stock of affordable homes. When asked how interested their community was in expanding its stock of homes affordable to lower income residents on a scale of one to one hundred, two fifths of town officials listed a number less than 50 and three fifths wrote a number equal or greater than 50. The average interest was 53.8 out of 100.
There are many tools that a municipality can use to encourage housing affordability in their community. Simple procedural updates like streamlining the permitting process or lowering the number of conditional use reviews can reduce delays in construction and uncertainty in the project's outcome—two factors which increase costs for developers and make securing loans more difficult. Regulation changes can also be incredibly effective. Allowing for higher density development, lower minimum lot sizes, and fewer parking requirements all reduce the amount of land a developer must acquire to build new homes, one of the largest cost drivers of a residential project.
If you would like to learn more about the steps your town can make to improve home affordability, please review these suggestions prepared by the Vermont Housing Finance Agency.