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View ProfilesPublished February 28, 2024 at 10:00 a.m.
Hundreds of new rental housing units have been brought online in Vermont with a boost from pandemic-era relief funding, and state officials plan to launch an expanded version of the program next month using state dollars.
At a time when high construction costs have made it nearly impossible for small developers to build or renovate housing for low- and middle-income Vermonters, lawmakers and state officials say the Vermont Housing Improvement Program has proved its worth. It's helped create or rehab 535 units in the past four years, many for people who were homeless. Another 386 units are in the pipeline, state officials say.
"It's a very successful, popular program," said Angie Harbin, the CEO of nonprofit Downstreet Housing & Community Development, one of five agencies that administer VHIP grants.
"We're seeing buildings that were vacant and in poor shape that are now rental homes because of VHIP," Harbin testified to the House General and Housing Committee on January 31. "We are seeing dilapidated buildings being transformed into safe, stable homes for people exiting homelessness."
As millions in federal COVID-19 emergency money flowed into Vermont, officials facing a mounting housing crisis funneled money toward new construction, mostly affordable multifamily projects. They eventually created VHIP as a way to rehabilitate existing buildings, many of them vacant or underused, to quickly make homes available.
Through VHIP, property owners who renovate apartments or create new ones can get up to $30,000 for a two-bedroom unit and $50,000 for units with three or more bedrooms. They must offer the apartments at fair market rent, as set by the U.S. Department of Housing and Urban Development. Property managers work with established agencies such as Downstreet and the Champlain Office of Economic Opportunity to find tenants who have been homeless.
Property owners who receive VHIP grants must provide a 20 percent match and complete construction within 18 months. They have to rent at HUD rates for five years, after which they can charge market value for the units.
In Bradford, builder Jonah Richard is converting a 124-year-old house and barn into six apartments with funding from $1 million in grants, including $150,000 from VHIP. In exchange for the VHIP backing, three of the units will be occupied by tenants who needed help from social service agencies to find housing; Richard also must keep rent at affordable rates. Richard, who also used VHIP to help fund the renovation of an eight-unit Fairlee building last spring, said the grant money is the "only way you can make the affordable housing numbers work."
Developer Samantha Hiscock has been using VHIP to renovate a three-story, 125-year-old building in Barre Town that she purchased in 2021. She plans to put eight apartments and two commercial spaces in the former store, which sat largely vacant for years. The project wouldn't have been possible without VHIP, said Hiscock, who estimated that she'll receive $280,000 in grants for the renovations.
In Barre Town, the HUD rate is $1,106 per month for a one-bedroom and $1,832 for a three-bedroom.
The nonprofit Vermont Housing Finance Agency estimated last year that Vermont has one of the lowest housing vacancy rates in the nation, at around 3.5 percent. In the Burlington area, the number hovers at around 2 percent. Further, the state is housing an estimated 2,500 homeless people in motels, and the administration of Gov. Phil Scott plans to create more shelters and end the motel program.
VHIP is a good fit for Hiscock because she often rents to people who had been homeless, she said, adding that she was once homeless herself with a young child. Hiscock, who has a bachelor's degree in construction management, owns and manages 29 units with her husband. Their company is called Rock Pile Properties.
Hiscock said most of her tenants don't have the credentials that landlords typically require.
"A lot of big property management companies and landlords are so rigid," she said. "No evictions, a minimum credit score of 650, no criminal record."
Tenants with a voucher from a program such as HUD's Section 8 usually pay only a fraction of the rent on their own, she said, meaning the bulk of the rental payment is guaranteed.
"I've had tenants who have had credit scores in the high 400s with felonies on their record and three evictions, and they've been great tenants," she said. "Over the last 14 years, I've probably only had maybe half a dozen tenants who have been absolute nightmares, which is pretty good considering the number of units we have."
Richard said VHIP's maximum of $50,000 per unit provides limited assistance but can make smaller projects feasible. Developers in Chittenden County estimate that apartment construction costs as much as $500,000 per unit. In Fairlee, Richard said, it's about $200,000.
"Fifty thousand dollars doesn't get you very far when it comes to renovating," he said. He also uses private equity to pay for some of the apartments, which he plans to rent at market rate.
VHIP has been used by developers large and small, according to the Vermont Department of Housing and Community Development. The Bove family, which has had issues with code enforcement over some of its rental properties, has used it; well-known landlord Joe Handy received $132,000 in 2021 for properties in Colchester and Winooski. The average grant is $38,000 per unit, said Shaun Gilpin, housing division director for the Vermont housing department.
"A lot of big players have used VHIP," Gilpin acknowledged. "But most of our grants statewide have been to smaller outfits."
The Vermont housing department lists grants made after 2021 on its website. They range from many grants of $30,000 to a high of $690,000 awarded for an apartment building owned by Jeremiah LaCross of St. Albans.
LaCross, who owns 57 units in St. Albans with his cousin and his cousin's wife, used the money to build 23 apartments in a vacant building that had been an assisted-living facility, a project he estimated cost "north of a couple million." It was completed last year and is fully occupied, he said. LaCross and his partners found tenants through CVOEO.
"Without the grant money, there is no way we could have made it happen," he said.
The program also grants $50,000 to people who build accessory dwelling units on their own property. ADUs are separate living spaces within a house, such as an in-law apartment, or nearby on the same property. Those funded through the program must be offered at HUD's fair market rent for at least five years, but there is no requirement that they be used by someone who was previously homeless.
"Even if that accessory dwelling unit is used by a friend or family member, at least we've got another unit out there," Gilpin said. "Our goal is new units."
Lisbeth Dodd received $50,000 from VHIP and another $20,000 from Montpelier's ADU program to renovate the basement of her ranch into a studio apartment last year. Her tenant moved in about four weeks ago.
Dodd worked as the general contractor on the project, with the help of tradespeople she has known for years, she said. She taught herself as much as she could.
"I researched insulation, acoustics, windows ... It was a long learning process," Dodd said. "You have to have an interest in it and keep plugging away."
Advocates have asked lawmakers to add people with disabilities to the list of possible tenants for VHIP apartments. On January 31, Elizabeth Campbell, whose adult son, Jesse, has Down syndrome, told the House General and Housing Committee that she's part of a group of parents hoping to build an adult housing community in Monkton called Riverflow. VHIP could help them secure the money they need.
"Nothing is more important to parents like us than securing a safe and meaningful future for our lifelong vulnerable adult children," said Campbell, who lives in Shelburne. "With the help of VHIP funds, Riverflow will address a critical and unmet need in Vermont's developmental disability community."
Hiscock doesn't want the criteria to be expanded, saying that would leave less VHIP money to house people who are homeless.
"The definition of 'disability' is now so widespread," she said. "When they're adding these other categories, they're not hitting the target demographic of people who are homeless, which is what this money was intended to do."
But Gilpin said expanding the program to include arrangements such as the single-room housing that might be suitable for developmentally delayed adults is allowed by statute.
"We're in discussions internally," he said.
VHIP itself is undergoing a renovation this month and has stopped accepting applications. The state housing department will relaunch it on March 25 with some new guidelines.
In 2022, lawmakers approved $20 million for VHIP, and Gov. Scott included a one-time $6 million appropriation for it in his 2025 budget proposal. That combined $26 million should get the program through 2026, Gilpin said.
VHIP 2.0 will cover new construction, not just renovations. Another change: Property owners who commit to renting at HUD-approved prices for 10 years — double the time stipulated in the original program — will not be required to rent to people who were homeless.
The minimum five-year time frame for keeping rents low worries Harbin. She noted that if owners raise the rent to market level after that period, the low-income tenants they originally served could be pushed out.
"What's happening with VHIP is amazing; they're getting units on the ground right now, and we need them desperately," Harbin told lawmakers. "But at the end of the five-year period, we don't right now have the answer to where folks are going to be able to go."
The original print version of this article was headlined "Homes Work | A pandemic-era program that created and rehabbed hundreds of apartments will be extended"
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