Editor’s note: This is part of the Affordable Housing Series.
By Guy Page
Tax breaks in the 2017 tax reform championed by President Donald Trump could help fund new affordable housing for low-income Vermonters.
That was one takeaway from Headliners’ conversations with Vermont housing leaders at today’s annual meeting of the Vermont Affordable Housing Coalition and Vermont Coalition to End Homelessness at the Vermont State House. The 2017 law created “Opportunity Zones” for private capital to receive tax breaks by helping struggling Vermont communities like Newport, Brattleboro, Springfield, Rutland, and Bennington and 12 others. These significant capital gains tax savings incentivize wealthy Americans to invest in communities facing chronic poverty, substance abuse, crime and joblessness.
Vermont’s affordable housing shortage for the extremely needy is acute. Fixing it would cost an estimated extra $417 million over five years, according to a December 2016 Corporation for Supportive Housing (CSH).
Vermont has a shortage of 11,876 rental homes affordable and available for extremely low income renters, according to the 2019 Vermont Housing Profile prepared by the National Low Income Housing Coalition. These Vermonters earn 0-30% of the average Vermont household income of $47,000. Housing them will be expensive.
Not providing housing costs money, too. For just one homeless person per day, housing costs $856 in a hospital, $1,000 in an inpatient psychiatric facility, and $1,602 in an emergency room, the CSH study said. Prisons, nursing homes, motels and assisted living also are costly alternatives. And there is this reality: “We cannot deal with our mental health and substance abuse issues without safe and affordable housing,” Sen. Becca Balint, D-Brattleboro, of the Vermont Senate Economic Development, Housing and General Affairs, told the joint annual meeting.
The CSH’s five-year, $417 million plan recommends four paths of housing intervention and homelessness intervention. Virtually all funding would come from local, state or federal governments, supported by taxes and fees. Where in the world will this money come from?
Sen. Balint identified the source as a loan to be repaid by the Vermont taxpayer: “We on the Senate side are ready to do another sizeable bond — $50 million.” A $37 million bond was passed in 2017 with the approval of Gov. Phil Scott. Conceding that Treasurer Beth Pierce doesn’t want to increase Vermont’s already heavy debt load, Sen. Balint committed to making “a sizeable investment,” the crowd of housing advocates clapped.
But Vermont has already suffered a downgrade in its bond rating, raising the cost of interest on its debt. Borrowing more risks a further downgrade. Vermont is already committed to paying an estimated $150 million per year on back payments and debt service on its underfunded pension fund.
Yet the housing problem remains. “We’ve got to do better. This is terrible. People are suffering,” Rep. Tom Stevens (D-Waterbury), chair of House General, Housing and Military Affairs, told the crowd. The good news is that many people who were homeless years ago are so no longer because they’ve received the help they needed. But much work needs to happen until needy people are “able to live with dignity and honor in a world of their own creation” Stevens said. His solution, too, is more state funding: “If you have someone in your district on the Appropriations Committee, call them,” Stevens urged the attendees. “We’re smart enough to know what works. But we’re still under capacity, and we won’t be able to fund what needs to be done.”
Is there a better way than the Legislature adding to the taxpayers’ already precarious debt load? Vermont Housing Finance Agency (VHFA) Executive Director Maura Collins thinks the Opportunity Zones could be part of the solution — directly or indirectly.
On the one hand, Opportunity Zone tax breaks and affordable housing lending aren’t a natural fit because the lender may want to recoup his investment when the 10-year tax break period ends, and most affordable housing projects have no other source of income than rent. Jacking up the rent to pay back the investor is a non-starter. Also, affordable housing generally doesn’t offer dazzling high-yield potential like, say, a new bio-tech company that wants to get started in downtown Rutland.
However, “I think the Opportunity Zones can start something in the community, to be that seed, and then affordable housing needs to follow out of that,” Collins said. Many projects feature both business and residential space in a single development. With Opportunity Zone investment funding some or all of the business side, getting money for the residential side should be an easier lift.
In fact, housing is essential to economic development. Collins cited a Bennington County manufacturer whose new employees needed housing so badly, it went out and bought its own housing. In an economy short on both skilled workers and housing for them, it makes sense for employers to be proactive about housing.
The Opportunity Zones in the Trump tax reform aren’t a silver bullet for Vermont’s housing woes. But used with skill and imagination, they can be a useful — and very cost-effective — tool in the community development toolbox.
Statehouse Headliners is intended primarily to educate, not advocate. It is e-mailed to an ever-growing list of interested Vermonters, public officials and media. Guy Page is affiliated with the Vermont Energy Partnership; the Vermont Alliance for Ethical Healthcare; and Physicians, Families and Friends for a Better Vermont.