Final Reading: House Ways and Means explores the roots of Vermont’s housing crisis

It’s no secret that Vermont finds itself in a housing crisis , and on Wednesday morning, Lake Champlain Chamber lobbyist Austin Davis hypothesized to the House Ways and Means Committee one perhaps unexpected culprit: Vermont’s property tax credit.

Wait, why is the Chamber dipping a toe into this year’s fraught property tax conversation? Because, Davis told the committee on Wednesday, “Whether we like it or not, education property tax conversations are housing conversations because it’s a variable that affects the actors in the housing market.”

Davis painted a scenario for the committee: Take two nearly identical, three-bedroom homes in South Burlington. In one, two South Burlington High School teachers each earning median salaries of $65,000 are raising their two children. In the other, a single teacher working at the same school for the same wage lives alone — without “even a dog,” Davis noted in his hypothetical.

In Household No. 1, Davis said, the two teachers’ combined household income would exceed Vermont’s property tax credit income cap. In Household No. 2, the solo occupant would obtain a property tax credit of nearly $3,700.

“We kind of, with tax policy, penalize folks who are more densely packed under one roof because all of that income under that roof is affecting the property tax credit,” Davis said.

Davis took the hypothetical one step further. What if the two teachers in Household No. 1 have $50,000 in student loan debt, and are only three years into paying a $400,000 mortgage? And what if, by comparison, the single teacher in Household No. 2 owns their home outright with no mortgage and is sitting on a cushy nest egg in assets? Household No. 1 would be significantly more debt-burdened, Davis said, but Household No. 2 would get the tax break.

“​​We use income as a stand-in for wealth, when I don’t think it’s a really good stand-in,” Davis said.

“What do you want us to do about this?” House Ways and Means Chair Emilie Kornheiser, D-Brattleboro, asked Davis.

According to Davis, Vermont’s current property tax credit incentivizes people like the teacher in Household No. 2 to stay in their homes — even years after they become empty nesters or past the point they can keep up on necessary maintenance.

Add to that the number of Vermonters whose homes are already paid off or who enjoy much lower interest rates than are currently available. Davis said such owners are bound by “golden handcuffs” and don’t want to move.

The result, Davis said, is that the churn of the housing market has ground to a halt.

“It’s also a bit of a chicken-and-egg conversation,” Davis said. “Folks will say to me, ‘Well, yeah, folks would want to downsize, but there’s not the housing stock.’ Well, there’s not the housing stock partly because we’ve stagnated the market with this market intervention of the (property tax credit).”

Davis offered the committee several suggestions of how to address the dynamic he laid out.

Perhaps the property tax credit should be calculated based on assets, as opposed to yearly income. Or maybe calculate the credit on an individual basis, rather than per household, so taxpayers aren’t penalized for having a partner or a housemate.

Or perhaps Vermont could mirror states like Maine and Minnesota that crafted a property tax deferral program for Vermonters who would like to age in place, which would bundle the owed taxes into a loan due upon the sale of the property or the owner’s death. Or maybe Vermont could explore a seller’s credit to push more owners to downsize.

While Kornheiser said she took some of Davis’s points and conceded that Vermont has “a lot of very wild disincentives built into our system,” she didn’t buy his argument wholesale.

“I think also sort of the signals you’re talking about are the signals that lead older Vermonters to not be able to pay their bills and leave their homes,” Kornheiser said to Davis. “The political reality and personal reality of that is, I think, quite different than the way you’re framing some of it.”

It’s not about pricing older Vermonters out of their homes, Davis pushed back.

“What we want is for decisions to be more closely associated with economic realities,” he said. “We want to create some off ramps.”

— Sarah Mearhoff

In the know

Now that the House-passed Fiscal Year 2025 budget is in the Senate’s hands, the Scott administration made sure to reiterate its position on the $8.58 billion spending plan in a letter to Senate Appropriations Chair Jane Kitchel, D-Caledonia, on Wednesday.

“The Administration is deeply troubled by the House budget, which seems little more than an empty vessel while all the cargo, carrying $132 million in increased taxes and fees, is hidden elsewhere, in other vessels moving through the legislature,” Secretary of Administration Kristin Clouser wrote on Wednesday. “This is not transparent and denies legislators and Vermonters a full understanding of total spending and its impact on costs of living.”

The so-called Dear Jane letter is an annual occasion under the golden dome, marking the budget’s arrival in the powerful Senate Appropriations chair’s committee room. In this year’s letter, Clouser reiterated the governor’s staunch disagreement with recent House proposals to raise taxes on corporations and high-income earners, as well as property transfer taxes on real estate purchases exceeding $750,000.

As Vermont’s economy reverts to its pre-pandemic state, Clouser wrote that it also should keep spending within existing revenues.

“The last thing we should be doing is compounding the already high cost of living in Vermont,” Clouser wrote. “The Governor’s budget prioritizes housing, public safety, and support for the most vulnerable with targeted investments in programs and services that are affordable and within current revenue. This is not the time to add more pressure on Vermonters.”

— Sarah Mearhoff

On the move

Gov. Phil Scott vetoed a bill Wednesday that would have banned the sale of flavored e-liquids, tobacco substitutes and menthol tobacco products, dealing a setback to a yearslong legislative effort to halt the sale of the products.

The legislation, S.18 , would have prohibited retailers from selling these tobacco products, with the goal of preventing children and youth from getting addicted to enticing flavors of vapes and other products.

The bill passed out of the Senate last year, and Vermont’s House approved it last month — a milestone for a proposal that spent years floating around the Statehouse with little apparent progress.

But Scott’s veto could put an end to that momentum.

Read more here .

— Peter D’Auria

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Read the story on VTDigger here: Final Reading: House Ways and Means explores the roots of Vermont’s housing crisis .