A Vermont contractor wanted to build housing for employees. It was too expensive.

Construction crews work in Williston on June 2, 2021. File photo by Glenn Russell/VTDigger

Tanner Romano wanted to provide housing for the employees who build his construction projects and for other middle-income people. 

His Brandon-based company, Naylor & Breen, owns some land downtown. 

“What I came to realize is the numbers just don’t pencil, even being a contractor, being able to build cheaper or as cheap as anybody, owning the land,” Romano said.

By the time he added the expense of navigating the regulatory process, architectural engineering, permitting fees and construction costs, building the housing was so expensive that he would have to charge more in rent than his employees could afford. And the project would not have qualified for subsidies for affordable housing because his employees made too much.

“It was frustrating and eye-opening at the same time for me,” Romano said. “And that’s why you don’t see any speculative building south of the equator in Vermont.”

The equator, as Romano called it, is Shelburne. South of there, he said, middle-class people cannot afford what a new house costs to build. 

“The economies of scale don’t exist outside of Chittenden County for the cost of developing, so not just construction, but all the costs associated, to meet the market at its price point,” said Elizabeth Kulas, a housing consultant who worked with Romano on the Brandon project. 

Construction materials cost the same in rural Vermont as they do in the rest of the country, but incomes of renters cannot match those costs, according to Kulas, who has worked in nonprofit development for 30 years.

One reason there is such a shortage of workforce housing, Kulas said, is what she called the “Covid refugee population in Vermont” — people who have moved to the state from across the country during the pandemic. If workforce housing was available, she said, it would be easier to draw people in the construction trades to Vermont. 

The Brandon project would have put 28 units on 7 acres, said Kulas, who was executive director of the Housing Trust of Rutland County for 27 years. The cost for each unit, she said, would have been $327,000. Some of the units would have been unrestricted, but others would have been intended for middle-income people with household incomes of $50,000 to $75,000 a year. 

Romano said one way to make such projects possible is to lower permitting fees and streamline Act 250 requirements. 

For the Brandon project, Romano said, he “was looking down the barrel at six figures” just for permitting costs, with no guarantee of getting a permit.

Water and wastewater designs must be completed before a developer can get an Act 250 permit, Kulas said.

Another solution, Romano said, would be for the state to funnel some money toward workforce housing, which is to say people who make more than those who qualify for affordable housing yet still cannot find places to live near work. 

The Vermont Housing Finance Agency is proposing such a plan. The housing agency is asking the Legislature to fund a subsidy to contractors to build more workforce housing. Under the plan, contractors would get up to 35% of the cost of building a home if building that home costs more than what the home could be appraised for. 

The subsidy would work like this: Say a home costs $400,000 to build, but it only appraises for $375,000. The developer would get a subsidy of $25,000 to build the home.

In addition, the buyer would get a subsidy. Seth Leonard, managing director of community development for the housing agency, told the Senate Committee on Economic Development, Housing and General Affairs last week that to be affordable to a household making the median income in Vermont, the house would have to sell for $319,500. So the buyer would get a subsidy of $55,500. That subsidy would stay with the house in perpetuity. The first buyer would have to pass that subsidy on to the next buyer, and so on. 

The committee is considering the proposal. 

“We’re serious in making a big impact,” said Sen. Michael Sirotkin, D-Chittenden, the committee’s chair.

Correction: An earlier version of this article misstated where Elizabeth Kulas worked for 27 years.

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