Vermont Legislature SmartTranscripts:

[Chair Marc Mihaly]: Welcome back, everyone, to the committee on general and housing. Don't worry me. It's unheard of that we're back this quickly.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Everybody is to It's an exciting presentation coming.

[Chair Marc Mihaly]: That's right. May 1226. Well, one thing I'd like to for our wine partners with us from Let's Build Homes, can introduce himself. Let me set the stage in one regard. I mean, I'm sure you're familiar with the evidence that we heard from the professor at UVM. One of his points, think, one of the more interesting of his points was actually a population question. He was, if I can paraphrase, essentially saying that he thinks that a lot of our projections, housing projections, were built on this period of the period between 2020 and 2025, and he thinks that this is a period which has been dominated by, really by the COVID experience of rather large population influx into Vermont, and that a situation where in the last two years we've seen population outflows not that big, but somewhat, He's really, I think, raising the question, which he didn't answer in his written, I read his study, but he's really raising the question of whether we don't need to revisit the housing protections in that regard. I mean, it's a So I just want to lay that out, that that was one of his many points. So anyway, and also just to let you know, I did read the Honolulu study.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Great, because I brought it back in a reprise here. Hello, everybody, I'm Mariel Weinberger, the Executive Chair Let's Build Homes. I know it hasn't been that long since you at least saw me up on the screen last week. It's exciting to be I appreciate the opportunity to be here with you in person and to respond to that testimony, which I'm prepared to do. I will say, Chair Mihaly, my understanding is that you have VHFA coming in tomorrow to explicitly speak to their methodology and to clarify some points that were made last week that I don't think they agree with. I'm to some degree leaving that to them. Will just quickly say, I did watch that exchange. What he raises there and what you've just raised is a point that comes up a lot now for the last couple of years. There has been, to best we can tell, which is not super well. Between census periods, population measurement is quite imprecise and you see different figures come out from different sources. I thought the suggestion that 2,000 people left was a substantially larger number than I had seen.

[Chair Marc Mihaly]: I had not seen that.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: I don't know where that came from. But here's the thing, the HFA has a good, very good post up on their webpage now. We have a more extended one on the Lexapro Homes webpage that really interrogates this question of does a year to year change in population, what does that mean? I think it means several things. First of all, there is no doubt that if we were building homes at the kind of rate that we did in the 80s and the 90s, the kind of rate that we did historically, we would be like numerous other states around the country that are better meeting the high demand for homes with new supply, and those states that are doing that are seeing populations increase. I think to some degree, we should see the fact that we are seeing some out migration as exactly what we've all been raising concerns about, that young people are leaving the state, that others are being pushed out of the state because there simply isn't enough housing. It made sense to me intuitively. I can't point to a specific study that has really documented this exactly yet, but we all have lived what happened during the COVID period. We essentially created thousands of new homes in the hotel program during COVID. There was also a very big influx of we were the biggest in migration state for two years in a row. I think we were the highest per capita of any state. Then as we have come out of COVID, we very low housing production years, and for financial reasons, we have pushed thousands of people out of those short term hotels. To me, it's not surprising that some number of people would need to go elsewhere in the wake of what happened there. Does that mean we should totally reevaluate our housing estimates? No, I don't believe that's what it means. My understanding is that one of the reasons that need for new homes in the housing needs assessment was presented as a range from 24,000 to 36,000 is that VHFA was anticipating, was acknowledging back when they wrote this in 2024, there was unclear whether we would continue to see in migration at the level we had in recent years. That's why they said, here's the range. I think it is possible, you'll hear from them in more detail that the upper end of the range may no longer be what we should be focused on. For our purposes, we've always chosen the middle of the range. We've always said 30,000 homes by 2030 is what is needed. Final point on this, and I'll move on, I think this is a really interesting point. The relationship between population and small changes in population and the number of households that are in need is more complicated than you might think intuitively, for the simple reason that these major changes are taking place in our society that are causing us to have smaller household sizes. We have older people who are living longer and spending long periods of time, much longer periods of time than they used to in two person and one person households. We have younger people delaying much longer than they used to when they will have children in part because of the housing crisis, that seven days article last week suggested. So, over time, we have seen a quite dramatic change in the number of people per household. I think VHFA indicated

[Chair Marc Mihaly]: They said we'd need 20,000 houses just to accommodate the change in household size.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Right, and that was based off some pretty, I think, incontrovertible math about how just if you're trying to house x number of people at one rate and that rate drops. Those are my So I hope that speaks to that point. Any further questions on that or and move forward. I think

[Chair Marc Mihaly]: and sort that testimony had, in addition to the population issue, really had two elements to it. One, which is sort of based on his model of what happened in Burlington, which of course is Burlington, is that outside investors make a difference. He also had, though, a kind of freestanding critique of the classical model of supplydemand as a lifeguard. Finally, related to that, he questioned whether building more housing in today's high interest environment, would produce affordable housing. Were his major points. And I know that we've been very concerned with the latter, which is that we don't want to be, particularly given the deregulatory push that we're seeing, we don't want to be in a situation where we end up with a bunch of $700,000 houses in the wrong place. So the struggle that we're kind of focused on is how do we produce affordable housing with limited subsidy available? Well, even missing middle housing, whatever you want, workforce, whatever you want to call it.

[Unidentified Committee Member]: Can I add one thing? Think when I'm talking to people, at least in where I live, I think when people talk about, like you said, like, people are asking, let's build more housing, but let's have it be affordable.

[Chair Marc Mihaly]: Which we don't know how to do.

[Unidentified Committee Member]: Right. Can you help us? No.

[Unidentified Committee Member (acting chair at close)]: Yeah. Well,

[Miro Weinberger (Executive Chair, Let's Build Homes)]: great. I have put that together. A presentation I think speaks to all three of those issues in one way or another. The opening slides just restate what you've heard from me in the past, that certainly from less vulnerable homes perspective, we have a housing shortage, and the way to address that shortage comprehensively is to build more homes. This comes from the poll you may have seen that we conducted in February showing that Vermonters put the cost and availability of housing at the very top of their list. Pretty much everyone thought that there was not enough housing that people can afford. Specifically, they wanted you to do more about it across party lines. I thought it was interesting, the partisan breakdown on this, that unlike so many issues in America, this is not at least yet really polarized. We talked about this 30,000 home figure, I don't think we need to talk about that more. Other than to say, I did take Doctor. Emmett's paper as questioning whether producing supply like this would have the impact on affordability that we and others are arguing it will. Were this paper definitively correct that might suggest a different direction for policymakers. This is a paper that has not gone through a peer review yet. There's been the most detailed critique of it that I think exists just got published yesterday by another- I'm

[Unidentified Committee Member]: not going to bring that up.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Another Vermont professor, Middlebury College professor. Is

[Unidentified Committee Member]: that right?

[Mary E. Howard (Clerk)]: I did

[Miro Weinberger (Executive Chair, Let's Build Homes)]: not know that. Gary Winslet. He a constituent of yours?

[Unidentified Committee Member]: Not in my district, but we're friends.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: At that link there, and you now and this is definitely a just in time presentation, but I believe you now have or soon will have the slide deck. There's a link to the response on Substack. It's a very accessible response. This is basically Professor Winslet's conclusion that this study should not drive policy. We have high quality evidence from other economic research that shows that housing prices very much are about supply. He goes on, and I'm not, unless

[Chair Marc Mihaly]: you want to I wanna interrupt this one minute. Elizabeth, I can't see you, but I understand you have a question.

[Elizabeth Burrows (Member)]: I do. Thank you. Am I wrong in am I misremembering that originally the goal was 80,000 homes? And if that has been revised, then why has it been revised so dramatically? Thanks.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Thank you, representative Burrows. There's a longer term goal out to 2,050 that is a higher number.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: But the

[Miro Weinberger (Executive Chair, Let's Build Homes)]: housing needs assessment that was published in late twenty twenty four that I think has gotten more attention than any other housing needs assessment ever before, that was the one that presented this range of 24,000 to 36,000 homes by 2030. It did have a higher number that I think is in the range you're talking about, Representative Burrows, for the 2050 goal. Range has not been revised by VHFA. Am I correct? I think they are coming in tomorrow to talk about their updated thinking on that number. I don't believe they intend to revise it dramatically.

[Elizabeth Burrows (Member)]: Thank you.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Doctor. Goes on, was not, unless you want to, going to go through his academic detailed critique of the paper. He finds, I have two pages of bullets of his major concerns about the paper. Some of it is fairly academic, but some of it is quite accessible. Maybe just to hit a couple highlights I think it's important since this paper is getting so much attention, I think it is important to understand that this is a study that by its own definition was very limited. It focused only on Burlington, a lot of housing studies, understanding that political boundaries, municipal boundaries don't have a dramatic, the economics are bigger than the political boundaries and you have metro areas that often housing studies look at an entire metro area. This one didn't, it just looked at Burlington and ignored the other 80% of the metro area. Secondly, it's looked only at rentals. Sorry, this did not look at rentals at all. A lot of the Burlington housing debate and push, it's a community that has more than 60% rentals and has seen really big rent increases. A lot of debate has been around how do we make rents more affordable, this didn't examine that at all. It looked only at the sale of single family homes and duplexes during the study period. And then even that, it cut 40% of them out, Doctor. Windham questions whether that makes sense. If you're doing an affordability study, why are you cutting out the bottom 20%? The authors said they were cutting out the outliers. In any case, it's a narrow study. Basically, the whole conclusions rest on this change from two investor sales at the beginning of the study and 12 in the final year. It's really, saw Representative Charlton that you had a question about, yeah, I see on the lines, these lines kind of look like each other, but is that correlation or is that causation? If you want to go deeper on that question, Professor Windham makes the point that regression analysis can't determine whether something is causational or correlational unless you do very specific things like a natural experiment or other techniques, none of which were done in this study. And then a final point that certainly caught my eye, I think there might even have been a question about it, The idea that the paper also finds that rising interest rates may have made homes more expensive is really contrarian study to a lot of what we know about economics. Those are some of the critiques there. I'm conscious that I'm not an economics professor, so I was going to move beyond there and encourage people to check out Professor Winslet's points if you want to go further. This next slide, we have in here, as I see this in some ways as the beginning of the discussion perhaps with your committee about this, and I would say this is an area despite the pronouncement of the headline. This is something that we're still trying to get our heads around and understand as well. Do share here that there's certainly within the housing abundance debate, there are many people who see investor activity not as something that is driving housing prices, but when housing prices go up and there's more of a business opportunity for investors or where they perceive that there is going to be restrained supply in the future, that's when you see investors attempting to come into a market and buy a significant number of homes. And this one study is sort of interesting in that it looks at Minneapolis, which is one of the cities given most credit around the country for really taking strong action to increase their number of homes. People may remember Burlington back in 2018, we had a housing summit, you might have been there, representative Krasnow, that had Lisa Bender, a

[Chair Marc Mihaly]: city

[Miro Weinberger (Executive Chair, Let's Build Homes)]: councilor from Minneapolis. It was clear back then that they were doing some very ambitious things that we wanted to learn from. In 2018, they passed a major plan that did quite a few different things. Legalized duplexes and triplexes throughout the city. They took other steps to really increase the amount of downtown housing being built. And in the years after that, you do see these lines really show that whereas prices continue to go up in the rest of the country, in Minneapolis, the red line, they stabilized. Similarly, the paper finds, it's a little hard to decipher, but this black line here shows that in 2018, the black line, which is Minneapolis, was much like a lot of these other Midwestern states in terms of the amount of investor activity that it was seeing. By last year, 2025, after that period of significant supply increase relative to their peers, Minneapolis had quite little investor activity, which again, think, Brad, I suspect this debate will continue. I saw the point that you may take this up next year.

[Chair Marc Mihaly]: You should know just, again, I want to promote an exchange here. Well, of all, completely understand the idea that they correlate in a reverse way from the claim, I get that. But we did just hear testimony from NCSL on the Minneapolis case, which found that there was Interesting, no change in really? Yeah, no change. Well, he cited several different interpretations of the Minneapolis experiment, and then concluded no change in prices. I'd have to go back. That's very

[Miro Weinberger (Executive Chair, Let's Build Homes)]: interesting, I'll have to look into that more Just

[Chair Marc Mihaly]: check that

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Great, and you know, I appreciate you raising that and I'm embarrassed that I was traveling when that was said. There's going

[Chair Marc Mihaly]: to be a lot of that in this whole debate. We're never going to get to the bottom. We're not?

[Unidentified Committee Member]: We will. There

[Chair Marc Mihaly]: is no bottom.

[Unidentified Committee Member]: I want to say again, before we go off to institutional investor piece, which I know I sound like I'm obsessed with, first of all, it may not even matter, It's federally, you know.

[Chair Marc Mihaly]: Well,

[Unidentified Committee Member]: I would also like to quote Vice President Vance on X yesterday. I wish Joe was here. The American dream doesn't belong to the highest bidder on all streets. It belongs to the American people. Work hard, save up and play by the rules. But for me, I don't think I

[Chair Marc Mihaly]: can remember this yet. You just. Fine.

[Unidentified Committee Member]: But yeah, I think it is, I don't think it is the piece of the, housing crisis or at all. My concern is how scarce we are in house, in production, but then it goes to those people. So that's my opinion. I want to build as much as possible. Let's keep building the homes.

[Unidentified Committee Member]: Let's build homes.

[Unidentified Committee Member]: Let's build homes. I just want to make sure that when we're doing that, that they're going to the people and not corporations first. That's all. So while I was quoted in that article, I don't particularly buy into a lot of it, although he kept saying this is a study not an opinion, but my point was, and I think Gary, I read his thing today, said that the bill that I introduced wouldn't have even been involved in what they because they were doing, like, LLCs and other things, not anyways. So I just wanna be clear that I just I find it to be something to discuss as a piece of the puzzle, but not the solution to any of it.

[Chair Marc Mihaly]: Oh,

[Unidentified Committee Member]: shoot.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Not in five, but in I'm supposed to be on a call. It's more important. My follow-up. Go

[Chair Marc Mihaly]: ahead and make your presentation.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: I totally understand your point and I appreciate your search for solutions wherever they might be. You're certainly not alone and we're open to being persuaded can be on-site strategies like that.

[Chair Marc Mihaly]: I

[Miro Weinberger (Executive Chair, Let's Build Homes)]: was going to move off of Doctor. Emilie, when he was here with you, went beyond his studies and made several other points about Burlington that you all know my relationship to Burlington, Burlington housing policy, and I just felt there were some things that were said that need to be cleared up and that were not accurate.

[Chair Marc Mihaly]: All of your development isn't ugly.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Know, beauty's in the eye of the beholder and I was going to comment on that. Was going to challenge. There are three things I wanted to point to that really quite surprised me. One was that the professor would critique, He made a big point on these brand new CHT owned apartments in the post apartment building that he called out there being rents for a studio of $1,200 a month and questioned the affordability of that. I mean, dollars 1,200 for a studio in Burlington is quite a good price now. There may be some people in that building that are paying that, but there are many who are not. In particular, and I don't know the details of that project, there are 38 units, and I do know that nine of them are being reserved for people coming out of homelessness. The face value of the there is rent on those apartments of around $1,200 maybe even $1,300 a month, but it is not the tenants that are paying that, it is the federal government through Section eight vouchers that are making those payments. I thought that was just way too broad of a brush of a statement. Similarly, Doctor. Ahmed had this slide up where he was making the point that those projects he has labeled in the middle Bayberry Commons, Cambrian, Rise, The Nest, City Place he made a statement to the effect of that these are extremely expensive luxury homes. There are some extremely expensive luxury homes in those projects, no doubt. At the same time, every one of those projects meets Burlington's and the state's inclusionary zoning and priority housing goals, meaning that at least 20% of each of those projects is permanently affordable and regulated. What does that look like in practice? So, Nest, this great downtown building, does have some very high run projects, but it also has 10 of the 49 units are permanently affordable. Two of them are for people coming out of homelessness. Cambrian Rise, it's particularly stunning to hear that painted as just a luxury project in that there are two whole buildings that are owned by CHT and Cathedral Square that are all affordable units, and there's an affordable condominium project that is well into redevelopment and hopefully breaks ground soon. And City Place, with no public subsidy, is billing 20% of the units as affordable, and that is one of the largest projects in the city's history. I believe it is the largest inclusionary zoning project in the city's history, and it's getting no subsidy. We do have the TIF District in place that's paying for the public roads. All of those have an affordability story to them that I think was just completely overlooked. And then finally, we found this one a little stunning and just had to say a couple of things. I think you probably recognize the slide. It was up for a long time during the presentation. Doctor. Aaron's basic narrative was that this was problematic public policy here, and that you had gone from having this single family home pictured in the top, losing its backyard, and now we have these two, what he characterized as a duplex that he said, he made a mistake with the affordability calculation suggesting you would need to be earning $2,500,000 to afford this, which is not right. And he said, I would argue these are wildly unaffordable. They are listed about $600,000 right now. The reality of the Burlington housing market is the median home that goes on the market is 550,000. This is probably where these are going to end up in that neighborhood. They've been on the market for quite some time with the small developers who are local developers, exactly the kind of developers we've been trying to encourage with the Homes For All program and various state programs out there. These are small local developers, I think from Essex, and they have it on that this rate is probably going come down quite close to immediate. Is that still higher than we would like? Of course it is. But is it a positive thing for there to be now three homes in a place where there used to only be one home, to have three different households, including, I will say, the top households, ironically, is owned by the deputy director of Let's Build Homes who bought the home after the subdivision. She thinks this is Jordan Rutland's home, she probably wouldn't have been able to buy it, but for the discount that came from subdividing it. And you now have three households that are just off the bike path, that are near great schools at essentially the median price. And this is a policy success from my perspective. This is only possible because of you guys passed the Home Act, which basically said we need to move towards zoning that allows more duplexes and triplexes and quads around the state. We And were working on something like that when you passed the Home Act. And in the months after the passage of the Home Act, we passed something called the neighborhood code, which reduced the minimum lot size. And so in the past, wouldn't have been able to subdivide the land, now you can. So We think this is a success story in the direction of Vermont public policy, to see it characterized otherwise was stunning. A couple more points. This is beyond this one paper. This is an ongoing debate. Doctor. Amon is certainly not the first to have questioned whether the arguments made by Let's Build Homes and others about increasing supply and whether that is going to increase affordability. That has been a contested assertion for a long time now. There's been while we don't have a detailed paper specifically on that UVM study, The second bullet here is a really interesting paper that you now have a link to that's the title, Housing, Supply and Affordability. And basically, the conclusion of that is that this sort of bunch, they were analyzing a number of papers that expressed various forms of supply skepticism. And this paper argued that they were all inconsistent with the evidence and that following the conclusions in those supply skeptic papers would likely do significant damage. And that's certainly how we feel about the paper. Summarizes some of these papers for you. If you want to go into it deeper, I'll pass over it here. I know we talked briefly about this very recent Pew study about Austin last week. I don't think I showed these graphs, which do go to does increasing supply. Basically, the assertion you heard last week is that building new supply does almost nothing for affordability. This paper found quite the opposite, that there had reduction in real rents, that's inflation adjusted rents over a decade period when the rest of the country in blue there had risen by over 10%. So that's a 15 spread. That is hundreds of dollars every month for households if you have change, that difference, hundreds of dollars or less of people in Austin versus the average US city. And then you can see in Austin, actually has where it used to require 95%, you had to be earning 95% of median income to afford the median apartment, it's now affordable to someone at 84% of income. And then finally, I just wanted to make this point that when supply runs short, it's like a game of musical chairs, and maybe hustling and getting to every opening you can has some impact on who gets the apartment. Basically, the people who can afford to pay more are the ones who get the home. When you increase supply, you fight that tendency. It sounds like you, Chair Mihaly, gone into this in detail. I thought the map in the study was interesting. This is the Honolulu study again, which what this is really showing is how one project, which is that little red dot in the center of the square there, that's one mixed income condominium tower in the city of Honolulu, ended up creating vacancies, and they were able to, unit by unit, household by household, trace the relationship. When this new apartment building opened up, it opened up throughout the metro area, these other vacancies with people moving to the new condos. And when they did that, those other openings were at prices much lower than the prices of the new condo tower. So that's this concept of filtering and how new construction, which will always have a premium to it and always be a certain expense to it, even new projects that are quite expensive, have a positive impact on the overall affordability of the metro area. This shows that in a way that I hadn't seen before, I want to share.

[Chair Marc Mihaly]: Do, yes.

[Unidentified Committee Member]: COVID being an anomaly. Windsor County was one of the hottest markets in the country for weeks on end, and it was not local families moving into these are all sold out of state cash sales. So how do we can we in Burlington, we know that a new building frees up 500 older homes, say, do we know that it's local people who need the family size home or who have a little more money and wanna move up? Is that who's buying it? Do we know who's actually buying it, or is it a continued influx from out of state with the same people still looking, still not buying a chair to sit in, so to speak?

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Yeah, this is a question that I believe some of the other papers that are linked to here try to take on directly. Generally speaking, I think what they find is that it's a little hard to generalize and characterize and that there might be differences from project to project. But generally speaking, when new housing supply comes on, we do have some of those units that are taken by new people coming into the market. A lot of that, I think we should see as a good thing. We know we have businesses that are struggling to recruit and retain workers, often need to retain, bring talent in that doesn't exist. Currently, there aren't people available. You hear that all the time from hospitals and banks trying to attract and retain workers. They need some people to move here, they lose a lot of people because they can't find jobs. So, long story short, some of it will go to new people coming into the market. I think there's some positive elements of that. And I think almost certainly some of the benefits will, a lot of the majority of the benefits will accrue to the local market. Great point. If you really are in extreme circumstances like you're describing there with the COVID, might have had a disproportionate for a period of time, had a disproportionate amount, like new things coming on. But I think that we all recognize that was a somewhat extreme circumstance.

[Unidentified Committee Member]: So just to follow-up, what we heard when we were talking about private equity investment, one, it's just hard to find out where they are. Vermont is Vermont does not have a high number of private equity owned residences, but they're the fastest growing. Right. So in in addition to, legislation like we're playing about for nest section, is there any conversation about how to essentially protect our our residential our our our The families that are here looking for a place, we don't wanna build even the 500 older homes, and these tend to be the homes that they most people buy, as we buy, we pay cash for homes. The signs on the telephone poles. Is there something we can do to encourage the local buyers to be able to move fast enough to not Yeah.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: So, Representative, I understand the question and understand that this is likely to be something that gets real scrutiny next year. We're going work hard to nail down exactly what Let's Build Homes thinks of that argument between now and when we meet again. I will say that if one point on that in today's slide deck to leave you with, I do think perhaps the best way or it is not an easy thing. If we reach the conclusion that that investor activity is problematic, and I do think that is a debated point, but let's acknowledge it, let's say that is a point, something we want to discourage. Discouraging it has all sorts of legal and political complexity to it and the potential for unintended impacts. We think the best way ultimately, again, we think where you do have the black rocks coming in, our understanding is largely in the places where supply is very constrained and they see a real business opportunity to purchase homes and hold on to them because they think it's going be protected. One way to discourage that activity is to build a lot more homes because you no longer are going to see that kind of rent seeking behavior, if you will, rewarded. So, I think that might be a point of agreement here is that the main strategy that we are engaged in, I think, is on point with the outcome you're seeking for that reason. That said, I think this is a hotly debated point, and we will come back and do another presentation when you take this up again next year with a little better, more specifically informed and armed on some of these points.

[Unidentified Committee Member]: I was just going to say, so you're not prepared, it sounds like, to take a stance on that, but I'm assuming you're saying that as Vermont continues to legalize, if we want

[Miro Weinberger (Executive Chair, Let's Build Homes)]: to legalize housing and build more homes, that I don't think your organization supports the BlackRocks coming into Vermont and doing that, is that right? We're certainly not seeking that as an outcome. No, the outcome that we're seeking is lower sales prices and lower rents. We do have questions and concerns depending on the details of how the legislature attempted to regulate that. Have a real role in one debate, for example, let's separate it from your bill specifically, a major debate, as I understand it happening in Washington, D. C. Right now is, because Trump is seeking a similar outcome, there's a real concern with some of the drafts of the federal legislation that might be done in such a way to merge in condominium projects. Investors to bill.

[Chair Marc Mihaly]: Right. It's gonna be difficult.

[Unidentified Committee Member]: May I ask before you leave, and it sounds like I would love all in those discussions to make sure that if we do something and we'll have more data because this is gonna be a study, that we do it in a way that doesn't do that, because I want that outcome either. I want to make sure that whatever we do gets after the predatory problem and doesn't cause more harm in building or producing homes. I would invite you to be a part of those conversations.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: We will certainly be there. If you are planning any kind of work over the summer or fall on this, we'd love to be part of such group and we certainly will continue to follow the issue and it is an issue that we plan to talk

[Chair Marc Mihaly]: you can

[Unidentified Committee Member]: talk about it places. I've been door knocking and I go, you know, whatever, I want to talk about it.

[Chair Marc Mihaly]: That's right. Okay. It's very difficult. It says that private equity involvement in this region is not, it's very small, and the intended consequences is that we're in patient Mary.

[Mary E. Howard (Clerk)]: I just have a couple of comments. One, the housing crisis started before COVID, and we keep hearing about the aging population. Why aren't we building more senior communities so that the seniors can sell their big family home? The problem is they have no place to go and they can't afford it. So I think, we have several places in Rutland senior housing, they have waiting lists for years. So

[Miro Weinberger (Executive Chair, Let's Build Homes)]: to just quickly respond to both this point, Howard, first of all, I totally agree with you on point number one. This is a shortage and a problem that goes back decades now. I do think it was exacerbated by all the forces that happened during COVID and afterwards, and that elevated the issue. But yeah, this is not new, and it's been a problem for considerable time. Secondly, I don't have a great answer for you. I must say, I thought when I was mayor and looked for opportunities, I thought we would see some downtown senior proposals come forward. There were various players that started down that path, and it didn't work out. I was excited by that project that got built in White River Junction, for example, with a market rate project was set up to serve a range of elderly folks. They had financial challenges. It's a great question and one that we are asking. I think what is going on with elderly households or aging households is quite complicated right now. This is a complicated area and one maybe there should be further attention to. Certainly what's going on with interest rates now being so much higher than where a lot of households locked in there, financing is one thing that makes it, it becomes a real, in the current moment, it tough for folks to move. Another issue that just there was a major New York Times article on this just last week that was fascinating. It suggests that you have many units around the country that are either vacant or at least underutilized because an older household owning it doesn't want to part with it because they will be subject to massive capital gains taxes if they do that while they're alive. Everyone's waiting for the reset in our tax system that happens when you die. Man, if that's driving, the suggestion was that might be driving millions of homes nationally that are underutilized. That's what's striking to me. So I think that's a really important complicated area, and I think there hasn't been nearly enough attention to it. I appreciate you raising it.

[Chair Marc Mihaly]: Thank you. Well, Burrows, thank you. I have some things to say about the study in Honolulu, which I will say to you often. Okay. And one more witness would be up to get

[Miro Weinberger (Executive Chair, Let's Build Homes)]: I'd love to hear what you think of And if we're overly enamored with it, we're we're definitely open to the mirror.

[Chair Marc Mihaly]: Okay. It's got the tyranny of small numbers too. So Okay. We'll

[Unidentified Committee Member]: Thank you for your time. Thank you.

[Miro Weinberger (Executive Chair, Let's Build Homes)]: Thank you.

[Chair Marc Mihaly]: So our next witness is Joe Chittenden. And Joe, those of us who have been to CSL conferences know Joe because he is a major organizer on the housing committee of the conference of state governments. So the council, Joe, you wanna introduce yourself and take it away? Great.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: Yes. It's it's great to be here. Thank you, chair Mihaly, vice chair Bartley, ranking member of Krasnow and all members of this committee for inviting me to speak and allowing my testimony today. My name is Joe Shyvitz. I'm a policy analyst with the Council of State Governments. I was asked to address the relationship between housing supply and costs, and I'm gonna pull up, I did bring a deck with me, if you give me just a moment. Okay.

[Chair Marc Mihaly]: Can

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: you see?

[Unidentified Committee Member]: Yes, we can see.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: Hear me okay? Okay. So I want to set the stage a little bit before I jump into the slides. I have about 10 slides, but I'm not going to bury the lead on this. The supply of housing is a fundamental, has a fundamental impact on the price of housing. So when the market fails to meet the demand for housing, prices increase, and the level of supply relative to demand determines whether you have a buyer's market or a seller's market. And this holds true for landlords and renters as well. Low supply drives up competition among consumers. They have fewer options and may have to accept the higher prices being offered by building owners. If supply were higher than consumers would have more options and more power to reject certain high prices with some limitations, it's the sellers who would try to offer more competitive prices to find a buyer or renter. Of course, in the scenario of low supply, it's the low income households that suffer the most. When prices are elevated, a high income earner may have to choose, let's say between a two bedroom or a three bedroom unit, they may be forced to select from the lower end in their range of options. When that happens, those more affordable options are taken off the market by those higher income earners, leaving the lower income earners with even fewer affordable and available choices. So the point is low supply forces low income households to compete with higher income households for available units. If the supply were higher, rent prices and homeownership could be offered at more competitive prices, and the options available to a low income earner would expand. So this data you may have seen before, it's national supply data, shows the historic declines in housing production on a national scale. On the left, you see housing production per 1,000 people. There's an obvious and sharp decline around 2007 resulting from the financial crash. But even coming out of the 1970s, you can observe declining rates of production. On the right is the share of single family homes under 1,400 square feet. And so according to this report by the Council of Economic Advisors in 2024, the fraction of all new single family homes under 1,400 square feet declined from nearly 40% in the early 1970s to about 7% in the early 2020s. So two takeaways from this, at least nationally, is that one, we're building less and two, we're building differently. As we're concerned with price, how much we build and what we choose to build both will impact consumer costs. So this is census data showing at the state level Vermont's historical production. So on the left, again, you can see total units and you can see that before 2007, the number of units generally exceeded 2,000 per year, even getting to say 3,000 or 3,500, And then after 2007, for more than a decade, production levels stayed below 2,000 units per year. On the right, when you look at single family homes, the discrepancy is even greater. After 2006, again, for over a decade production levels hovered around, I'm sorry, before 2006, you're building about 2,000 units per year as sort of the baseline, a little bit higher, little bit lower than after 2006 for over a decade, production levels hovered around half of that amount around a thousand units per year. And so next just getting a little bit more granular into Burlington, I think on their on their I pulled this from the Burlington City page and they actually keep quite good data, which is which is great to see. I think they said they've been building around 120 units per year from 2012 to 2021. So I just marked out a little blue line to show you approximately where that is. And without knowing the, you know, the exact population, the demand or some other variables that I'm not familiar with with Burlington specifically, I can't say too much about it, but you can see the drops mirroring what we saw before, drops in production around 2008 to 2011 and again from 2020 to 2023. So one important question is whether adding more supply can lower housing prices. Will new supply lower the price of housing? In the long term housing being considered an asset, its value is expected to grow typically in alignment with inflation and income growth And when the cost of housing is rising much faster than that, such as how we've seen post pandemic, there may be additional factors at play. But nonetheless, the level of supply again, in relation to demand will always be an important determinant in the price of housing, even when other upward pressures exist, such as spikes in demand, higher material costs and higher construction costs. This graph from the Harvard Joint Center for Housing Studies, it's showing the price to income ratio for the Burlington, South Burlington Metropolitan Statistical Area. It's the median sale price of single family homes to median household income. You can see the ratio is at two to one in 1984, rising steadily for twenty years and then hits three in 2004, and just five years later it reaches the level four in 2010, again, right after the financial crash, and it continues steadily a bit, then jumps around 2020 and hits five in 2022. So again, not to say other factors weren't also at play, but these spikes generally coincide with the production levels that we saw, you know, around the financial crash and with the twenty twenty pandemic, these major recent events. And here again, you see the same general shape in Vermont's statewide single family home price. And I just put this slide up to show you how the shape of the graph is generally the same. I want to mention something somewhat unrelated to this slide. The housing market of course is comprised of existing housing and new construction. So we can talk about new construction in a bit, but why did the listing prices for existing homes and rental units leap during the pandemic? Well, production levels, were already historically low, sank even further, and there was a strong rise in the demand for housing, an even stronger demand partly as the result of working from home, subsequent migrations as work and lifestyles changed during that time, a need to isolate less access to public space and so on. It's an example of when demand exceeds the supply and the supply remains low, there's almost no cap on the price growth because consumers have very few options. It's no longer competitive. So in this scenario, building owners benefited from an environment of low supply and were able to raise their prices while vacancy rates were at their lowest points. And I just want to caveat that it's, I'm not trying to throw the building owners under the bus. I mean, costs were elevated. They had issues as well, but that lack of competition kind of eliminated the growth cap. So another important point that I wanted to make in this presentation, a higher supply of housing can apply downward pressure on prices and price growth when the demand is high. Vacancy rates are a common measure for demand. A healthy vacancy rate is generally five to 8% for rental housing and one to 1.5% for homeownership. Rental housing tends to have a higher rate of turnover, so hence the higher vacancy rate. But when the vacancy rates fall below these levels, researchers will point to it as one indicator that demand is high and supply is low. So increasing the supply and in turn the vacancy rate should apply that downward pressure on housing prices and bring them closer in line with inflation and the expected growth rates. So the slide that I have up here, it displays the rental vacancy rates for Vermont on the left and then Chittenden County on the right. In both cases, can see that the rates fell pretty sharply in 2020 and again in 2024 below what's considered healthy and even from 2010 to 2020, it kind of drops in half in both cases. And I didn't find a chart or anything for the homeownership vacancy rates, but I did find a couple of market analyses performed by HUD on the Burlington, South Burlington, again, Metropolitan Statistical Area, which reported that the home ownership vacancy rates were around 1.7% in 2010, which is pretty good, and then half a percent in 2019 and zero point seven percent in 2022, so under 1% and not quite as good. If you're looking for one measure of how much supply is needed to apply that downward pressure on price and price growth, building enough to shift the vacancy rate is one starting point. It's one place that you can look at to kind of get an idea. The Pew Charitable Trust recently did a study on the relationship between vacancy rates and rent growth as well as between new construction and rent growth. They looked at four cities in different regions of The United States and found that higher vacancy rates and new construction both had caused rent growth to slow down. You guys with me so far?

[Unidentified Committee Member]: Yeah. And can

[Chair Marc Mihaly]: I ask you? Go ahead.

[Unidentified Committee Member]: So and so this is the effect on rental price, you're saying is affected by both construction of rental property and Home owned. Homeowner occupied properties. Yes?

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: I would say there's similar effects in both the rental and homeownership markets. And saying I mean, that the supply. Yeah. The the well, the the price is gonna be affected one by supply, but then also by the cost of construction.

[Unidentified Committee Member]: Yes. My question maybe I'm not so if you're building more single family owned homes, does that affect rental vacancies? Is that what you're Are including all home building when we talk about a growth in supply? Or are we only talking about rental properties increasing, having an effect on rental properties, on rent.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: So I mean, even a single family home, I mean, be a rental. So I would say in increasing the supply of that particular housing type is going to have a downward pressure on that housing type across markets. So if you build more apartments for rent, that may have a downward pressure other rental apartments or condo type of apartments that you may purchase for home ownership. In a single family, it'll work similarly. So again, the quantity of the type of unit is going to impact the availability of that type of unit, and that's gonna have an impact on the price and the competition and kind of the baseline what that home price might go for. Does that offer some clarity?

[Unidentified Committee Member]: Yeah. I guess I'm kind of questioning whether there's a trickle down or not when the point being made that even when you buy expensive condos that are going to be owned by people who don't need affordable housing, is that going to have an effect on the overall rental rates?

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: It should. I mean, again, there's going to be multiple factors at play, but so when new construction comes online and is typically, at the higher end of the market because new construction just gets more and more expensive and which we'll talk about in a little bit, but it does have an impact on the overall market, and so say that those higher income earners in whatever space we're talking about, they may opt to move into one of those higher end units, therefore vacating an existing property that is more affordable and then there's kind of a like a domino effect in theory. Right. I mean that takes time, it doesn't happen overnight, people don't just you know move know off the you know on a dime. So I do, there is a filtering effect, but it's a slow process and I think if your goal is to kind of, I don't think it's the fastest way to achieve affordability across the market, but it will still have a effect on affordability across the market.

[Unidentified Committee Member]: Thank you.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: It's related to what I was going go into here with this next slide, and sort of to calibrate the expectation around lowering prices with new construction, it's important to note that you won't be able to lower prices of new units below what it costs to build them or operate them. And so sometimes we hear concern that new homes are being built and sold or rented at high prices when the expectation was more, you know, the more we build, the lower prices should be. Two things are true. So first, while supply and demand are critical components of the housing price, there are additional factors such as the cost of construction, which itself can be affected by the cost of materials, changes in building codes and energy requirements, labor and so on. The second truth is, as I mentioned, the housing markets can be slow to adjust and the homeownership market adjusts even slower than rental markets. So here on the left, you can see reporting by the National Association of Home Builders on the history of construction costs for single family homes. I've highlighted in 2011, the cost to build a home was 184,000, and by 2022, about a decade later, it doubled to 392,000, and by 2024, it's jumped again to 428,000. So again, these are national figures, but, and I'll show you in a minute the breakdown of that 428,000. I'll just quickly mention on the right, basically see how this aligns with the census reporting of single family homes nationally, the sale prices. I'll also say that these changes in the construction costs are not necessarily all things being equal. So the question becomes how different was a single family home in 2011 compared to 2022? How much of the change in that construction cost is a difference in the cost of materials versus, you know, the features of the home or the size of the home or the lot size or the utility connections or, you know, any number of things. This leap from 01/1984 to 04/28 can be described a couple different ways and this is a national figure. So I wanted to give a show the further breakdown of what that $428,000 looks like, and so this is just kind of an interesting illustration of how much is involved in the construction costs. I don't know if you can see the, you know, it's kind of small text here, but in the top left, the sale price is 665,000. The profit and the sales commission together amount to about $90,000 and this data is being presented by homebuilders, but I think it underscores how much construction costs are growing and that it's not just a case of developers trying to inflate those profit margins. And again, here you can see how the total sales price has changed from $19.98 to $20.24. A lot of the year over year changes appear to be small, a percent or half a percent, but the total construction cost was not only consistently the largest expense, but has also grown the most over time. You see it's 55% in 1998 jumps to almost 65% in 2024 whereas other factors like the financing costs in 1998 similar to what you see 2002 changes by a fraction of a percent.

[Chair Marc Mihaly]: Can I ask a question? Yeah.

[Unidentified Committee Member]: Do you have You don't happen to have any further breakdown between materials versus labor for the construction cost?

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: I don't, but it's something that we're working on, we're researching, we're trying to connect with the right people. You know, I will follow-up with the National Association of Home Builders here to see if they have more data collected, but I think that's an important question that unfortunately we just don't have the information on right now.

[Unidentified Committee Member]: Thank you.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: So, and this is my last slide and then I'll have a little bit of a recap, but I wanted to say that in an environment of high construction costs, lawmakers across the country are considering policies that affect what builders are able to construct. This is why you're likely familiar with efforts to build smaller homes, legalize smaller lots, reconsider building codes and so on, the question again sort of becomes not only if more supply can lower housing prices but how

[Unidentified Committee Member]: can

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: we achieve a supply of housing that is affordable at various income levels? It just, seems just as important to build various types of housing as it is to build higher quantities of housing. And so on this page, on this slide, you can see data pulled from the National Zoning Atlas on minimum lot sizes in Vermont on the left and Chittenden County on the right. In both cases, according to this data, more than half of the land where single family homes can be built requires 80,000 square feet square foot lots or more, and that's roughly two acres. And for comparison, a football field is roughly one and a quarter acres or 1.3 acres. So in some cases, in addition to the cost of building the home, those materials, home buyers will need to cover the cost of purchasing large quantities of land, sometimes two football fields worth of land. So take from that, I guess what you will. I have two questions to recap if I may. The first is again, will increasing the supply of housing decrease the price of housing? I would say yes, increasing supply should generally lower housing prices or at least stabilize the growth of housing prices. Housing will generally appreciate in parallel with inflation and income growth, But if housing prices begin increasing more rapidly than inflation and income, then we have to examine why that might be. So again, is certainly a factor, but it's not the only factor. And the second question is what if new supply is not reducing prices? And to that, I'll say the amount of new supply certainly matters. One or two units may not have an impact. There must be enough new supply to proportionally meet the demand. And as I mentioned, vacancy rate may be, again, at least one metric. I'm not saying it's a perfect metric, it's one, it's a good starting point. Rising prices are also one indicator of strong demand. It means people want to live there and move there. These other factors that we've talked about may include the construction cost, the labor cost, size of the home, the lot size, and so forth. And again, the supply cannot lower home prices below what it costs to build those homes. And so my last point is just the housing market again can be slow to respond when you're adding new supply. So I guess don't feel discouraged right away And that response is slower in owner occupied units than rentals, which sees a higher turnover. So with that, once again, I'll thank you for having me here today. I hope that was helpful. And if there's some discussion, I'd be glad to. Or whatever works for you all and your time.

[Unidentified Committee Member (acting chair at close)]: Are there any questions? Awesome. Well, I don't think there are any additional questions, Joe. Thank you so much for being here and kind of being one of my go tos for questions regarding housing data, especially in our area.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: Absolutely, we appreciate that.

[Unidentified Committee Member (acting chair at close)]: We really appreciate being here. I think I'm always all about the data, but I think when it comes to housing, it's a very complex and large issue. And unfortunately, we also have to take in some of the anecdotal information that we're hearing. So it's finding a balancing act. Thank you.

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: Yeah, absolutely. I think the, you know, looking at national data or broad statewide data can kind of give you some clues as to where to look, but it's true. You know, housing markets at the local level, you kind of have to see what's going on there. It could be any number of things. So yeah, thanks again and it's a pleasure. Council of State Government is here. If you have any follow ups, we love to be a resource to you. I think you have my information and we'll be in touch.

[Unidentified Committee Member (acting chair at close)]: We definitely do. You. Awesome. Thank you so much, Have

[Joe Shyvitz (Policy Analyst, Council of State Governments)]: a great evening. Thank you so much.

[Unidentified Committee Member (acting chair at close)]: You as well. For the committee, I've been asked to tell you all that you are all expected to be butts in seats at 09:30 tomorrow morning, and we're going to continue discussing housing needs and demographic trends. With VHFA. With VHFA. Yep, VHFA and a bunch of other different agencies as well. And with that, we are going to adjourn.

[Mary E. Howard (Clerk)]: Well,