Vermont Legislature SmartTranscripts:

[Senator Alison Clarkson (Chair)]: We are live. We are live. Welcome everybody back to Senate Economic Development, Housing, and General Affairs. It is Friday, April 24. It's Eagle Scout Day in the State House. David Weeks orchestrates that. And in addition to celebrating Friday, we are celebrating work on continuing to improve how we finance our rural housing development and our housing development period, and we are looking at genetic data privacy, and we are looking at what else? At landlord tenant law. So as is usual in this committee, we have a wide range of jurisdictional issues that we're gonna be addressing today. So we're gonna begin with Laura Collins. If Laura would come and join us at the table, there is a proposal that we are being asked to consider on how we can extend an opportunity to people of lower income is what my understanding is in certain housing belts. So we welcome Oregon. It's good to have you back. I believe we have Thomas Chittenden online. Is that right?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: He's not here yet already, but he has the same like the sinus joints on the

[Senator Alison Clarkson (Chair)]: Okay. Do you wanna so do want me to text him? Just to let him would you you text him and let him know we're we're alive. Absolutely. Thank you. We would welcome him joining us, And I'm sorry he has to change. Something must have happened. So I just haven't had time to see that. Laura, are you set to go?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: I am. I am may I please share my screen? Yes. Thank you. Yeah. So, I'm pulling up my slides. What I am here to talk about in the program I'm here to discuss is the rental revolving loan fund. That is I I wanna give you a brief update a brief reminder of what it is and then give you an update on it. And

[Senator Alison Clarkson (Chair)]: And we have this handout Yep. Here with us. I've just been trying to get us all, and it is online. So, Thomas, who is online, can enjoy it. For the record, sorry.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: My name it's been a minute since I've

[Senator Alison Clarkson (Chair)]: been working. And we welcome you back. It's good to have you all

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: being so healthy and well. Thank you. I am both. I am Mark Collins, the executive director of the Vermont Housing Finance Agency. Apologies. I haven't been here in a month, but I'm back. And Right. Want to remind you of a program that this committee really supported in the past. The Home Act of 2024 gave $10,000,000. It flows through DHCV to get to BHFA. The goal was to incentivize the creation and preservation of rental housing for middle income folks. So it picked an income of lower of an income affordability that was just above traditional affordable housing and reached all the way up to a 150% of median income,

[Senator Alison Clarkson (Chair)]: which is pretty high for renters. High for renters, but sadly not high necessarily this market. So Right where rents and housing prices have increased somewhat.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Yes. So we know that 90% of renters earn less than a 150% of median income. And so it really served this was designed to serve the bulk of the rental market. So this is a subordinate loan that we would give to developers, and they could apply for up to 35% of their total development cost. And we would the idea would be they go to a traditional bank for most of their financing, and we'd be in that subordinate role below that. It was pretty wide open about what kind of housing we could fund. We opened it up in late twenty twenty four, and demand was far outstripped supply of money that we had available. And it was pretty impressive how strong demand was. This is a brand new program that we had to communicate to people about. This wasn't something they'd ever experienced before, and so it was we got two times the amount of requests as we had money available. We handed up all the money in one board meeting.

[Senator Alison Clarkson (Chair)]: And All to 10,000,000 in one board meeting? Yep.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Yep. And then a year later, we came back and asked for some more middle income funding, and you all again supported money to go to either the middle income for membership program or the middle income rental program. We received that money, and we intend to open that up for deployment in the rental program. There'll be about $14,000,000 available for this rental program going forward. What I wanna talk to you about is what we do with the first 10,000,000 and what lessons have we learned so that when we open up the next 14,000,000, we'll be making some changes. Not all these changes that you're gonna see me reflect need to be discussed in statute because, like any good government program, much of the administration is in the program guides and not outlined in statute. But there are a few elements that are spoken to in statute I wanna tell you about. So one unique aspect of this program is that it really tried to leverage outside money. And so if you could get if a developer could get more than 5% of their funding from an employer or a municipality or a regional housing fund, then we would give them even better long terms. Maybe a lower rate, a longer term, some kind of advantageous role. And that's customized to to what the project needs. It said also in legislation that we should really try to maximize the use of these 4% tax credits. I've spoken to this committee before about how there's two types of tax credits, and you know that the 4% ones are the unlimited ones that sadly Vermont does not use fully. They are essentially unlimited in Vermont, but for a few reasons I'll talk about in a minute, we we don't capture all of them. And so this was a way to try to use more of these federal funds that if we don't have a partner source with, they expire and go back to the feds and we miss out. This program was also designed specifically for small smaller projects in full development. I was at the rural caucus a week ago, and I referred to the tax credit program as the AP class you aim to take senior year of high school. I can appreciate the interest in, the plan we have that, talks about where tax credits are going and the interest in that. But I also wanna remind people that that is not the only path we have to develop housing. Tax credits work really well in larger communities where you need 24 to maybe 30 some odd units. If this program, this rental revolving loan fund, which I'll call RRLF, is really designed to be smaller projects. And it can be for big, but it also could be for some of those rural areas. So the statute laid out that the program needed to have a streamlined and appropriately scaled application process, that we needed to do outreach and education. It's a brand new program. And so we had to get the word out and we were directed to specifically target underserved regions or sectors. And that we needed to make sure our system was equitably, we're equitably awarding funds based on geography, maybe size, economic need, and trying to reach people who didn't have lots of other public access to funding. These are some of the projects that were funded by this program, and you can see how much of the money we have dispersed so far. You can see that, there are some smaller I consider these smaller projects when you, see there's, several of these are fewer than 20 units. You also can see that both in Winooski and St. Albans, there's some larger projects, so we have some diversity there. The map on the previous slide shows that there was some diversity in the communities we were able to reach, and you can see that we have closed on these loans and dispersed a lot of the funding. So what lessons have we learned? What I'm telling you here is that we opened up a brand new program. We designed a program guide and administration. We've now deployed a lot of the money, and we've learned some things. And one of the things we've learned is that we were directed to have, this is a quote from the legislation, a simple application process that's accessible to small developers, builders, and contractors. One thing we learned is that when you're working with new and emerging developers, they need some extra help. They're coming in and working with even a modest governmental public source or even just trying to get funding from banks traditionally, they need some hand holding. And so seeing how much hand holding we needed to do with these developers, the HFH took some of our funds. We took some of the funding that we have through the treasurer for the 10% Vermont programs. We also called that the WIAT program. And we, found a, anonymous philanthropic source who gave us $3,000,000, which we're very grateful for. And together, we provided, technical assistance to help these small scale emerging developers. We hired a consultant. We hired some someone to help them with pro formas and the financial expectations. So when they went to a bank or, frankly, when they came to us, they had a more realistic view of what it was gonna take. A lot of folks had a lot of dreams that they were gonna be able to achieve really inexpensive outcomes, and they need a little reality check to say, actually, I know you think you

[Senator Alison Clarkson (Chair)]: can do this on the cheap, but you history shows that some Did you invest in these smaller developers? Did you invest in ones that you're gonna continue to develop housing or just one offs? Well, I I mean, I can see investing. It's important to have handful that help developers and smaller new developers into the space. Yeah. But were you prioritizing people who are gonna continue doing that?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: All of the developers that I know of have dreams and hopes that they are gonna continue to develop. Right. Whether that dream has been squashed by now may happen, but our understanding was that a lot of these newer developers also were not new to development in total. They were new to development in Vermont. They so they need help with mapping DRB process and act two fifty and things like that. And so Okay.

[Senator Alison Clarkson (Chair)]: So these might not all be smaller developers. They might just have been new to Vermont. Correct.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: And and some of these were very small even though they were new to Vermont. And in our attempt to have a simple application process, thinking let's cut out the government bureaucracy, let's just get it down to what do we need. One example of something we didn't do is we didn't require a market study, which traditionally, we always have to have a market study. We need to make sure that there is a market for the types, sizes, amenities, rent levels, demand in that area. This is a standard thing that in my world, we're always gonna ask for a market study. This time, we didn't.

[Senator Alison Clarkson (Chair)]: Because we actually know that the market is desperate for as much housing as we could build.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: That is not

[Senator Alison Clarkson (Chair)]: true. Sorry. Okay. Well, then

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Some of our bigger projects found that depending on the timing of when neighboring properties were coming in, there are some temporary moments when the market needs to catch up. When you bring seventy, eighty units online within four blocks of this proposed development in this community, you're not we haven't solved the housing crisis. We still need more housing. Let's acknowledge, though, that depending on the timing of when all these projects are coming online, there may be six months of some competition between these properties. And understanding the market and the timing of what's coming online is very critical. Didn't tank anything, but in one instance, it encouraged us to tell a developer, instead of doing all these units, which this is one of our larger projects, instead of doing this all as one phase, if they were already gonna do two buildings, could you do it as two phases and get the financing and moving forward on this one and then bring the other one on as a second phase? And that was the kind of thing we learned. I also think it was important, there's a lot about designing a project and understanding the scope of work to the project that we allow to not be perfectly clear at the beginning, and that led to some of these conversations around, you're rehabbing this property, but you may not be going far enough that this rehab is going to last the the test of time. And we think you're gonna need more money within five, eight years because you actually aren't doing enough work right now at the initial outset. And so

[Senator Alison Clarkson (Chair)]: we learned some things like that.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Another thing we learned, we are learning all over the place, and I want the committee to know that when we got all the applications, and I can proudly sit here, and hopefully you're impressed with the fact that we awarded all the money in one board meeting, and that sounds really good when I show up at tables like this, that is a problem. And in some ways, you all should be criticizing and looking at us, because what I'm saying is, and this is a chronic issue throughout government programs in Vermont, is that agencies like mine are desperate to please you all. I know it doesn't always sound that way when I tell you bad news, but but we want to show you, like, there's demand. We need and I couldn't have shown up here the next year and asked for more money if we hadn't awarded all the money from last year. And we did that. We did our part. But what happened is we made early awards based on somewhat incomplete information, you know, lack of information that we didn't ask for. We didn't have full clarity about scope of work and some of the terms, and what we found is that as the projects went through the development process, they changed dramatically. Who they were serving changed, the amount of rent they needed to charge changed, the, again, the scope of work and what they were proposing, and costs went up.

[Senator Alison Clarkson (Chair)]: I was gonna say cost. Was a big huge factor.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: And so, again, I don't want you to misconstrue that this new program, this Rental Revolving Loan Fund, did something different. I think this is something that you should be looking at across all your housing programs. I can tell you that our tax credit program, I wanna use VHFA as an example. I recently was given some information about some applications that we have, and some of our partners are, take more time from a ward to shovels in the ground than others. So we're trying to benchmark what is reasonable between what we approve and when the housing actually goes under construction. And we found some averages and medians and all that, and we're finding some outliers. And that is causing us to make some hard conversations with our partners to say, you know what? You have a really big open pipeline right now. You have a lot of projects in development. Until you start closing those and get shovels in the ground, we don't wanna set you up with more money to further exacerbate these long delays because we are finding that some projects are going years between when we award it and when they get shovels in the ground. What happens to us as a public administrator is we've already made a commitment to this project. It's now a year and a half later. Kids went out and got all their money from all the other sources, and they come back and say, we finally went to bid, and guess what? It's 50% higher than what you approved. Imagine the position I'm in now, when I've already given it millions of dollars of commitment, and now they say, we only need another half million dollars. And then a $12,000,000 project, that seems reasonable. And we award it, and we award it, and we don't stop to have that scrutiny. So one thing the HPA is trying to do right now is to shorten the time period between when we award the funds and when the shovels get in the ground. I want these projects to be more ready to proceed because developers are clear. Time is money. The faster we move, I think there's ways we can consolidate the awards. I think there's ways that the public funders can work faster and better together. And we, I don't think it's fair for us to keep turning to you all and saying, can you speed up the environmental review process? Can you get the state to award permits faster? Can you reduce the number of permits? If we don't look at our system and say, how can DHCB, the state housing authority, DHCB, VHFA award projects faster in more alignment, that will save cost. It's gonna save a couple of months. I'm not saying we're gonna drop housing costs dramatically, but it's an opportunity we have. And I want you to know, I know that there's been, I'm switching topics a little bit, there's been a lot of conversation and the chair is looking at the way we allocate tax credits and how this works. One of the major criticisms we have right now is this very issue, is that we are trying to shorten this time period as a way of controlling costs. And our partners are really upset that we are pushing more risk onto them because they have to go longer with uncertainty because they didn't have the millions of dollars we initially gave them as they go through this long process. Right. So having a bit of a challenge. Absolutely. And so what's happening is we have to find the balancing act between the fact that currently the system has the state, which I'm gonna consider VHPA state for people to not do it. This state is taking all the risk, meaning the risk is I like what I see here, but my risk is I don't like, I don't know if I'm gonna like what I see by the time they come back to me two years later. We've taken on all that risk. The impact is we are just funding it with not a lot of ability to rescind these awards, and now we're trying to find a better balance between sharing that risk. And so this program tried to alleviate that by saying the state will take on all the risks. We're trying to spur units. We're gonna make awards early. And there's some projects that were awarded in June 2024 that are still not closed as a result of that. The other thing I think is very important is that this program, we found that we talk about how we go up to 150% of median income. And developers assumed that if they do the math and at 150% of median income, 125, 130,000, what you do is you divide it by 12, you multiply it by point 30%, and that's how much someone can afford in rent. So developers put that into their pro form a. I'm gonna serve, you know, the higher income end. I wanna serve middle income. And so one example here is a two person household. Each person earns $60,000. Actually not like middle income, but you know, 120,000 could be a middle income household. They can afford $3,000 a month if they pay 30 percent for rent. That is above the market in Vermont. And there are several projects where we were asked, we were told, well, you can serve households at a 120, 150% of median, so therefore you should approve this loan where we serve this income of household, that's fine, but that you should let us charge $3,000 a month in rent. Again, let's go back to the market study. Oh wait, we didn't have one. So we do know the market, and when we look at our other tax credit housing, we know that $3,000 a month is too high for a one bedroom unit, which is what a two person household probably is gonna mean. So, there are ways that it actually, I wanna be clear and develop and fully understand that. It's not the income limits that are constraining what is happening with this program. It's actually the rent levels in our state. And I put here what the median rents are from the flawed incomplete data that we have, and this is from 2024, so if time moves, but a 100 room apartment in Franklin, Grand Isle, Chittenden County is about $1,800 a month. In Windsor County, it's just over $1,200 a month. In Rutland, it's 1,100 a month. Again, that's two year old data. It's from HUD. It's based on a sample. Mean, it's it's gone up. I can tell you. Absolutely. But it's not at 3,000. I don't believe for a one bedroom apartment in this state. And I have triangulated my census data with zillow and apartments.com and Craigslist and anywhere I can find listings. So I can't give you an official number, but I can tell you it's not 3,000. So another way this program has been criticized is developers saying, you aren't letting us max out the rents at these high income levels. And I'm saying, we're a lender. We're not going to let you build a pro form a budget for housing where you are assuming you can get $3,000 a month when I'm looking at your community, and I see that there are apartments for $2,400. New construction. But what this program also this first bullet is from statute. This program was designed with a hope that we could prioritize projects that utilize tax exempt bond financing. That's what unlocks those 4% tax credits. The unlimited ones I come and talk about and that we wanna use more of. You've seen this ugly table on the right before in testimony back in January, I believe. And what I'm showing here is this is, this is the amount of money that Vermont had to return, to the Feds because we didn't use it all. And when we can use all this money, we can unlock more of these valuable tax credits. We returned $11,000,000. We did. And so, we returned $300,000,000, between 2013 and 2021. We used to return tons of it. Then there was ARPA money. There was other sources we could pair with this money to make it work. I know you're talking high level, but just trust me. When you have when you have major state investments, when you have other sources like RLF and other things, this money can be utilized better. It all fits together, and all of a sudden, we don't have to return the money, and we unlock these tax credits for more money for projects. And so just last year, housing lost another $11,000,000. And so unlocking this 4% tax credit is a wonderful tool that is not gonna cost Vermont taxpayers more money. It is a federal resource that is Vermont is eligible to tap into. And there's so much more we can be doing to unlock this. And so, we need to find more solutions to unlocking this resource. And this RRLF can be one of those. In the past, we've done it through ARPA funding and a lot of state money through VHCB and the like, but there are other ways to get there, and this is just one tool. It's a very modest one. You all had hundreds of millions of dollars of ARPA money in the rest, and what I'm talking about is ten or fourteen million. But in order to do this, and in order for the housing to do these tax credits, there would need to be a statute change to this program when we open it reopen it up with additional funding. And this is my last slide showing what the edit is, and I'm gonna explain it to you. Right now, all the black, text on here is existing statute. The red is what I'm proposing to be eliminated. Right now, what this is saying is that this, to be eligible for a loan through this program, we have the developer has to serve households between 65 and a 150% of median income. Again, we put a floor to it because the legislature was trying to signal that this is not necessarily traditional affordable housing resource. This was trying to do something else and hit a middle income market. In reality, what we're seeing more of as developers learned about the RLF program, this is how it's played out. Folks are like, wait, there's RLF money? I want some of that. Tell me about the program. We're like, we'll tell you all about the program, but we have no more money. We spent all $10,000,000. And then we were able to get, thank you very much, another award from you all or appropriation, and we are getting ready to reopen this program. And as we're talking to developers, there are some who are saying, you know, I'm not looking at this as a source to create extremely low income housing. I actually like that there's a higher ceiling in who can be served with middle income. But in some of the developments, these developers want to condominiumize their housing development. This is a very common legal structure, financial structure too, where you take a development and you break it up into different financing condos to maximize the funding that's available through each. You may have heard about this in the Ben High project in Bennington, where it was one building, one old high school. If you walked through the halls, you would not know you were walking through two different condos. But the lawyers know they got rich setting it up. There was actually two condos in this one building. But not condos for

[Senator Alison Clarkson (Chair)]: the actual individual. I'm talking

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: about condominiums. It's housing for them, but it's for

[Senator Alison Clarkson (Chair)]: the purposes of the development.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Legal and financial condominium is very different than the housing type of condominiums. Although there's some legal connections. It's a different thing. But these are all just a whole bunch of apartments. I forget how many. And one of the condos was using tech federal housing tax credits and maximize that. And by separating the other condo, it used new markets tax credits and didn't have the same low income housing tax credits in it, and they were able to maximize these federal resources in a way even though all one building, all one set of neighbors, one Ben High project. It's Those of us who are nerdy enough to be have financing in it, we it's two projects. When you all go to cut the ribbon on it, you'll walk through one building.

[Senator Alison Clarkson (Chair)]: With the same quality of units in both. Right? All of that.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: You won't be able to tell them. Yes. And so this tool, benefits maximizing financing opportunities and all that, is sometimes limited and not available if we set a floor of 65% EMI rents because some of these developers picked up what the legislature was putting down. You all said in statute, we should prioritize projects that utilize tax exempt bond funding or federal housing credits. If they're gonna do that, federal housing credits, that eligibility means they have to serve households at 60% of median income. So we're telling them in one statute, we will prioritize you if you unlock these 4% tax credits that we wanna unlock. And the feds say, you need to serve households at 60% of median as a max, maximum 60%. And then in this legislation, we're saying do that, but also you can't serve households that low of income. So, we can make an argument. Should we replace 65 with 60? Well, again, that's the federal limit is 60, so the actual households are gonna be maybe 55, something like that. There's also a way to unlock these tax credits where you could serve households that 50% of AMI, fewer number of units at a deeper subsidy.

[Senator Alison Clarkson (Chair)]: What you're asking for is to get rid of the floor.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: It is, but not change the priorities of the program. I wanna be very clear. I'm not trying to turn the RLF program into a deeply subsidized affordable tool as my primary goal. If we can get a few affordable units out of it, I'm always gonna be okay with that. The priorities of the program are not gonna change, and the priorities were somewhere, you know, saying about streamlining, appropriately scale, do outreach, equitably serve the system. These get funding from employers, increase leverage, use the bond credits, small and meaningful development. None of that changes. Just the fact that we are going to struggle to unlock the 4% tax credits as a tool for this program if you don't eliminate that type

[Senator Alison Clarkson (Chair)]: of change. So plus is it lowers the goal, the floor. It enables us to unlock more valuable tax credits, and it enables some development that might not have occurred in some of these developments.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: My goal, it it disgusts me that I have to tell you that $11,000,000 of housing assigned private activity bomb cap disappeared, and that 300,000,000 disappeared in the last fifteen years. And so this is the problem I wanna solve for. And I can't solve for this without this as one

[Senator Alison Clarkson (Chair)]: of the tools that could And help how much of that money do you think we could have kept had we done I for my

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: I really want you to trust my numbers so I don't give you numbers. I don't really know. And I I don't even have an estimate. I'd have to really think about that.

[Senator Randy Brock (Vice Chair)]: I'm sorry.

[Senator Alison Clarkson (Chair)]: So the objective here is to make this statutory change to enable us to draw down more value tax credits for development, housing development

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Provide the opportunity. I also just wanna say, I we haven't reopened this program. We haven't, you know, finished redesigning it. But I want this to be possible when we go up next developers.

[Senator Alison Clarkson (Chair)]: Yep. For the next work. Yes. Yeah. The previous 10 is But this won't affect the people who've been awarded money in the previous 10. You can decide that. We're already down the road.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: All of them have closed, but I think one.

[Senator Alison Clarkson (Chair)]: But you're asking us for prospective. That's my teaching. And we and that change Cameron has language for this because he has drafted this change with the current. We could put this into July. That is what's being asked of us. Right?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: I'm a little behind from the month off, so I'm lost track of the vehicles, I'm trusting you to

[Senator Alison Clarkson (Chair)]: This is our housing vehicle. Yes. Perfect. Will be the vehicle I would like. This will be our big housing. Any changes we need to make, we Fortunately, to take care

[Senator Randy Brock (Vice Chair)]: I'm not in the apartment building business that I was in twenty, twenty five years ago, but I have to confess, I don't fully understand this.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Okay.

[Senator Randy Brock (Vice Chair)]: Tell me again the issue of having to lower this, presumably that would make available additional monies that you would not have used because the projects that you had looked at at that time did not include enough of the lower priced properties. Is that a fair statement or a corporate Prices, if there weren't enough properties available that would qualify for people who were at that income level, and as a result, you had to leave projects on the table, is that correct?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: I'll put it a different way, which is when developers read that the floor of affordability had to be at least 65% of median income, They didn't consider looking at using 4% tax credits. They knew the rules of that program, and that program says you can't charge more than 60% of median. Mhmm. So when we set the floor at 65, they never considered it a source. So it wasn't, they just, they picked up, again, we signaled things with legislation. And what we signaled in this legislation, Middle somewhat erroneously

[Senator Randy Brock (Vice Chair)]: income housing, and that's the objective So of this particular as a result, you set the lowest parameter below the level of some housing that would be considered applicable to the kinds of projects you want to support within the range, because the 4%, which had to be a 60% floor, was not available, and so they passed on the entire program, is that?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: That is, yes, that's what I'm saying. Okay. And I also, I'm worried to bring up a new concept because I do know how complicated this is, but in the tax credit program, there's two ways for the project to be eligible, and I'm gonna throw out percentages. 40% of the apartments have to be affordable at 60% of median. That's what I've been talking about.

[Senator Alison Clarkson (Chair)]: Up to.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Yep, up to 60% of median. But only 40% of them have to be. What we find is that the tax credits are so valuable that they don't do mixed income or only 40% are affordable at that point and have the rest be market rate. Mhmm. The tax credits bring so much value. They actually do a 100% buildings usually. All the apartments are affordable under 60%. Because while the threshold is only 40% of the apartments have to be affordable at that point, we also will prorate the assistance based on how many apartments are affordable under 60%. So if all the apartments are below that income level, we can give them more tax credits. If if less than half are, they're getting less than half of the government funding. And so it doesn't go far enough. But there is a second way to trigger these tax credits that I don't talk to you about a lot because it doesn't happen in Vermont a lot. And that's that only 20% of the apartments have to be affordable and you can still get these tax credits. But if you're doing the only 20% being affordable, they have to be super duper affordable. They have to be affordable to some underneath 50% of median. But it's a small, smaller number of units. In other states outside Vermont, that structure, using that 20% of the apartments affordable at 50 of median, is a more commonly used tool. These deals sometimes are called eightytwenty deals, where 80% of the units are market rate, 20% are affordable. The cost of construction in Vermont and the rent levels in Vermont, which I spoke to, which are very high and unaffordable, but not high enough to cover the cost of construction if they're less than 50 About moment, yeah. Yep. That actually limits our ability to do these eighty twenty deals. But there are some communities I was gonna name it Burlington, some of our highest income, highest rent opportunity communities where I think some eighty twenty deals are possible. And for years, I have been talking with developers about how can we get one done. I wanna get creative with you. I wanna prove a proof of concept for Vermont that we can do this. Because this is the way of getting mixed income housing, which evidence and research nationally is clear that the outcomes for the tenants are better in mixed income housing. And so In terms of

[Senator Randy Brock (Vice Chair)]: the popularity of mixed income housing, where there is such a range, does that deter the upper income people from joining?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: National research has shown that it doesn't. No. I mean, we all have in our neighborhoods and communities very low income folks living among, what I would say, homeownership homes where prices are at a certain point, but I mean, let's look at aging in place and owning a home that, but the income of that occupant can be poverty level, even though they're in a neighborhood where prices are quite high. And so unlocking this opportunity to do more eighty twenty deals and things like that, I would need this change so that that project could utilize these tax credits. This, you know, these developments, these buildings, especially if we think of a condo structure where it's, are not at risk of segregating deep affordability. And in fact, it's a tool toward integration.

[Senator Alison Clarkson (Chair)]: That's how I would do it. Right. So this continues to enable middle income plus housing, while at the same time utilizing more valuable federal tax credits and opening it up to to families with lower incomes. Making it possible.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Don't even know who's gonna apply. I don't know anyone's gonna come for tax credits. Want the door to be open that we can use this tool, and right now the door is shut.

[Senator Alison Clarkson (Chair)]: And in all honesty, it might open it to some of the developments that are being considered.

[Senator Randy Brock (Vice Chair)]: Oh, the developers, though, is the one who ultimately makes the decision, and that's before the project is even thought through or it's built circling.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Yes, and And

[Senator Randy Brock (Vice Chair)]: so that developer has to make the assumption that I can rent to the high income people in a building that has what, 20% of income. Low income, right? Much lower income. And that said, the risk then becomes the risk the developer is taking.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: And so the developer does start to make those plans on their own, here's who I wanna serve, here's what I know the market is. Here's what the market is And a lot of our developers are deeply rooted in communities. They know exactly what they're trying to hit with the market. And what I appreciate is that good smart developers come to us early and we start talking with them and we'll look at some early drafts before they even fly. A lot of times we have pre application meetings and all this. And we this is where I say, when we see things, when we see developments and markets where we think this 8020 structure is possible, it's very common for us to push back and say, can you try can you run your numbers a different way? What if you had fewer affordable units and you could leverage the market rate units more? And it is a conversation with the developer to try to get the most number of units out of the system that we can And these are all, even though it's in a building that is perhaps a condo, legal, these are not condominiums,

[Senator Randy Brock (Vice Chair)]: these are rental properties, Correct, correct. And so as a result, the rental properties, the child is the developer who is deciding the breakdown of what's gonna be affordable and what's not going to be, and that is part of the original plan. Now, is that plan changeable at all at some time down the road? In other words, it's a rental property, must they keep it at that 20% or whatever the percentage is at the interlocutory, or is there an opportunity to change that?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Yep, depends on what money to get. For the RLF program, it's they get a loan from us. The rent restrictions last for seven years.

[Senator Alison Clarkson (Chair)]: I was gonna say they haven't time.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Or the length of the loan plus three years. So if they ask for a twenty year loan from us, then they have to have hit that affordability for the twenty years, plus we ask for another three years so that we can communicate to tenants that there's a risk that, you know, their rents will be because reduced there are rent caps on the growth that can happen each year. For the tax credit, the 4% tax credits, the federal government says, if we're gonna give you these tax credits and all this money, then there has to be thirty years of affordability. And so that's what is in place. And that's federally deemed. BHFA does not add any extension to that affordability, we only go with what the IRS requires.

[Senator Randy Brock (Vice Chair)]: And from the developer standpoint, that period of time is acceptable based on the way the funding is distributed?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: For those who go for tax credits, they're getting so much money that they agree to 30%, I mean thirty years of affordability. Some choose some of the RLF projects that we well, all of the RLF projects we awarded previously, none of them did tax credits. I didn't ask them if they want thirty years of affordability. If they got a thirty year RLF loan from us, then they were agreeing to thirty years of affordability by taking the money that's in the terms. But if they said, I don't wanna do affordable for that long, I only wanna do it for seven years, then they probably got a seven year loan from us.

[Senator Alison Clarkson (Chair)]: Right. But that, well, has a different rate too, would assume, and different

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: tax credit. Well, it's a I wanna be very clear. An RLF loan is a loan with an interest rate that gets paid

[Senator Alison Clarkson (Chair)]: back. Right.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Tax credit. Oh, free money. So it's different. It every time you it's always a seesaw here of how much you're asking in terms of affordability and depth of affordability and and income levels and all that compared to how good the money is. And when we give 0% deferred loans, which for free, then you can ask for a lot. You can ask for perpetual affordability. It's very clear. We have a lot of it in Vermont. But when you're only offering these 4% tax credits that are very valuable but not free totally, then we ask for thirty years of affordability. When you're only giving someone a subsidized subordinate loan, you can't ask for that much because it's a loan with an interest rate and it's subordinate, which has value. Yep. But so it's all about finding the balancing point of the trade offs of affordability and restrictions to how much benefit we're getting. And sometimes we have some disagreements here where the legislature wants so much out of programs and I have to come in and remind you all of like, actually, the benefit isn't that great. You can't ask for that much for this benefit. We had that conversation many years ago. We had priority housing projects under act two fifty.

[Senator Alison Clarkson (Chair)]: Right.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: And there was times when people were like, let's have perpetual affordability. I'm like, you're only giving a break on I'm two fifty. That has value. It's money. I'm not but but it's not perpetual affordability kind of money. Right.

[Senator Alison Clarkson (Chair)]: So 4% generally comes with a thirty year affordability.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: The IRS requires thirty years of affordability.

[Senator Alison Clarkson (Chair)]: So those are higher value, but they're also let's bring it back to Vermont constituents that we represent. That also enables thirty years of affordability for Vermonters, which is great. It just kept on. Yep. Remind us who we're serving here.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Exactly. And so the but the rules are set by the developer gets to decide what kind of money they wanna work with. Know developers who come in for tax credits because they want thirty years, and they won't go for state tax credits, which require perpetual affordability. Some others are okay with that.

[Senator Alison Clarkson (Chair)]: So so I think we at least I have a sense of what you're asking for. I think this is a good opportunity for this next $14,000,000. There's a

[Senator Randy Brock (Vice Chair)]: couple more questions for me. Yeah.

[Senator Alison Clarkson (Chair)]: Yeah. And I just wanna make sure Thomas, who's online, has an opportunity to ask any questions if he has some. And then, Randy, Thomas, do you have any questions?

[Senator Thomas Chittenden (Member)]: I do not. Thank you very much, but I've been following along.

[Senator Alison Clarkson (Chair)]: Okay. Great. Yeah. I think I think this is an opportunity I'm glad we're exploring.

[Senator Randy Brock (Vice Chair)]: Randy? As you're looking at the people who are doing these projects, are they principally developers who are bot based?

[Senator Alison Clarkson (Chair)]: Who are what? Or bot based?

[Senator Randy Brock (Vice Chair)]: As opposed to a larger audience of developers? There is such a thing?

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: The previous awardees were all Vermont based. They were all Vermont residents, as far as I know, and they all have portfolios in Vermont, some of them very long standing, like decades and decades, and some newer. I don't know who will apply for the new money, but I will say that BHFA has been actively we have a strong robust development network already in Vermont that we are trying to grow by offering TA to new and emerging developers, but also Technical assistance. Technical assistance to new and emerging developers. But also, I'm down in Boston and at national conferences, and I am trying to get other developers to come to Vermont who have long standing track records of building affordable housing. And so an example is these 4% tax credits. There is an outside Vermont entity that has decades of experience running high quality affordable housing, and they have been buying some of the deeply subsidized buildings that need rehabilitation. And the owner who built it thirty, forty years ago was ready to retire and sell and get out of his business. And so other companies are coming into Vermont, we're working with them more and more.

[Senator Randy Brock (Vice Chair)]: Well, again, think crux of my question, is there an untapped market of developers that what we're doing in Vermont and the kinds of things that you're proposing may appeal to? Because part of the issue is getting more housing built, maybe more developers wanting to build houses.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: Yes. I would say that. And while I don't know who's gonna apply for this money, I have heard from out of state developers who would like to do business in Vermont who say, this would really help us because we know how to do eighty twenty deals. We know how to make this work. And if we could have tax credits in the mix, we can deliver you middle income, market rate, mixed income housing, but we need this tool.

[Senator Randy Brock (Vice Chair)]: Those are the tools. That goes to the next question I have, is there any activity that is focused on getting other developers interested in this, or for that matter, in creating tweaks to a program that make it more attractive for those developers?

[Senator Alison Clarkson (Chair)]: I think what Laura is saying is that actually by offering this opportunity, we will.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: This is one, but there's another one. And it's what I referenced earlier, which is not the point of my testimony today, but it is right now, we're in a public comment period for a qualified allocation plan, and the QAP governs how we do tax credits. One of the goals of the draft that has gotten a lot of attention right now and is a lot of public comments are we proposed several changes that we think could open the door to make it possible for larger developments, more cost efficient developments, different ways of doing housing, leaving the priorities largely unchanged and knowing that we're not trying to prohibit small, expensive, boutique needed opportunities in communities, but opening the door to other ways of doing things. And I will characterize the response by the Vermont folks who were getting comments from are really unhappy with those changes and trying to get us to not go in that direction. So that's another example of trying to just open the door, not make decisions, but create some tools. Thank you, Ming.

[Senator Alison Clarkson (Chair)]: Great, thank you. I think that was helpful. I think we have a pretty strong sense of this ask. Cameron has been drafted, and I believe I'm not sure if his new draft has it incorporated, but we will certainly discuss that. And I would hope we could add this Let me see his language. He had to step out and go to senate judiciary for a minute. That way, it's been more than a minute.

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: If I can just offer because I've been gone for a month and senator Ram Hinsdale, I know you're just coming in, I'd be happy to connect with you or if Senator Chittenden has the question. No, it's her answer. So, I'll be here till, through lunch today, but, you know, I'm available to connect on this.

[Senator Alison Clarkson (Chair)]: Well, I think the more 4% tax credits we can access, the better in enabling those units to be rented to people with a wider range of incomes is a good idea. So two goods. Okay. Great. Sadly, David has just left and his his Eagle Scout were and Cam is not with us, and we were so we were gonna address the off-site accelerator and the 1% credit facility with David. So, Peter, do you wanna join us for us for a bit? Sure. And I think now is an opportunity. David had some concerns. I know about the off-site accelerator. I was trying to connect him with Alex on that as well. Any concerns still on the Off-site Accelerator? Have language that limits it. We've got It's sort of like to go through what Cam has done. And so let's maybe wait for Cameron to go through because he's incorporated. So a lot of our concerns

[Maura Collins, Executive Director, Vermont Housing Finance Agency (VHFA)]: I I think it's unnecessary language. Yeah. I read it. Okay. We need a quorum. I'll be right back. We'll have a quorum.

[Senator Alison Clarkson (Chair)]: I know. I appreciate it. Yeah. Thomas, I I know you're here. Thanks. Thanks. I think I'm gonna take a break until Cameron joins us again because I think I'd love to have Cameron here with us at. So we're gonna take a break until we get Cameron back, and then we're gonna go through this. And so let's do that. Either that or yeah. So let's take a break for a second and go offline and