Keelan: Is a new home affordable, even at $200 per square foot?

By Don Keelan

Recently, a major conference on the need for workforce housing in Bennington County was held for the second time. The latest one was in Manchester, following last year’s Arlington, Vermont conference.

The conference speakers were senior state, county, and local officials connected with housing development, joined by Bennington County’s elected state and local representatives. Established building contractors and material suppliers were notably absent.

Don Keelan

Except for the different venue, this year’s conference was similar to last year’s. State officials expressed how critical it is for the state to develop thousands of workforce housing units on an annual basis. The state’s businesses, government entities, nonprofits, and schools cannot attract much-needed staff due to a severe lack of housing.

The administration and elected officials noted how successful they have been since last year in setting aside hundreds of millions of dollars in funding for the state’s housing needs. Additionally, funds have been set aside to provide for town review and updates to zoning regulations to create more density and allow for housing units in downtown areas.

These are exciting developments, but they do not address the level of uncertainty that entitlements will be granted in a reasonable time frame, or if at all.

All the above can be cynically described as bureaucratic window-dressing in responding to the housing crisis. For the most part, luxury housing is the only housing being built in Manchester and the surrounding areas of Dorset and Stratton.

As mentioned, the few premier residential builders are constructing top-of-the-line housing that costs millions of dollars, from $800 to $1,000 per square foot. This figure is after the future homeowner has paid for the land, water hook-up, wastewater, drainage, utilities and landscaping.

However, there is one exception: multi-family housing construction is now underway in Burlington and other parts of Chittenden County.

Back to southwestern Vermont. If you could cut the cost in half or even by three quarters, the price per square foot is still unaffordable: $400/500 or $200/250 per square foot just for the building. Expressed another way: a 2,000-square-foot residence today costs $400,000 or $500,000 if one could even find a builder who would charge $200/$250 per square foot.

Let’s meet the couple who believe they can afford the low-end priced house at $400,000 and have plans to put down 10%, resulting in a $360,000 mortgage.

A year ago, said mortgage would have had an annual interest rate of 2.75% or $9,900 in annual cost. Today, the rate is 7.6% (10/26/22), with a yearly cost of $27,360. The major interest rate changes prevent many buyers from qualifying for a 90% mortgage. Of course, they could put additional money down above the $60,000 they need to close, but how many young families have such funds available?

What is needed to drive the cost per square foot down is to develop multi-family housing with stacking units (one over one) similar to what is being done in Burlington and planned for Bennington’s Depot Street development.

Suppose we are genuinely interested in building workforce housing desperately needed in many Vermont towns and villages. In that case, attitudes will have to change toward what single-family housing units look like. For the foreseeable future, the one acre-one house developments are a thing of the past.

With interest rates at 7.6% and climbing, construction costs at record levels, and construction labor in short supply, it is not the time to build. It is, however, time for towns and villages to plan and acquire housing sites with zoning and all approvals in place. Interest rates and costs will eventually come down, and maybe this time, Vermont can do what it should have done a generation ago: build workforce housing.

Don Keelan writes a bi-weekly column and lives in Arlington, Vermont.

Image courtesy of Public domain
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