By Carly Berlin
Editor’s note: This story, by Report for America corps member Carly Berlin, was produced through a partnership between VTDigger and Vermont Public.
When 10 apartments at the new Armory House building just outside of downtown Vergennes opened in June, they all had tenants within two weeks. To Peter Kahn, the building’s developer, watching the new apartments fill up so quickly — most deemed as “workforce housing,” and several as affordable to people with lower incomes — underscored the severity of Vermont’s housing deficit.
“Seeing firsthand and experiencing the shortage at a personal level really illuminated how deep this problem is,” Kahn said.
Kahn’s plans for the Armory Lane lot have been guided by recent changes to Act 250, Vermont’s land use review law. At first, he’d planned to build 9 apartments there, to avoid triggering scrutiny under Act 250, which he feared would add time and expense to the project. But after the Legislature made temporary tweaks to the law last year, he realized he could build 24 apartments without Act 250 kicking in. He quickly added a 10th unit to the building-in-progress, and started hashing out plans for a second, 14-unit building at the same site.
Then, the Legislature passed even bolder Act 250 reforms this year, as part of Act 181. Kahn learned he could add even more homes to the Armory Lane lot without bumping up against the land use law. He has also begun to sketch out plans for a much larger, 74-unit workforce housing apartment complex on a vacant lot near the police station in town. Kahn is shaping that new project around a new, temporary Act 250 exemption for 75 units or fewer in certain areas designated for growth.
“100% we are tailoring the project around that exemption,” Kahn said.
The response of developers like Kahn indicates the reforms are beginning to work as intended. Proponents had hoped the temporary carve-outs for housing in Act 181 would clear red tape and encourage compact housing development to ease Vermont’s acute housing shortage. Since the law took effect in June, about a dozen housing developments have used the interim exemptions, most of which stipulate that construction has to have begun by 2027 or 2028.
That’s based on a VTDigger/Vermont Public review of development proposals that have received explicit confirmation from an Act 250 district coordinator that the project will not require an Act 250 permit. Still more projects might be moving forward without seeking this official thumbs up, called a “jurisdictional opinion.”
‘Signs of success’
The housing projects using the new exemptions span geography and scale. They include the conversion of a nursing home into 40 apartments in Hartford, the construction of a new senior housing project in downtown St. Johnsbury, and a hotel-plus-apartments development in the heart of Rutland.
“There are signs of success,” said Alex Farrell, commissioner of the Department of Housing and Community Development, about the interim exemptions.
Many developments taking advantage of the exemptions were likely already in the works, but will now have an expedited timeline — a positive outcome, Farrell said. But the bigger impact will come when more developers like Kahn take the exemptions into account early, and expand the number of homes they seek to build.
“I think this coming spring and summer, we’re going to see some — probably some really exciting results,” Farrell said.
But the exemptions are already encouraging developers to take on projects they may have shied away from otherwise.
In Brandon, Naylor & Breen Builders recently got word that they would not need an Act 250 permit to convert a former arts center into 24 units of housing, using a new exemption for commercial-to-residential conversions.
Tanner Romano, the owner of the company, said Naylor & Breen is working with several other local employers to create workforce housing. The project is not yet a guarantee, he said. But the fact that it will not need to go through Act 250 means the developers won’t have to pour thousands of dollars into permitting, design and engineering fees just to put a permit application together.
“So when you put that exemption into play, it’s like, ‘OK, now we can take a real crack at this’ — without having to put all that money up front and run the risk of either not getting permitted or the project not going, and you’ve wasted that investment,” he said.
Had the project been subject to the typical Act 250 requirements, Romano said, the company probably would have passed on it.
And the exemptions are making a difference for housing developments in some of Vermont’s smaller towns, too. In Fairlee, which has fewer than 1,000 residents as of the last census, the small real estate development firm Village Ventures is planning to rehabilitate an existing 10-unit apartment complex at the corner of Bridge and Main Streets, and is also planning to build two new fourplexes on the same property. That will nearly double the number of homes at the site. The project is taking advantage of a new Act 250 exemption for building up to 50 units of housing in village centers.
The developers plan to allow the current tenants to stay, and they’re planning to apply for low income housing tax credits to keep the apartments affordable to people making less than the median income in the area. Rents will range from $890 for a one-bedroom to $1,653 for a four-bedroom, according to Austin Meehan, a development manager for Village Ventures. Several units will be set aside for people exiting homelessness and will come with supportive services, he said.
The hope is to create more housing options in a town that’s largely a tourist hotspot for Lake Morey, Meehan said.
“Trying to get this village center activated — and kind of start becoming a job center, and also a housing center — will do a lot to help the area continue to grow, and not just remain a summer destination,” Meehan said.
Looking ahead
The temporary exemptions to Act 250 were put in place as the state undertakes a mapping process over the next several years, which will determine the law’s reach for the future. Administration officials hope lawmakers will extend the interim exemptions this year until the new Act 250 framework is finalized, said Farrell, the housing commissioner.
“What we could end up with right now,” Farrell said, “is a sunset of the interim exemptions and then a long gap that creates uncertainty for home builders before the new, longer term exemptions come.”
That change is one of several updates to Act 181 that Gov. Phil Scott’s administration plans to pursue during the next legislative session, which kicks off in early January. Other proposals include making the exemptions apply retroactively — assuring projects that were already in the development process before the law went into effect can still benefit from it — and clarifying how they apply to subdividing properties, Farrell said.
Sen. Kesha Ram Hinsdale, D/P-Chittenden Southeast, one of the chief architects of Act 181, said she “probably hear[s] more of the bad news than the good news” when it comes to the impact of the new exemptions — meaning she gets calls from developers when they hit a snag in the permitting process, rather than when it goes smoothly. She sees more need for permit reform.
“I think there’s still more work to do outside of Act 250. People still come to me to talk about the length and obscurity of the [Agency of Natural Resources] permitting process, and, you know, issues that still increase the cost per unit of housing,” she said.
Both Farrell and Ram Hinsdale see taking on the appeals process for housing as a priority this coming year. Proposals for reforming how neighbors can challenge new housing — a key issue at both the local and state permitting levels in Vermont — largely did not make it to the finish line last legislative session.
The issue of neighbor opposition hits close to home for Kahn, the Vergennes developer. Plans for a South Burlington development he worked on faced significant community pushback several years ago, as many neighbors voiced their concerns over the loss of open space. The specter of taking that project through the Act 250 process — with the potential for lengthy, costly delays — ultimately led the developers to abandon it, Kahn said.
He hopes lawmakers ultimately make the interim Act 250 exemptions permanent, to keep easing the path for more housing, he said.
