The Vermont Housing Finance Agency asked the Senate Economic Development, Housing & General Affairs Committee on 2025-10-12 to fund two middle‑income housing programs at $15 million each and to provide $250,000 for a study of off‑site (modular) construction.

The agency’s executive director, Maura Collins, said the two programs — a homeownership development loan and a rental revolving‑loan fund — are intended to serve households that earn just above income thresholds for subsidized housing and therefore “miss that cutoff.” Collins told the committee VHFA would cap its subordinate loans at about 35% of a project’s development cost to fill financing gaps and, on the homeownership side, to cover the common appraisal gap between construction cost and lending value.

Collins outlined how the homeownership program covers the difference between what it costs to build a starter home and what that home will appraise for, and how a subordinate VHFA loan can also be used to “buy down” a sale price so affordability remains with the home on resale. On rental projects, Collins said VHFA provides below‑market construction financing that converts to a permanent mortgage and can offer lower interest rates if an employer or municipality contributes to the project. “What makes it innovative,” Collins said, “is if they can get 5% of the cost of building the housing paid for by a local employer or a municipality, we’re going to give them even better loan terms.” She added that a prior $10 million rental appropriation leveraged about $21 million in employer and municipal support.

Committee witnesses described local demand and delivery challenges. Lorelei Tester, director of the Northeast Kingdom Chamber of Commerce, said manufacturers, hospitals and schools in her region are losing job candidates because they cannot find housing. “We can recruit people, but there’s no place for them to live,” Tester said, describing regional vacancy of second homes and pressures on school enrollment and career‑technical education. Tester said some employers are already building housing locally while others remain unable to do so because “it just financially…doesn’t make sense” given high construction and permitting costs.

Builder Peter Kahn, who described a mixed‑income neighborhood project and a later shift to multifamily development, told the committee that material and labor cost spikes since the COVID pandemic pushed single‑family starter prices from the mid‑$300,000s into the $500,000s and higher in his projects. He said switching some projects to rental multifamily yielded rapid leasing: a 10‑unit building financed with a state COVID grant filled almost immediately when it opened.

Witnesses asked the committee to retain and extend regulatory and program tools that have helped projects move forward. Kahn and others noted that Act 250 exemptions tied to accelerated housing approvals are set to expire in 2027; Kahn said those time frames make planning and financing multiple projects difficult and “there’s 0 chance” to complete several larger projects before the expiration without an extension. Collins also described a proposed change in the Budget Adjustment Act that would keep a 3% target rent‑increase cap but permit VHFA to grant waivers when property taxes or insurance costs require higher increases.

On modular and off‑site construction, Collins requested $250,000 for a multi‑partner study to assess whether Vermont should support a domestic modular manufacturing capacity, coordinate bulk purchasing, or rely on neighboring states. She said the study would examine models used in Colorado and Quebec, identify who should lead a Vermont effort and deliver a progress report by January of the following year, while cautioning a full build‑out of a statewide off‑site production base would likely take longer.

The VHFA told the committee the two middle‑income programs are included in the governor’s budget; Collins said the agency previously received $24 million for the homeownership program and $10 million for the rental program and can report back on how that $34 million was used. She credited community banks, employers and municipalities as partners in projects and said VHFA’s role is to fill specific market gaps.

The committee did not take a formal vote during the hearing. Collins said the VHFA’s funding requests and the off‑site construction language will appear in the committee’s housing bill and that the agency can provide progress updates to the legislature as the programs move through the session.

The hearing also referenced other work already under way: a statewide building‑code study enacted in Act 181, and legislative deadlines tied to the committee’s timeline (the committee must advance a bill by March 14, as noted during the session).