Vermont Legislature SmartTranscripts:

[Marc Mihaly (Chair)]: Thank you very much. Welcome everybody to House General and Housing, and today is Wednesday, well into February, 02/04/2026. We have a long day today, and I'm just going to very quickly go over what we're going to do. We have two sets of testimony that involve the APD, Department of Housing and Community Development, and the Agency of Commerce and Community Development. We're hearing from them first because they are one of our budget assignments. So they're one of our budget assignments. So we'll have time, again, to hear from them, but this is a first round of what's in the budget, how do they feel about it, what do they really care about. You know, like, could VHIP continue forever and ever to be year by year or what? Okay. So that's one thing. Another is the committee has expressed interest in hearing how VHIP is going, and are there issues with the okay. Then, at nine nominally at 09:30, we're shifting to act to seven seventy five, which is the rural finance bill, and Alex and two other witnesses are testifying, beginning testimony on that bill. The DHCD is involved because, as you remember, there is a proposal in the bill to allow DHCD to advance money in India rather than when they deem it appropriate. It gives them an expression to advance money rather than act on a reinforcement basis. So, then we're going to have, still this morning at 11:00, our counsel, Wood, will come in to begin the first discussion and markup on seven seventy five. With that, Alex, you wanna call us your name, direct it, and take it away.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Thank you, Mr. Chair. For the record, Alex Farrell, Commissioner of the Department of Housing and Community Development, been a familiar place. What I'd like to do today is start with VHIP. I know there's a lot of familiarity with VHIP in this committee. So I've dropped some paperwork on your desks, beginning with what should be a familiar handout for all of you. I put this on your desk a few times over here, and it's essentially just an update on the statistics on BHIP, where we're at, how things are going.

[Marc Mihaly (Chair)]: Do you want to do this? Do you have slides or do you not? Want it. Would you like me to pull it

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: up on Zoom? I'm happy to do that if that's easier.

[Marc Mihaly (Chair)]: Well, I think that it might be a good idea so that those who are looking, who are Gayle and Saudia, who are attending via Zoom can see them, and also anybody who's watching it. I think it's worth it.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Mister chair, if you wanna test my technical prowess, I'll meet the challenge.

[Marc Mihaly (Chair)]: Do does he have the link? K. So

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: why don't I start while I'm pulling this up just by discussing the budget. So in the governor's budget, there is a request for $4,000,000 for BHIP base funding. You heard this from us last year that we've been running BHIP off of very strong one time funding. We've been able to make it work because the funding was so large and we were able to get limited service positions to band aid this thing together and make it work. It's, I'd say, largely been proven to be a tremendous success. And I'd say for the administration, stakeholders, legislators, communities feel that we have ought to be a permanent presence, permanent tool in the toolbox. I'm vamping while I wait for the link. What I'm getting at one time funding, even if we were to get one time funding this year, VHIP would end. The staff that runs VHIP in our department, the staff that runs VHIP in the home ownership centers largely have just been strung out to this point because they had terms that end this year and we were able to piece together funding. Without base funding, VHIP will end. So $4,000,000 goes a long way to keep an important tool in the toolbox.

[Marc Mihaly (Chair)]: How else? Alex, I'm a little What was the amount last year? 4,000,000 at one time. 4,000,000 also?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: That's right.

[Marc Mihaly (Chair)]: Okay. So it's level funding entirely aside from the one time versus permanent, it's level funding.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: It would be, and it makes a big difference one time versus base, especially this time. The limited service employees that operate it, their their terms expire. Can you

[Marc Mihaly (Chair)]: just offer them contracts or you essentially convert their position?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: And without permanent funding, it's a point.

[Marc Mihaly (Chair)]: No. With permanent funding.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: With permanent funding, you're then able to take admin dollars, then physician pooled in joint fiscal are able to say, basically we have to demonstrate that we have permanent funding and then they can authorize, we have to ask them, but they can then authorize permanent physicians. So base funding is the path to that.

[Elizabeth Burrows (Member)]: Can you remind me how

[Leonora Dodge (Member)]: many FTEs we have needs as a program?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: We run it in house with two FTEs and those teams are those two are stretched to the max.

[Marc Mihaly (Chair)]: And they're limited service positions.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: They are currently.

[Deborah "Debbie" Dolgin (Member)]: Debbie? Oh, I know that I think it's the hip that got a grant, like, in Saint John's Prairie. Think there was a grant used to help people get into housing. Would the way we fund BHIP, would that grant be, like, not usable, or we wouldn't be able

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: to get grants of that nature? You know what, I'm not sure, not sure which grant you might be referring to. I'm sure it's

[Deborah "Debbie" Dolgin (Member)]: a place I mean, we looked at those houses in St. Johnsbury, and they had grants to pay the rent. Oh, I understand what you're The

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: tenants are vouchers. Okay, then. Yes, yes. So the design of the program by using fair market rents very much relies on a robust voucher program. That does nothing to fund the construction of the units. I do want to go back just on staffing and the capacity. We were able to do this with only two people because the home ownership centers take on a tremendous amount, and they have been excellent partners. I can't stress enough how great the partnership's been. This wouldn't have happened then. All right, so what you're seeing here is, again, a very familiar dashboard. You're looking at nearly 1,200 units that have been funded with VHIP after around $40,000 an award. Property owners are bringing in at least that much into every project. There's a substantial amount of capital from that. As a reminder, I'm going flip through this so you can just see all the iterations of BF. BF two point zero, where we began offering a five year with a ten year, BF one point zero, which was still ARPA and then state revenue replacement dollars. And then going all the way back, some folks may remember there was RHRP, Re Housing Recovery Program. This was using CARES Act dollars. This was before VHIP was in statute, before VHIP was really programmed. This was the first attempt at VHIP. The reason I'm bringing this up today is because these are the first units, essentially VHIP units, even though it wasn't VHIP yet, that have begun to come off of their five year term. So we've had nearly 60 units finish their five year term or are about to. So we've received data back from these folks as to what they intend to do once they are no longer subjected to the covenant. And so I'm going show you the very first look at data. You've been hoping for this data for a while. So I'm going show you what we're initially seeing as to the intentions. We're asking these folks, what do you intend to do with these units once you're no longer bound by this covenant? And we had long theorized based on our engagement with landlords that this is actually creating bonds with these tenants, with the coordinated entry folks, and it's enabling folks who never would have thought they'd wanna be tenants for certain low income populations to remain landlords to these folks and keep renting at fair market rents. And the data is showing that that at least so far is true. So, of the nearly 60 folks so far who are going to wrap up their five year covenants, 56 of them, 93% are going to keep charging fair market rents.

[Marc Mihaly (Chair)]: How

[Deborah "Debbie" Dolgin (Member)]: does your office perform the outreach and how do you get this information? Like you're just asking people, excuse me, what are your plans?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: When they come to us to release the covenant on their property, which they have to come to us to do so we can do We then say, we'd be happy to. We can't hold them hostage, but we can say, we love it if while we're doing that, you can fill out this form. I see. That's now gonna be part of our annual recertification process. So we're constantly getting feedback. Are folks staying in these units? Are you keeping the same tenant all five or ten years?

[Marc Mihaly (Chair)]: Because when you say fair market rent, you mean HUD fair market rent.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: HUD fair market rent. That's right. Can

[Marc Mihaly (Chair)]: I ask? Yeah, go ahead.

[Elizabeth Burrows (Member)]: Has anyone ever said, No, I'm

[Leonora Dodge (Member)]: not gonna give you this information?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: This no is no or left blank. I believe that's one person who just did not answer. It's not that they said, No, I'm not going to keep this on the market. They declined to answer, and we still have to release the covenant. Can't force them. But three units, the unit is going to stay on the market, but the rent is going to increase above fair market

[Elizabeth Burrows (Member)]: rents. Just so

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: you know the makeup of that, you can see a handful of them were serving folks exiting homelessness, not a tremendous number. Again, it seems like not everybody answered this portion of the survey. Many were not using vouchers, so we designed the program so that vouchers can be used, but only a handful of folks, less than 10, were using vouchers. Again, many folks didn't even see the numbers here didn't respond to this portion of the question. This is really the data that we are at here. Are you sticking with unfair microgrants? Yes, go ahead. Do

[Leonora Dodge (Member)]: you have a sense of whether the property owners felt

[Elizabeth Burrows (Member)]: that they needed to answer in a certain way, or was

[Leonora Dodge (Member)]: it clearly educated? Just how was it presented, right? The survey as just like, we're just trying to track things.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: It's a good question, right. Do they feel compelled to? I could bring in the team to give more details about how they did the outreach. I would offer that it was very clear that we were going to release the covenant no matter what.

[Elizabeth Burrows (Member)]: Yes. So, I'm a little bit confused about the timing of that, because the program was started in 2020, right? Original, I think.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Right? Mhmm. Yep.

[Elizabeth Burrows (Member)]: And so the subscribers to that original program would have taken some time to to complete their updates or construction. And the requirement is that they keep it at the the fair market rate for five years, right?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: That's right. Very well.

[Elizabeth Burrows (Member)]: And so, as it is now 2026, are we talking about people who were immediate subscribers to the program, who only now have had people in those units for five years? Mhmm. What's the number of those?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: It would be 50 think it's 59 or 60. It was on

[Elizabeth Burrows (Member)]: 56 units.

[Leonora Dodge (Member)]: And that was 12, what makes you

[Deborah "Debbie" Dolgin (Member)]: The total is 60 units.

[Elizabeth Burrows (Member)]: Those are all by 60 separate owners or?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Not necessarily, 60 units. Of them, some parties may have multiple units.

[Elizabeth Burrows (Member)]: Is there any way to know how many owners were surveyed in this survey?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: I could get that data. Thank you.

[Deborah "Debbie" Dolgin (Member)]: Oh, yeah, that's a good question.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Oh, I'm sorry. What I was showing here is the timeline. So this is, you can just see the period of when these covenants have begun. So the project completed, so the lease up, that's when their clock starts, and so you can see essentially when their five to ten year clock starts.

[Marc Mihaly (Chair)]: Why do you think such a huge majority intended to keep going as they were? Do you think it's because they have tenants that are stable and just wanna keep the stability? What what do you think it is? It's a little surprising, you have to admit. So given the forces in the market over the last five years.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: I'm not entirely surprised. Turnover is expensive with a rental unit. The nature of the way these folks are paired with landlords isn't necessarily the way it would always happen. Granted, if you keep in mind, this is our HR piece, so they're operated a little bit differently. So not everybody's coming from coordinated entry, but it's all five year. It's just a little more structure around how these folks are getting to the units. I'm not entirely surprised. I'll also offer that in some parts of the state, hunt for market rents are that much lower than what they could get market rate. So they may just feel that if they've got a happy tenant, stick with them. I think what you hear from most landlords is that's the case. There's probably more detriment cost to upping rent 5% or 10% than losing somebody and having to turn it over, losing a few months worth of rent.

[Marc Mihaly (Chair)]: All

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: right, anything else on VHIP before I move on?

[Marc Mihaly (Chair)]: Any questions about the committee on sort of where VHIP is? No, Judith. Oh, sorry. You go ahead, I'll

[Leonora Dodge (Member)]: go back.

[Deborah "Debbie" Dolgin (Member)]: Oh, I just want to reiterate, so for the committee, so you're asked based funding so that it's not knowing, and for the employees too, so we

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: just know this is a program that's going to exist. And so we can lock in long term, more stable grant agreements by our homeownership centers. Mean, God bless them, they've put up with significant changes in our grant agreements because the funding sources have changed, the amounts have changed, the admin cuts have changed. This gives everyone more predictability and it means that VHIP can just be a tool that's out there in the market and applicants have more predictability. I can't tell you how many of you have emailed me, I'm hearing from a constituent that they're no longer accepting VHIP applications because it's oversubscribed. I mean, number of legislators in this building that send me those emails every month, it's true. So if we can give the market some predictability so people keep using it, I

[Deborah "Debbie" Dolgin (Member)]: think everybody Well, I certainly support that.

[Marc Mihaly (Chair)]: Gayle, Leonora, did you have a

[Leonora Dodge (Member)]: Yeah, I just really wanted to clarify because I think we were trying to get you connected, your spiel about why base funding, we can't do another one time, and we want the program to continue. Why were we able to do one of the times until now? Just to clarify.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Because there was substantial funding, the appropriations we were getting were $10,000,000 at a time, enough that we could kind of make it more. Other really important piece is when this all started across the enterprise, a substantial number of limited service positions were allocated because we had ARPA funds. So under ARPA, our team was able to receive a substantial number of positions for our little tiny apartment, and we use those limited service positions, which are authorized under ARPA, to administer this program. All ARPA positions have to end by the end of this year. That's federal timeline, and there's really no chance of getting new limited service positions. If we have base funding, permanent funding, we then have a chance to go and seek from what's called a position pool, permanent positions to keep this program running.

[Leonora Dodge (Member)]: Can I run an experienced pool of staff?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Right, right. Yeah, well, that's right. Well, the positions are shared from a pool, but the staff the position has to be advertised. So the staff that's currently working on the program could apply and think would likely be a good fit for those positions, but it's

[Leonora Dodge (Member)]: Sorry, really quick. When you say end of this year, do you mean fiscal year or do you mean calendar year?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Good question, calendar year. Thank you.

[Elizabeth Burrows (Member)]: Thank you. Good clarification. Yes, Elizabeth. A few questions about VHIP. Yeah. We put into our law that we wanted to set aside funding for updates to units

[Marc Mihaly (Chair)]: allow that

[Elizabeth Burrows (Member)]: for people to create accessibility going on previously existed. And, I see in your 2025, VHIP resources for property owners that that's not even included. So it didn't Can you just give an update on that program and exactly where we are on this day with regards to that program?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Yeah, it's included in everything that property owners get. But it's

[Elizabeth Burrows (Member)]: not in this guide at all.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: It's on the website. In many cases, not many, in multiple cases, a property owner has initially opted to take the 20,000 bonus and then ended up declining because the improvements so far exceeded the $20,000 bonus they actually decided not to do. And the reason in most cases that that's what happens because when VHIP is renovating an existing building, particularly a historic building, the biggest constraint is being hallway bed. And to start moving walls becomes a dramatically more costly project. Why?

[Marc Mihaly (Chair)]: If we have a builder here Because builders don't work for free, it costs about a dollar a minute for a carpenter once you add all

[Thomas "Tom" Charlton (Member)]: of the benefits and everything else to it.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: And figuring out structural walls versus other walls, and once you have to

[Thomas "Tom" Charlton (Member)]: move a structural wall And

[Elizabeth Burrows (Member)]: do you think that universe as a builder, do you think that universal design might help with that scenario?

[Thomas "Tom" Charlton (Member)]: I think in some situations, if you have one unit on the 2nd Floor of a building that is not going to have a lift or a three mile ramp, no. If Well, I there is a unit suitable, it's an option, I think it is an option, it's a viable option.

[Marc Mihaly (Chair)]: Go ahead, Saudia. Want to keep this to questions for the witness.

[Elizabeth Burrows (Member)]: I am, so I'm just going. Yeah, okay. So, when I last talked to both you and mister Gilpin about this, the last status update that I received about it was that it was impossible to people to be able to access that extra pool of money because there was no actual definition of accessibility or visibility. Has that changed in the last two years?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: I don't know about impossible. There were language changes that passed last year to give a little bit more

[Saudia LaMont (Member)]: clarity to- Where? In the statute. In which statute?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: There was a series of changes that were negotiated to this VHIP statute. Some included say the 30% set aside for units for folks exiting homelessness and a couple of small clarifications around the accessibility language. Was in the last session of the session. Well, it must have been last session. Mr. Mihaly was here. If you would like, I think Mr. Gilpin is probably more appropriate to give more detail.

[Marc Mihaly (Chair)]: You know, we have a series of witnesses coming next week on disability, and I think it would be really good to have as complete a report as you can produce on exactly what the status was. Mr. Girland has been invited for next week. Next week. I think we need as complete a report as can be produced on the fate of the 20,000 extra and how many units of all the units have incorporated either some or all necessary for either universal design, however that's just defined or thought of, or actual accessibility.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: I think that's certainly something that we can come back with Sean, can dig up that data to specifically number of units.

[Marc Mihaly (Chair)]: Gayle, you have your hand up.

[Gayle Pezzo (Member)]: Hi. Thanks. I was wondering is since it's one time funding, is it more difficult to staff because those positions essentially are temporary positions?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: That's a much more articulate way of saying what I attempted to say. It's hard to give anyone reassurance Okay. Temporary position.

[Marc Mihaly (Chair)]: Do Gayle, does that answer your question?

[Gayle Pezzo (Member)]: Yes. It does. Thank you.

[Marc Mihaly (Chair)]: I do have a question. So is the 4,000,000 total, that's the total amount necessary that includes permanent staffing, but also grants? Or is there I mean, isn't that less than in past years?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: If the question is what's the total demand in the market, it would be substantially higher.

[Marc Mihaly (Chair)]: Yeah, but I mean, isn't 4,000,000 less than you got in prior year?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: It is, it is. In other years with the one time where you've been receiving it, I believe the biggest appropriation we've received was 10,000,000 Is

[Marc Mihaly (Chair)]: that because of ARPA money?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: We did receive 15, yes, with ARPA, and then we received, in

[Marc Mihaly (Chair)]: one

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: of the budgets, there was actually a transfer from BHCB to us. So that year, in total, we got $15,000,000 Okay,

[Marc Mihaly (Chair)]: So do you have a sense with 4,000,000? Are we talking about, I mean, you're saying you're not meeting the market, but are you meeting a tiny fraction of the market? Are you meeting much of it? Most of it? Do you have any sense of that?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Well, maybe 4,000,000 a year, I suspect there would still be, and the homeowners centers may have an interesting take on this as well, especially Cornerstone, their rents uptake, but there will still be a backlog of applications. We likely produce with 4,000,000 a year, I guess in the neighborhood of 75 to 80 units per year.

[Marc Mihaly (Chair)]: Chris, I'll have you identify yourself, but Chris Donnelly, are you act as a home ownership center here, is that correct? Chris Donnelly with the Trampton House of Trust. Yes, I work. Do you have any sense of backlog and what you need, you know, whether this 4,000,000, is it really underfunding? Is it kind of okay? Is it, you know, do you have any sense of that? I don't have a sense of the backlog. I do know when we have resources, people access them. So there's no lack of need right now. Okay. Think, any last questions?

[Leonora Dodge (Member)]: Very quickly, and this funding, does it tend to go to small property owners?

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: That's a great question.

[Leonora Dodge (Member)]: What kind of units are we talking about? And so we kind of get the sense of.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: Yeah, it's been a good mix. I mean, there have been a couple instances where there's been a larger building rehab, say, six or eight units, something like that, and a property owner has access to that. The vast majority, and again, I can ask the team to give sort of a project makeup, but the vast majority are small. ADU has been a decent portion of these up to three or four unit. The reason we like that sweet spot so much is actually raised perfectly with our broader initiatives to expand this universe of who's doing the building. If you think about our eight zero two Homes initiative as part of our broader overall, we're trying to get more people into small scale and we're targeting that one to four unit. VHIP just pairs perfectly with that. So as these folks come through our training program, maybe utilize the designs through eight zero two Homes that Chris' team is putting together, they can then go and apply for a VHIP grant. As a reminder, if a building is a new build, there's a cap. VHIP cannot be used if it's more than, I believe it's six six or eight units in a building. So if it's a new build, it really can only be the smaller scale. Now, if you're rehabbing, you could apply for more. We really don't tend to give those big projects grants with rehab. We don't want it to be just another source in the typical funding stack. We want it to be something different. The home ownership centers and their prioritization of applications have really taken into account.

[Leonora Dodge (Member)]: One thing you just said confused me because I thought that VHIP was to sort of revitalize an already existing unit that's fallen into disrepair, but eight zero two Homes is about new buildings.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: You can use VHIP for new build. It isn't the most common use of it because it's only 50 ks a unit. So the property owner would be putting in a tremendous amount of money. Where it's truly a new unit most often is conversion of a space. So conversion of a space in terms of splitting a single family home into a few or converting it for a physical space.

[Deborah "Debbie" Dolgin (Member)]: Conversion of a family

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: home. Exactly.

[Leonora Dodge (Member)]: Okay, great, thanks. Yes.

[Marc Mihaly (Chair)]: Thank you. So, it's a little past 09:30 now, and we're going to move on to H775, which is an act relating to creating tools for housing production. And, Alex, would you like to be first on this year, first on the list and talk about the one element for you is on VHIP, which is the ability to advance funds, and anything else you'd like to say about the bill? Sure.

[Alex Farrell (Commissioner, Department of Housing and Community Development)]: All right, I'll start with that, and then maybe after hearing Mr. Lubell or Mr. Webster, I may have more to offer later. Why don't I start with the authority to advance funds? To be clear, we do technically have authority to do this if we wanted, we could advance funds. It's not our practice with any of our grant programs. Generally speaking, with public dollars, we like to do things on a reimbursement with program updates, check ins that the home ownership centers do. We do recognize that there may be situations, whether it's manufactured modular construction, or maybe some other circumstance could arise where there's compelling reason to advance the funds all at once rather than on a reimbursement basis. So, we have no issue with this language. We appreciate that it still gives both the Department and Home Ownership Centers discretion to sort of exercise their judgment. So we see no issue with that. Maybe I'll save the broader discussion of the bulk purchasing. If you'll allow Mr. Webster and Mr. LaMont to go to that, speak to that first. But, know, in broad terms, we're largely trying to support any anything that can increase the use of off-site construction we're supportive of.

[Marc Mihaly (Chair)]: Do we have Jeff Lubell here? What, Jason is next? So they're both on Zoom. I don't see Jeff, are they together? Jason's first. Jason's first. Okay. Jason, welcome to House General and Finance. I think you testified to forth once before. You're muted, or we can't hear you. It doesn't say you're muted, but we can't hear you. Yeah. Is this on our end or his? Can you talk and see if we hear you? Don't think he can hear

[Elizabeth Burrows (Member)]: Can you hear us? Oh, we cannot hear you.

[Marc Mihaly (Chair)]: He can hear us. We can't hear you. Maybe, do you think you should hop off and hop back on? How

[Jason Webster (Owner, Huntington Homes)]: about that?

[Marc Mihaly (Chair)]: There we go.

[Jason Webster (Owner, Huntington Homes)]: Alright, earbuds. We

[Marc Mihaly (Chair)]: hear you loud and clear, Jason. I just want to state your name for the record and take it away.

[Jason Webster (Owner, Huntington Homes)]: Sure, well thanks for having me. I'm Jason Webster. I am one of the owners my brother and I are owners and operators of Huntington Homes, a modular manufacturing company located right here in East Montpelier, Vermont. And I thought I would start I know you've been working on the issue. We've all been working on a housing issue for a while, but I thought I would start with kind of a big picture, just like statement of the problem. The other day I saw a chart, a graph that was really helpful for me to see this. And what it was, was it was on the horizontal axis, and this was for Chittenden County and Addison County. I don't know if you've seen this. On the horizontal axis was incomes, and it was and then on the vertical axis were number of families or number of households in that income bracket, right? And no surprise, there's a bell curve there, right? There is a bulk of, there is a section where you have the most amount of families in one income bracket. And this was in Chittenden County and Addison County that I saw, and the bell curve, the number of people in a certain income bracket, you know, the bulk of the people were in an income bracket of a 100,000 to a $180,000 a year. And once you know somebody's income, when we talk about housing, it's all this is all about affordable housing, This is all about what can people not how many units are being built, but what units are being built that people can afford to live in. And so if we take that income group, the bulk of the people in this group, and we do the math that says you know a certain part of your wages should go to housing, we can find that the bulk of the group used to be able to afford construction costs, right? So when we say that $100,000 to $180,000 a year bulk group of income, you know, they could afford houses that were being built at about $175 a square foot, you know, houses that were, you know, in the low $300,000 land. And the $175 a square foot is what builders used to be able to, you know, we used to be able to build for that. Now, and that timing is pre COVID, so 20. As we move through time, the bell curve has not really slid up, right? So the wages have not gone up nearly as much as construction costs. And so now, you're hearing contractors talk about $400 to $600 a square foot, that has now left the construction costs have now left the bell curve. It's significantly to the right of the bell curve, And so that bulk of people just can't afford new construction anymore, right? So that's kind of it's kind of a statement of the obvious, but you know where we are today, costs are beyond what most people can afford. And this leads me to problem number two, which is that builders today are still at capacity, right? You won't find a builder that says you won't find an electrician, you won't find a plumber, you won't find an HVAC tech, you won't find a single builder that says that they don't have more work than they can do right now. What that tells me is that we don't have enough builders, and that even though we're beyond the bell curve of what society wants to pay, there are you know, the bulk of society wants, there are still enough high end projects to keep all of the builders active, right? And so now we have this public policy question of saying, well, what do we do? Right? Now we know the issue, right? The issue is that there's nothing being built in a price range that people can afford. So what do we do? And I think big picture, public policy, your work, know, every regulation, everything we look at, we need to be figuring out the solution to this problem is, one, is that we need to slide everybody's incomes up, right? Not their costs, but their incomes, which I think is the goal. But I think more is that public policy needs to figure out how to move the line of construction costs back down to the bell curve of where people's incomes are. And so I think every public policy, every regulation has to come from that viewpoint of which direction are we walking, right? Is this policy walking us towards houses that can be built for less money to get us closer to where we can afford stuff? Is this policy walking us away from what people can afford? Right, so there's my I don't know if anyone has any questions on that. That's kind of just my big picture statement of the problem we face today. So I look at, you know, the the bill at hand, right, age seven seventy five. I think that looking at the individual components of it, right, like the the financing piece of it, where the money is, how it's gonna be assigned, really is the administration of it. That's really kind of like out of my wheelhouse. Sit as a, you know, I'm a builder, not a developer, and so we're the ones figuring out how do we effectively nail two by sixes together to deliver a product to a client, not necessarily what's program and the financing and all that kind of stuff. The one piece that I can't speak as well as Alex and everyone else about the financing piece of it. Is one piece in there though that I did see that I just want to make, which is the 15% or minimum two unit, you know, affordable aspect. It's a great policy goal. It's important. I'm not saying it's not. What is important though to know about that is that if I go back to a statement of the problem, we can't build affordable housing market rate today, right? We can't if you put a client in a room and a builder in a room and we sum up the costs, we can't build that affordable house without some program to buy that cost down. And so we have programs, right? There's the big A affordable programs that are out there that are buying down that cost to close that gap between the construction costs and the bell curve of where people are income wise. And this program, which is geared towards extending housing into more rural communities, I think we can assume that those smaller more rural projects are probably also less sophisticated. And they probably those developers probably don't bring with them the horsepower or the administration to access the affordable housing programs. And so if they don't bring with them these programs to close that gap, those individual developers are going to have to do is they're going to within their own project shift the costs to other builds in their project. And I can think of I have an example of a project we're working in right now where that's exactly the case. The developer has not leveraged, he's not partnered, he's not used any of the programs, but the town required a certain proportion or percentage of his units be deemed affordable, and he essentially pushed the costs onto the other units. Which if we're trying to if those other units are really high end, well maybe there's enough room to make that work. But if those units are trying to slide towards that bell curve of what people can afford, and the rest of the units are trying to be more workforce housing, which I think is what the policies are trying to achieve, I'd caution us about that affordable requirement just shifting the burden onto those houses. So there's that part. And then, you know, I guess speaking specifically to the part where I can probably speak the best to is the, you

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: know, this

[Jason Webster (Owner, Huntington Homes)]: idea of a bulk purchase to lower costs. Of course, right? Mean, more widgets from a manufacturer is always going to lower costs. The question is, is that, how can a program be designed to actually do that? And going back, I want to kind of like zoom out a little bit as to one of the reasons housing is so expensive right now. One of the reasons housing is so expensive right now is that we really, as much as we understand it's the right thing to do and it's the way to get to cost effectiveness is through standardization, right, where we have the same unit built over and over and over which can lower cost. I don't like to use the example of the car industry, but the car industry, right? Like you walk into a Toyota dealership and specify the vehicle, I want this transmission with this engine, you know, with this interior and all that, right? There was a manufacturing company that provided to the dealer the product that they can sell to the client, and that allowed the manufacturer to produce cost efficiently and effectively because they could develop the project, they can develop the product themselves. So when we look at, when we bring that over to construction, pretty much every house right now that's being built, especially the one off houses on your lot, which is primarily what we build small developers, individual clients that come to us for us to come build them a house on their lot. Every single one of them is bespoke every time, right? Clients might understand the concept of standardization and lower pricing and that they desire lower pricing, but we always are met with the yeah buts, right? Yeah but I want this, or yeah but I'm different, or yeah but that's not important to me, this is important to me. So when we talk about a bulk order, I think that it's going to be something I think it's unlikely that we're going to have a program that sets up a series of small developers all over the state, and that at any period of time, developers are going to aggregate an order for 40 of the same house and then shop it around to a manufacturer and say, okay, I have an order of 40, like who's going to build this for me? One is I just don't think developers and clients act like that. I'm not sure that they would ever align like that. And two, I don't know I don't know many manufacturers that would just be, you know, all of a sudden that purchase order comes in and you know 40 houses is a lot. Like we can build a house in twelve days, but 40 houses is still a lot of them, For us, that's still, you know, that's still three or four months worth of work. And I don't know many manufacturers that would just, when that order came in, they would shut down their production line to everything else and say, I'm going to allocate, you know, four months of work to this bulk order purchase, right? I think a program that would be, and how do I say that, you know, kind of the same thing said another way, builders aren't at a none of us are at a lack of work right now, right? We all have as much work as we can process right now. I think what and so we need to if for a bulk order or something to catch any of our, you know, to be that shiny flashy thing that catches our attention where we're like, where we're competitively going after that, which is going to kind of obvious, which is theoretically going to lower price to consumer, be a bulk order that is something that is easy for us to process in a time when we're looking to process additional work. And so where I can see it, and this ties into, you know, Jeff's going to talk about the eight zero two for all program. We have a product, a standardized product line called True Home. I'm actually in the middle of developing another product line right now that I'm kind of calling the we're calling it because we haven't figured out a catchy name for it yet. We're kind of calling it the Vermont series where think like Mary Ezarian traditional New England vernacular houses across Vermont, you know, those little kind of capes, colonials, one stories, cottages. We're building kind of a standardized package around those houses. I think what would be a more successful program would be if there was a bulk order submitted to a manufacturer to kind of pre build those things, so more like the car industry where that product is built in waiting. And then one is it gets us away from the client, yeah, budding the design because it's already well, this is something that's already built and it's right. It's like the existing real estate market. Well, you want to buy that house, that's what it is. Like if you want it different, but that's what it is. And so it kind of starts to cut out the Yeah Butt customizations. But more importantly for a manufacturing company is it allows any of us to work that production into holes that we have in our manufacturing schedule. And if we are all looking forward and we can kind of like fill in those holes that we all see in front of us, right, no matter all of our companies are very expensive to operate every week, right? We have a very high payroll, we have leases, we have an expensive shop, like we have insurances that don't go away. And so all of us, I think, we look to the kind of our future order flow and we kind of like match our production levels so that we can stay busy, right? The last thing we want to do is run ourselves into a wall or off a cliff, right? So we kind of match our production schedules to the workflow that we see in, which has dips. So we have to take that into consideration. A program like this could fill those holes in, that would allow us easier to set our production levels higher. And then the client can be kind of taking these projects, they can be taking this product out of inventory as they need it. So we're no longer trying to kind of like align a manufacturing schedule with a developer schedule, which are two very different things.

[Marc Mihaly (Chair)]: You have, Jason, I want to say you've been really clear, think, and it is very useful. We have a couple of questions here, And then we do wanna allow time for the others to testify. You have a question.

[Elizabeth Burrows (Member)]: I do. I feel like I'm missing something, and I just would like some help understanding. Like, the DHCD program, which is coming out with the the permit ready act two fifty avoidant, designs, couldn't those designs be, like You mean v c r do

[Marc Mihaly (Chair)]: you mean, 802 homes?

[Jason Webster (Owner, Huntington Homes)]: The 80802 homes.

[Elizabeth Burrows (Member)]: Yeah. That's VCRD. Yeah. Okay, so we're talking about applying the eight zero two Homes catalog or yeah, catalog.

[Marc Mihaly (Chair)]: He's suggesting that. He's suggesting that what he's saying, if I could interpret is to answer your question, he's saying two important things really to the point. One is the bulk ordering isn't gonna work if let's take 40 units. It's not gonna work if it's 25 different kinds of houses.

[Jason Webster (Owner, Huntington Homes)]: Correct.

[Marc Mihaly (Chair)]: It's not going to Well, it'll work, but it just won't reduce prices. And the second is So, it would be much better if it was one type, one one variations on types, but all within essentially the same unit without all kinds of customization. And the second thing he's saying is, which is new to me, is he's saying, it's not as if we're going to open up a whole new line and hire a whole bunch of new people to make your order of 40 units, even if they were all the same. What he's saying is it would be better if we knew that that order was there and could depend on it, and then we would just fit it into our schedule and because there it's like a his factory is like a machine that costs money every week, so they have to keep it busy, and if they would build up the inventory and then it would be deliverable to whoever ordered it.

[Jason Webster (Owner, Huntington Homes)]: That's correct. So if I knew that so we as a manufacturing company in Vermont in construction, are sort of subject to the same cyclicalness of the building cycle that happens here, right? So when we I can't people aren't ordering homes for us to build in January when they know they can't take delivery of it. So we always have this logjam of work in June. Things kind of cool off through the summer because people are summering and Lake Champlain is beautiful. And then in the fall it rolls through again and then it falls off in the winter. And so if we knew that if we knew we had 40 the winter is what scares me, right? The winter is why I don't sleep. The winter, you know, like it's a lot to run this manufacturing company. And so if we knew that we had this order coming in for winter work, that even if we have to put it in our parking lot and wait to deliver it when sites can get ready, that would encourage me to run at a faster pace in the summer to increase production, to get those houses out of the way so that we could then work at a higher production through the winter as well. Because what happens right now is internally, we're looking at the orders coming in all summer and all fall, and we're looking at which ones can we push into the winter, like which ones can we push out to make sure that we have year round work to make payroll, you know we provide health insurance to employees, like to do all of that kind of stuff. So that kind of keeps a little bit of a cap on our production level because we don't ever want to run out of work. But if I knew it was there, we would run faster.

[Elizabeth Burrows (Member)]: Elizabeth, go on. Well, guess what I was really asking, I understand what you're saying. That was what I was sort of getting at. I understand what you're saying. That was sort of what I was getting at. And I wondered why we wouldn't just create a plug and play mechanism like that where, when we are looking when we do as I was saying to chair Mihaly the other day, when we do actually take a step back and look at what we are thinking about spending our precious treasure on, what are we spending our precious treasure on, and shouldn't we be prioritizing the not just building more homes, but building more homes for the real need in different areas of our state, including rural areas? And why wouldn't we wanna do that quickly and as affordably as possible? So why wouldn't we just try to not just why wouldn't we prioritize creating a kind of plug and play?

[Marc Mihaly (Chair)]: Well, I think you're gonna hear that from the subsequent witnesses. I mean, I think you're on the right track. Jason, we we really should allow the other witnesses time to testify. Is there anything you haven't said that you wanna add or any questions by the committee before we move on?

[Jason Webster (Owner, Huntington Homes)]: No, I thank you for your work on this, and I agree that these packages should be geared towards, I mean, grew up in the Northeast Kingdom right I think they should be geared towards the more rural communities because they're experiencing the same construction costs that Chittenden County does right the contractor costs are the same and they really are the ones that are being left behind right now as that work has migrated to these areas as it's just math, The work is following the curve of incomes.

[Marc Mihaly (Chair)]: Right. I do want to ask you one question because you just said something at the end there. I want to make sure I understand it. I got the point where you said, hey, it costs us x gazillion to run the thing per month, and it's a machine, it just runs and that's what it costs, so we have to fill it up with orders to produce the income, and what you lose sleep over is in the wintertime, we don't always have it. So, it would be sure be nice to be able to fill up the winter with bulk orders. Correct. Okay, but I also heard you saying that the size of your overall operation has to match the overall income that you can earn. So, other words, even if you could be bigger in the summer, in the status quo situation, you can't afford to expand to meet summer demand if it means that you have all of those fixed costs eating you alive in the winter. And then if you had more winter orders, you might even be able to redo the math and expand in the summer.

[Jason Webster (Owner, Huntington Homes)]: No, that's exactly what I'm saying is that ideally we want to maintain the same production levels year round because it's a slow it's an oil tanker that takes a long time to speed up, slow down and turn.

[Marc Mihaly (Chair)]: Right.

[Jason Webster (Owner, Huntington Homes)]: So we want a production level that's year round and then we will match that with staffing.

[Marc Mihaly (Chair)]: Okay, great. Thank you.

[Jason Webster (Owner, Huntington Homes)]: Thank you.

[Marc Mihaly (Chair)]: And thank you for your time.

[Jason Webster (Owner, Huntington Homes)]: Of course, thank you.

[Marc Mihaly (Chair)]: Which we now know, we now understand it's expensive. I don't wanna even know what this meeting costs. See all this? Yeah. Alright. Thank you. Thank you. Alright. Jeff? Jeff Lubell, you are next.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Okay. Great. Thank you for, providing me with an opportunity to, speak with you this morning. I'm gonna see if I can share my screen. Just give me one second. Yeah. Can you thank you. Can you can you see my screen?

[Deborah "Debbie" Dolgin (Member)]: Yes. Yes.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Great.

[Marc Mihaly (Chair)]: We also see the little sidebar if you want us to

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Yeah, yeah, yeah. I'm trying to change it so I can you can see the whole thing.

[Marc Mihaly (Chair)]: That was interesting.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: All right. Wonderful. So thank you for the opportunity to testify. My name is Jeff Lubell. I am a senior fellow at To Williger Center for Housing at the Urban Land Institute. This is an organization of professionals across the country focused on housing development. The Twilie Krasnow is really trying to expand the supply of housing affordable to people of different incomes around the country. I also Where

[Marc Mihaly (Chair)]: is the Twilie Krasnow?

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: The Twiliegr Center is based in Washington DC. It's the Urban Land Institute that works nationally, and I work out of my home in Norwich, Vermont. And I am also I also have a consulting group. So I'm doing that part time. I've been in Vermont for about eighteen years. I I thought I what I would do is is really quickly kind of review a little bit of what I said last year, not go into any depth, but just in case it's helpful to have some definitions of terms and a little bit of background and then switch to really focus on the legislation. And I'll try to do that all within ten to fifteen minutes so we have ample time for questions. As you may recall, I testified last year about a report that had been commissioned by three Vermont state agencies that I coauthored with Seth Leonard focused on ways to use off-site construction to meet Vermont's housing workforce and climate goals. And really, that report picked up on a question that the New York Times had asked in this article, know, why are we building housing the same way we did a hundred and twenty five years ago? But all these advances in in in assembly lines and in you know, but most homes are still being built, you know, stick by stick. And, so they that, article really urged to focus on off-site construction, and that's something that I've been focused on really as a way to achieve a bunch of of different goals that we'll talk about, but mostly a way to lower housing costs and increase the supply of housing. So first, just a little bit of, of terminology that I think can be helpful because it it's it's it's really confusing and and but really, very simply, off-site construction is housing that's mainly produced in factories rather than on-site. So there there can be and often is some work on-site, but most of it's done in a factory. And there are these there are basically four different kinds.

[Marc Mihaly (Chair)]: There's manufactured Deb, just a minute. Members of the watch this and pay attention to these types because it will be very useful for us in the future to understand the differences in the subsets of this off-site construction. Go ahead, Chad. Sure. Because this is very apropos.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Great. So manufactured housing, is housing that is produced, and conforms to a national building code called the HUD code. And these are homes that are required currently by law to include a steel chassis. And you're most familiar with them as single wides and double wides, which are a form of home that you often see in special parks. They might call manufactured housing parks or used to call mobile home parks. We don't like to use that term mobile homes anymore because it typically connotes a low quality of homes, but there's been a lot of improvements in the code. These homes are quite nice quality homes and they can also be installed on permanent foundations as the Vermont State Housing Authority is doing with their mobile home infill program. But as you'll see, there are now, there's a high end version of manufactured housing and there are some really beautiful homes and I'll show you some pictures. So you you can see that it's not just, you know, the kind of single wides and double wides. There's really a range of different configurations. So the the next type is is often called volumetric modular or or really just modular. This is the type Jason was just talking about Huntington Homes. So this is what they do. It involves the construction of boxes off-site, and they're called volumetric because they have volume inside. They're not just a two dimensional panel, but they're a three-dimensional box. And those are constructed off-site and they're joined on-site. Depending on the approach, there's a different amount of work that's done on-site to kind of finish them off. And then there's a type called panelized construction, and that's where you're basically building two dimensional wall floor ceiling panels. And those are are can be shipped to the site and constructed on-site. And so you have the building is on-site, but most of the assembly has been pre done, so it can be assembled quite quickly. And then, there's also a kind of a number of variations. Kit homes, for example, are are really a form of panelized construction that that that, you know, sometimes are intended for the homeowner to even assemble, right, without without a lot of, of additional work. And you might recall that Sears Homes had a kit home product that they offered that people could order homes, you know, seventy years ago. They could order homes, some beautiful homes, built through Sears catalog. So that's just a little bit of terminology. Here's, like, some pictures so you get a little sense. There's a Huntington home in the upper left, in their true home line, which is one of their more affordable lines. There's a company called New Frameworks that makes, smaller homes with compressed straw bale, and that they're in the bottom left, and you see kind of a rendering of the interior in the middle. The two homes on the right are both manufactured homes. The upper right is something called the cross mod, which, the cross mod is a product that is really trying to fit in to residential neighborhoods. It looks as you can see, a lot like a conventional one story home, but it's just a lot more affordable. And the bottom right is actually a duplex, so it has two modules that are connected, and both of them are built with a standard roof pitch that looks a lot like site built homes. The CrossMont homes actually have access to a preferential financing program from Fannie Mae and Freddie Mac that are really designed to try to encourage the use of manufactured homes in residential neighborhoods. So some of the benefits, again, I'll go kind of quickly, but I'm happy to go back more slowly, but I want to make sure we get to your bill. There's a potential for cost savings here. It comes from a shorter timeline, there's less waste. If you really have economies of scale, and Jason was talking a little bit about what would be needed in his context to do that, there are a range of different economies of scale. But really, it's one of the biggest factors that is driving up housing cost in Vermont is that we really are not building at scale for the most part in Vermont, particularly when it comes to single family and kind of missing middle typologies. If you were to create a plant in Vermont or expand a plant, you would have more jobs. There's a lot of labor shortages that we see in the housing field, particularly of skilled tradespeople. And if you're doing it off-site, there's a way to sort of hire someone year round rather than trying to find someone for each individual job so it can be easier to supply that expertise. There's you get buildings done a lot faster, so it can be a good, for example, response to disasters because you can build homes in a week or two rather you know, takes then you have to install them. So maybe it's a month or two, but it's not, you know, the way it typically takes. And, if you specify energy efficient designs, you can achieve your climate goals. And finally, there's a way to streamline the inspection process. If you were to adopt, you know, the kind of the model codes around how modular gets inspected statewide, then there wouldn't be a need for local inspections and that would streamline things and I think make life a lot easier for the manufacturers. There are some drawbacks and limitations, one of them is that the potential for cost savings are not always realized. For the most part right now, in this country, we use modular and panelized to build custom construction of high end homes because that's what pays they pay cash or, you know, they have easy access to financing and and there's a lot of work that's needed to complete the homes on-site and and it it kind of works for what it does, but it's not meeting the need for lower cost homes. Manufactured housing does have scale and low cost because they're typically built in much larger factories, and so they're buying parts at greater scale. But right now, they're limited to one story structures, But there are multiunit structures like duplexes that are now allowed. And actually, as we speak, HUD is in the finishing stages of finalizing a rule that will allow, we think, multistory manufactured housing structures. And congress is also contemplating eliminating the chassis requirement, which will, again, make it easier to build multistory structures with manufactured homes. High upfront costs. So our manufacturers are very vulnerable to housing downturns, much more even than stick built, construction. You know, it's if you have a construction company and you don't have a plant, you can kind of melt away. People lose their jobs, yes, which is bad, but you haven't made huge investments in materials and factories the way you have with an off-site construction plan. And so this is one of the reasons why we've lost capacity in the Northeast. There used to be eight, I understand, eight volumetric modular plants in Northern New England, and now there are three. There are places where local building codes and design review processes kind of pose obstacles to scale. And this includes differences in how the codes are interpreted. Vermont, for example, the larger cities, you know, take over the inspection processes, and they might interpret things differently from the state, and that leads to problems that make it harder to achieve economies of scale. And there could be issues related to labor shortages and and public perception. So the report that I mentioned made a number of recommendations, and I'm really pleased to see that there's been progress along many of these dimensions. One was this idea of using bulk purchase guarantees to achieve lower costs. Eventually, the way to achieve the greatest cost savings really is to have very large orders that would allow a plant to expand their capacity on a reliable basis rather than trying to squeeze in a single order. I understand that's something that takes time to get to, but that's where I would say we wanna be heading towards. If we were buying a 100 units a year and and the manufacturer knew that you were gonna do that for several years, then you could add a second shift, you could hire more staff, you could really think about doing that. And so that may be where we're going, the current bill is actually a really important step in the right direction towards that, even if it doesn't quite get there yet. The second was to focus on newer expanded factory capacity. My understanding is there's been work done to really understand the needs of the Fairhaven plant, which is a former manufactured housing plant, to allow it to restart. So it's great to see that moving forward. There's more that can be done, I'm sure, to really think about ways to use off-site construction as part of the development of apartment complexes. And I am currently in the fundraising stage of trying to raise some money to support a off-site construction working group of Northeastern states, which was actually another recommendation in that report. We will be doing work on both single family and multi family to really help states learn from each other and really utilize and incorporate best practices to try to lower costs. There's a number of really exciting ways to lower multi family costs. That's not what we're talking about today, but something to to think about. And, some of the other recommendations were a statewide building code for off-site construction, you know, which

[Marc Mihaly (Chair)]: Jeff, can I interrupt with a question? Please. At the February, there is a conference of the Council of State Governments Eastern Regional Branch on Housing. You know about that? Will you be there?

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Yeah. You know, I I had I have heard about that. I I don't have a plan to be there. But if there were you know, if if you all were interested in talking about a region wide building code, for the Northeast or you're interested in talking about statewide building codes or off-site construction, I'd be eager to learn more about it and see whether there might be an opportunity thank to

[Marc Mihaly (Chair)]: you.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Yeah. We talked about preapproved designs and and which is, again, you'll see part of the demonstration that's being proposed here and and maybe some small grants to help builders and manufacturers adapt. So that's a little bit of background. Happy to go into more detail. I just have a few more slides. I wanted to focus a little bit on what's going on with implementation. Here I want to emphasize that there are actually two pilot programs that have been proposed that both involve the bulk purchase of homes produced through off-site construction. So there's the one that's in your bill, the Off-site Construction Accelerator pilot. And then the Vermont State Housing Authority is also planning a program that they're currently tentatively calling Move In Vermont. There had been some other names they had been thinking about, and maybe they'll end up with a different name, but that's their current one. I'll tell you on the next slide a little bit about that one. There's also in this bill a credit facility, Section 10 F, for the purchases of homes produced through off-site construction. That is a huge step because one of the biggest challenges with, doing off-site construction generally, but particularly thinking about a bulk purchase is that is that there's a kind of a revolving need for funding. You need to put a deposit down when you place the order so that the manufacturer can go and order materials and reserve a place in their line. And then eventually the home gets built and there's a need to pay the manufacturer, then the home buyer buys the home. And so you're getting replenished, but there's sort of this extension of credit, temporary extension of credit. And so having a kind of revolving fund that can help you manage that without having to say, We're going to force every single project to apply for a separate construction loan. It just adds cost and complexity, and this is much simpler. That would really be fabulous if you're able to kind of move that forward. My understanding is it does not require appropriations. So part of my big picture message here is that this is really important progress towards implementation of some of these ideas. So let me, if I could, just describe the two pilots as I understand them. And certainly, I think Alex is here and can correct me if I am misunderstanding either of these. So the Off-site Construction Accelerator, as I understand it, it's really built on the foundation of the Department of Housing Community Development's Homes for All initiative. So they are working on a series of home designs, and they are then going to work to get those designs pre approved. So they will accelerate the housing development process by identifying these designs that you won't need to go through a separate design review process at the local level. My understanding is that they're focused on what we call missing middle typologies. I don't know if that is a term that you all have used, but it typically is used to define the housing types that fall between single family on the one hand and kind of mid rise multifamily construction. It would include duplexes, triplexes, quadruplexes, like four homes attached to each other. It includes townhomes. It might include garden style apartments. But it's this typology that has historical roots throughout the Northeast, but for a variety of reasons isn't being built. But it can be a more cost effective typology because you're building a little bit more densely. It's not by any means high rise, but it's a little more dense. So you can make more efficient use of land and and you're also sharing walls. I expect they would probably be using modular or panelized construction for that. What it's testing is you know, the use of preapproved designs and municipal collaboration to streamline the approval process. It's testing just this idea of bulk purchasing. You know, how will that work? And the idea when you when we say bulk purchases to really be purchasing the same unit, but in lots of them. And so this will have some modest cost savings. It's not the the the larger cost savings that you would get if you were sort of doing a permanent standing order for a large number of homes, but it is you're going to be able to amortize the engineering and design costs across a larger number of homes. You design it once, and now you can pay for it with 20 homes instead of one home, for example, or 30 homes. And if you can sequence it in ways that fill in the gaps in some of your producers, it might be a way to help them out, and maybe you get a modest cost break as a result. I'd also test the, can we identify sites? Can we execute the pilot? So it's a lot of things that it will be studying. And the cost savings here will be a combination of the shorter time and streamlined approval process, so you don't have to pay for the time that it takes and the cost for that, and also the savings from a bulk purchase, which will be modest, but will hopefully be something. And if this works, the next step could be, okay, we tried it with duplexes or we tried it with townhomes. Now let's try a different housing typology and see if we can expand the number of successful examples. Then also to extent that you can increase and regularize this purchase, you might be able to achieve greater cost savings. So that's, as I understand, H-seven seventy five's Accelerator Program. So now the Vermont Program. This is a program that's based on a program that is being implemented currently in New York called Move In New York. And they are using manufactured housing rather than modular or panelized housing. And as I mentioned, manufactured housing, these are built in larger plants. They already have a lot of economies of scale. And they have developed some high end products. For them, end, not high end for the market. But for example, they have a cross mod housing type that I'll have a bigger picture on the next slide. And they just did a pilot in New York of looking at three of these cross mods and they came in around 2 and $50,000 to build a home. That did not include the cost of land, but it did include putting the foundation in and doing everything from building the home to installing it, that was a fully ready home. And they are now in the process of expanding, and I'll talk a little bit about Move In New York in a second. And so this is testing kind of a different concept, one that's very complementary, right? So they're testing the ability of high end manufactured housing to provide attractive homes at low costs. They also will have site identification and effective execution, things that they're testing. They will be trying to aggregate demand across multiple sites. I think that's something probably that H775 will be doing as well. And it's really important concept and it's a little tricky, not impossible, but it is something you want to test. Can we find eight places that want to put 15 homes, right? Or eight places that wanna put 10 homes. And what does it look like to kind of pull those orders together so that we can achieve a little more scale? I do think you're likely to see lower with this one in particular because it's using manufactured housing, but it's also more limited in the housing types. So right now, they can do basically single family and duplexes. They won't be able to do some of the two story homes, for example, that you'll see in the Off-site Construction Accelerator. And then so if that's successful, the next step would be to say, okay, how do we expand our network of partners so we aggregate more demand and we could be building a larger volume, maybe get some more volume discounts and grow our utilization of the revolving fund. So two programs, both off-site construction, both bulk purchase, but really different enough that it's worth moving forward with both of them. I mentioned the Move In New York program. I want to just show again the picture of the home. This is a home that was built by a company called Champion Homes. So these are across mod home. As I mentioned, it cost about $250,000 all in. It varied a little bit. There was one home where the utilities were not where they thought they were gonna be, and that cost a little bit more, but they were very happy with it. They're in the process now of rolling it out statewide, so they're inviting basically municipalities, and they have these institutions called land banks that have assembled parcels of land around the country, and they've negotiated pricing with Champion and with another company called Clayton Homes. And so they'll be doing a mini bid process. And their goal is 200 homes this year. I don't know if they'll quite get to 200 homes finished this year, but they're really trying to ramp up. You can read this article. It was in the New York Times, and I'm happy to send a copy if it would be helpful. Really quickly, my conclusion is that the Off-site Construction Accelerator is a really important step forward. It will generate actionable learning and pave the way for future scale. I really applaud you all for proposing it and the department for considering it. I would also underscore the importance of the proposed credit facility. It's just, you don't need long term credit for this. It's short term, but it's just a lot easier to do it in bulk rather than through individual loans. From what I understand, and you'll have to talk to the treasurer to know for sure, but my understanding is the proposed credit facility should be large enough to finance both pilots. I encourage you to think about that. I don't think you necessarily need a lot of changes in the legislation to accommodate that. My understanding is the Vermont State Housing Authority does not necessarily need state authorization to move forward with theirs. You just want to make sure as you're writing the credit facility that you're thinking about it as being able to fund both. I've proposed that the credit facility operate as a revolving fund. Not that you don't need grants, you might need grants too, but that would be a separate thing. And I understand that the finances around that are more complicated. I see that you requested input on whether you need a statewide code. I think that's great. And I think you really should be thinking about this. Obviously, it's a longer time horizon, but there are a series of model off-site codes that have been prepared by the International Code Council in partnership with the Modular Building Institute. What they do really is kind of rationalize the process of developing off-site construction, it's really clear what the state can do versus what the localities can do in terms of inspections in particular, and really provides a lot of common terminology. So a number of states, I saw Rhode Island just adopted all of those model codes, and would encourage you to really think about them as a way to make things easier. Because the more you can get inspected, the more you can do at the state level, and get those panels sealed up so you don't have to do local inspections, it's gonna save everyone time and money, and really just be better for everyone. Did have a couple of suggestions on technical fixes. I think when it comes to the credit facility, it's great that the treasurer has stepped up to run that. It would be important, I think, to coordinate with your four state agencies just to make sure that everyone's needs are met. So that would be the Department of Housing Community Development, the Vermont State Housing Authority, the Vermont Housing Finance Agency, and the HCB. And then I did notice that the Off-site Construction Accelerator seems to currently contemplate a single municipality. I would think that you might wanna allow yourself the opportunity to work with multiple municipalities. Great, if you find one municipality that has enough space for 30 homes, but what if it's two or three, and they each have 10? It seems to me the great, one of the real benefits of outside construction is they don't all need to be in the same place to achieve scale. You could really think about this as an infill program, as something that could be really helpful. So that's really all I have here, and I'm gonna turn off my screen and I'm available to answer any questions that you might have.

[Marc Mihaly (Chair)]: Jeff, this has been most helpful. I, for one, don't have questions, but do members of the committee have questions? Jeff, a thousand thank yous. This has been most useful. Really appreciate it. We may be back in touch.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Great. Alright.

[Marc Mihaly (Chair)]: Thank you. Chris, are you gonna be representing? I sorry. I have one very

[Leonora Dodge (Member)]: quick question. Jeff, are you

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: still I'm here. Hi, Jeff.

[Leonora Dodge (Member)]: Hi. I was wondering about whether your off-site construction factories were all in state or whether you used I saw somewhere about Quebec off-site. Were just citing Were you just referring to other successful programs, or was that one of your providers?

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: So I'm sorry if I didn't make this clear. Am not a provider.

[Leonora Dodge (Member)]: A consultant. I You're big tank. You're the brain trust.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: But I'm part of the Yeah. I'm here to help, you know, if I can be helpful on on on any of the issues you have around housing. I have been doing this for twenty five, thirty years at the federal, state, and local level. So the reference to Quebec had to do with multifamily housing. So as you start to think about, for example, apartments, how do we lower the cost of apartments so that with the Vermont Housing Finance Agency can finance more apartments with the same amount of Low Income Housing Tax Credit. So there are a number of different models and ways to think about that. And the reference to Quebec was to a program that the province of Quebec has established where they put out a competition and they requested that teams of modular manufacturers and architects propose specific designs for kind of small to midsize apartment buildings that are being assembled into a catalog. And then municipalities will be, and nonprofits will be given this catalog, and the province is offering to pay for the construction of these homes using the catalog. And it's a way to achieve standardization because they're saying, We're going to build this apartment. You don't have to pick this one. You could pick a different one. But if you pick this one, this is what you're getting, and it's a way to contain costs. And so they had a particular cost structure that they were working under. Now, it may very well be possible for Vermont to access the homes that are in that catalog using those manufacturers, because there are some manufacturers in Vermont, in Quebec, who have historically been open to working in the Northeast. I can't speak to the exact status of the tariffs and all of the relationships between the two places. But there are manufacturers in Vermont, there are also manufacturers in Pennsylvania and in New Hampshire and in Maine that will all service the Vermont area. So you have a number of choices.

[Leonora Dodge (Member)]: Great. And then my other question was whether the if

[Marc Mihaly (Chair)]: I

[Leonora Dodge (Member)]: have this right in our bill, we're targeting the rural pilot program for communities that are under 5,000

[Elizabeth Burrows (Member)]: people.

[Marc Mihaly (Chair)]: That's that's not That's separate. That has to do with the tax stabilization. Toilet is silent on, it just does say a municipality, it could say one or more municipalities. Okay. Any other questions for Jeff before we really let

[Leonora Dodge (Member)]: him go? One last one.

[Marc Mihaly (Chair)]: Yes.

[Leonora Dodge (Member)]: Sorry, I think I have a lot of questions for you, Jeff.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: That's fine, I'm here.

[Leonora Dodge (Member)]: So, move in New York, which was mostly manufactured manufactured housing, what we think of as single wide and double wides, it's a lovely home, way more affordable than a lot of other housing that we're talking about here, I'm imagining. Right? So the Like, have you how did we get a price of what He your

[Marc Mihaly (Chair)]: said it's too Modular?

[Leonora Dodge (Member)]: No. That is this move in PROSMAT, not necessarily the

[Marc Mihaly (Chair)]: No. The the modulars are more expensive.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: The short answer to your question is I think of cross months, I like to call them high end manufactured homes just as a way to distinguish them from your conventional single wide and double wide. Nothing against those, but they're just, they look different and they have a lower cost. And my view is you need housing of all types. We need a range of different price points to meet the needs of Vermonters at a range of different So there's an absolute place for single wide homes. We're seeing the mobile home infill program is producing some high quality, efficient single wide homes that are priced at a particular price point. The CROSSMOD program is aimed at that kind of the idea would be to produce homes kind of in the $250,000 to $300,000 range. And yes, they're a lot less expensive than other homes. I do expect the homes in the modular accelerator to cost somewhat more than that, partly because they're being built with modular and because you're not yet at the scale where you can quite secure the same level of discounts. But over time, my view is the goal ought to be to really try to, after you've done your demonstrations, when you feel comfortable, ramp up the scale so that you could be ordering a larger volume of homes in a way that gives a manufacturer the assurances they need to be able to sort of more permanently increase the size, whether it's Huntington homes, opening a second line or expanding their staff, or it's another manufacturer, if they knew that they had a guaranteed order every year of 100 homes, you would get a lot better pricing, in my view, than what you're currently going to be able to get right now. And that would be the long term goal, be to find a way to say, maybe the state can serve as this aggregator of demand from individual municipalities or individual nonprofit partners or individual for profit partners in a way that would allow you to achieve greater economies of scale and greater cost reduction so that maybe in the future, those duplexes and triplexes can get down to $2.50 and 300. That would be the long term goal that I would encourage you to be thinking about working towards.

[Elizabeth Burrows (Member)]: Great, thank you. Thanks, Jim.

[Marc Mihaly (Chair)]: Any other questions of Jeff? Yes, Tom.

[Thomas "Tom" Charlton (Member)]: Just one general question. Can you comment on the durability of cross mod versus manufactured homes and modular?

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Sure. I can tell you what I know, which is that, cross mod homes are built to the HUD code standard, just like single wides or double wides are. So it's the same minimal building code, but I would encourage you all to be asking for homes that someone exceed the minimum standards, which you have the ability to do. And in two ways in particular, one is higher level of energy efficiency. So the Clayton Cross mods, for example, are all net zero ready. So that is something they're already doing and Champion has the technology to do that. The other thing to think about would be to build homes to a higher level resistance to wind and hurricanes. And the manufactured housing code has different zones based on the wind level risk and the highest requirements apply to Miami because of hurricanes down there, but you have the ability to say, I would a home built to the Miami code installed here in Vermont so that you would be more resilient. So I would encourage us to be thinking about ways to use the cross mods to produce homes that are resilient to natural disasters, that are highly energy efficient, that are going to be a solid, excellent investment for decades to come, just like a single family home.

[Thomas "Tom" Charlton (Member)]: Just a follow-up question. I understand that cross mods don't depreciate over time, the same way a mobile home might or manufactured home.

[Elizabeth Burrows (Member)]: I think that's a lot too. For

[Thomas "Tom" Charlton (Member)]: a first time buyer that is looking to build some equity to move on to a future home, do they appreciate with the market the same as some modular might?

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: I don't think there's enough experience about Crossmont specifically to say, but the evidence shows that I have seen is that a manufactured home that is built on a permanent foundation and is treated as real property rather than personal property appreciates at about the same level as a stick built home. So there are studies that I have reviewed that say that. Thank you. I would expect the same level of appreciation.

[Thomas "Tom" Charlton (Member)]: That's good. I

[Marc Mihaly (Chair)]: was surprised to hear that, but I have now heard that.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: If you have any other questions, please let me know. I'm happy to follow-up with you on this or any other aspect related to housing. I really appreciate you taking the time to hear my testimony. So thank you.

[Marc Mihaly (Chair)]: You have another question? I

[Leonora Dodge (Member)]: do. I have some outside.

[Marc Mihaly (Chair)]: Don't worry. Let me clarify. Our next item is So at we want to allow a little time for a break, but we could take another five minutes. So, go ahead.

[Leonora Dodge (Member)]: Thanks. Jeff, do you have any comment on the process for identifying sites? It feels like we're trying to do everything all at once, right? We're developing housing design options and trying to release the credit and identifying manufacturers and trying to find all of the participants who would want to buy these homes. Do you have any better steps or how to whether our language has to speak to any of the desired steps that we should be taking, even the order or any other hints

[Elizabeth Burrows (Member)]: on that would be helpful.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: My suggestion would be that that be something that the authorizing, that the groups that are operating the demonstrations figure out. I don't think you necessarily need to figure this out at the state level, and it would actually be kind of cumbersome to have legislative language that was hard to change. Imagine you did it and you were well intentioned, but somehow you got something a little off. They would have to come back to you and get a legislative revision next year before they can move forward. I feel like you've made very clear that what you're hoping for out of this legislation, and it would be the department's responsibility to develop a plan that makes sense for selecting the design and for identifying communities and all of that. And I will say that the Department of Housing and Community Development right now, they're doing listening sessions on their proposed designs for homes for all. So there's a lot of public input that's going into the selection of the designs. They are reaching out to municipalities already, even independent of this legislation, to develop agreements with municipalities to accept the designs. They already have a number of sites that they have seen that could potentially accommodate these homes. I think what's great about the pilot, as you've proposed here, is that it really builds on the Homes For All initiative and all the progress they've made, rather than something that's from scratch. And then on the Vermont State Housing Authority side, I'll actually be working with them to develop some guidelines around how do you select sites and how do we find partners and all of that. So I think that you've got two very capable agencies that I think would do an excellent job administering these programs. Certainly, And as a legislative body, obviously it's your prerogative to do whatever you want, but I would say give them some flexibility, but demand accountability in terms of making sure that you get the report and you see the results and that whatever documentation you want of the program's effects and learning, I think that would be great to follow-up on. So I think at the end of the day, both of these are just taking steps in the right direction towards aggregating demand and building the muscle memory around how to do this well. And there'll be a lot of learning from this that can inform future efforts and hopefully at a larger scale.

[Elizabeth Burrows (Member)]: Thank you.

[Marc Mihaly (Chair)]: Any final, final, final questions? Jeff, again, thank you.

[Jeff Lubell (Senior Fellow, ULI Terwilliger Center for Housing)]: Yeah. My pleasure. Alright. Best of luck.

[Marc Mihaly (Chair)]: So it's a quarter of let's reconvene, please, exactly at eleven. Where what we're gonna do is just have a discussion about this bill and suggestions to counsel about things to add or change to the text. So, it's not for vote, it's markup. And, you know, give everybody a chance to sort of talk about it, think about it. Okay, and that's at eleven, so we have fifteen minutes before, yeah Debbie.

[Deborah "Debbie" Dolgin (Member)]: I just want to say we have Sears homes in St. John's Berry and they're still standing.

[Leonora Dodge (Member)]: I think I lived in one of those.

[Marc Mihaly (Chair)]: I was in California, my first home, let's go