As Legislative Session Wraps Up, Showdowns Loom Over Key Housing Bills 

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• Kevin Mccallum ©️ Seven Days
• A Winooski housing complex that was exempt from Act 250 review

As Vermont's legislators lurch toward the finish line this week, the fate of several high-priority housing bills may hinge on whether Democratic lawmakers can sidestep or override vetoes from Gov. Phil Scott.

Three key housing bills — two with millions of dollars for new programs and one that would revamp environmental regulations affecting development — each have goals Scott supports but also contain regulatory programs he says he cannot.

One package of changes to Act 250, the state's land-use and development law, faces opposition not only from Scott but from seven of the eight mayors in Vermont. They contend the measures that legislators favor would not sufficiently relax the state's Act 250 review of housing projects and would hinder the ability to build.

Burlington Mayor Miro Weinberger, a former developer, delivered a withering criticism of the lack of regulatory reform on Tuesday during Scott's weekly press conference. One proposed change, he said, would reverse past efforts to streamline the Act 250 appeals process.

"In short, this gives obstructionists to housing projects yet another way to throw sand in the gears of needed new homes," he said.

Scott vowed to veto the Act 250 bill, S.234, as currently written. Though he's not been reluctant to wield the veto pen, that's a rare line in the sand for a governor who tends to wait until lawmakers finish tweaking bills before weighing in on their fate.

And yet the Republican governor has been very vocal this session about his dissatisfaction with the progress of key housing bills, calling elements he dislikes — particularly state registries for rentals and home contractors — "poison pills" and accusing lawmakers of playing "political games" by linking the provisions to housing funding.

Democratic leaders counter that the new regulations are as important to growing the state's housing supply as the millions in federal funding meant to jump-start construction and rehabilitation projects.

"These are not poison pills," said Rep. Tom Stevens (D-Waterbury), chair of the House Committee on General, Housing and Military Affairs. "They are policies that complement the large expenditures."

The showdown on the housing bills underscores the pressure on state leaders to address a housing crisis marked by soaring prices and an all-time shortage of inventory.

"Housing has been a signature issue for the 2022 legislative session," said lobbyist Adam Necrason, whose firm is advocating for some key housing bills on behalf of the Vermont Affordable Housing Coalition. "This final week of the legislature will be a test of state leaders' ability to compromise."

Legislators and the administration both favor spending pandemic relief money on housing. One key bill, S.210, contains $20 million in federal funds to help landlords rehabilitate and winterize their properties. Vermont's housing stock is among the nation's oldest, and officials say helping owners renovate run-down properties can be a faster and cheaper way to boost the housing inventory. The bill would create the Vermont Rental Housing Investment Program and empower nonprofit housing organizations to give eligible landlords grants or loans of up to $50,000 per unit for renovations.

But the bill also includes provisions Scott not only dislikes but has vetoed before — a registry of rental properties and an associated statewide inspection program.

The bill calls for owners of about 60,000 rental properties to pay a $35 annual fee per unit and inform the state of the unit's location, year built, handicap accessibility and other details. The fees would fund a statewide rental inspection program meant to ensure that those units are up to code.

The program would effectively shift responsibility for rental property inspections from often overburdened town health officers to new state inspectors in the Division of Fire Safety. Those inspectors could more effectively make negligent landlords toe the line, the argument goes, and thereby improve living conditions for tens of thousands in substandard housing.

The bill would allow the creation of up to five inspector positions, but only one would be hired initially as the program ramped up. Penalties for violations could be as high as $1,000.

Professionalizing enforcement of health and safety codes for rentals would be a vast improvement over the current system, Necrason contended, likening it to "calling the town skunk officer when your landlord won't give you heat."

Scott counters that the rental registry would simply create another state bureaucracy and exacerbate the housing crisis by prompting more landlords to pull homes off the rental market instead of dealing with the costs.

But even some of Scott's key supporters are skeptical. Megan Sullivan, lobbyist for the Vermont Chamber of Commerce, said the fees are modest enough that she doubts landlords would stop renting units in response.

The bill would exempt many properties, including those with fewer than four units, places rented for fewer than 90 days a year, seasonal properties, farmworker housing and units rented to family members.

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• Kevin Mccallum ©️ Seven Days
• Burlington Mayor Miro Weinberger speaking at Tuesday's press conference as Gov. Phil Scott looks on

A conference committee called to hammer out differences between the House and Senate versions of the bill met Tuesday afternoon. Lawmakers agreed to drop the rental registry and fund the inspection program another way, and to dedicate $4 million to developing accessory dwelling units.

A similar showdown was also shaping up over the other major housing bill, S.226. The bill contains $15 million that Scott wants to support the construction of homes that middle-income residents could afford. Many in the housing industry say this would address the "missing middle" — those who can't afford market-price homes but earn too much to qualify for subsidized housing programs.

But the bill would also require home improvement contractors to register with the state, which Scott, the former co-owner of an excavation company, opposes.

Workers who do residential jobs of more than $10,000 would have to pay annual fees of $75 per individual contractor and $250 per business. Citing the burden on small businesses, Scott vetoed a previous version of the registry that had a $3,500 contract threshold. Lawmakers raised it in the hopes that the governor would sign the bill.

But Scott's decision could hinge on other provisions in the measure.

Lawmakers have included $4 million to help people repair and upgrade manufactured homes, as well as included down-payment assistance for new energy-efficient homes. That's $1 million less than Scott wanted. The governor also wanted $5 million to help cities develop dense, smart-growth-focused neighborhoods, but legislators included just $1 million.

The bill would also create a position in the Attorney General's Office to respond to consumer complaints against contractors on residential construction jobs under $10,000.

The House version also proposes an additional $1 million for down-payment assistance and $200,000 to create a Vermont Land Access and Opportunity Board to advise the state on how to promote homeownership for people from historically disadvantaged communities. Stevens acknowledged that the new board wouldn't have much power or funds initially, but he said it was an important start of the conversation.

Unlike some bills often dubbed "Christmas trees" for how they contain myriad unrelated items, Stevens said S.210 and S.226 have cohesive housing themes.

"These bills both have stories to tell," Stevens said. "There are through lines running through each of them."

For years, Act 250's story has been that it's tough to change. Developers routinely cite its stringent regulations as inhibiting growth, yet others see it as essential to preserving Vermont's character. This year's debate over Act 250 took on added urgency because of the housing crisis.

The Senate's effort to modernize the law, S.234, originally sought simply to expand the Act 250 exemptions for housing projects in developed downtown areas to include projects along rivers and to double the allowable project size to as many as 50 units in small towns. Exemptions from Act 250 allow developers to circumvent a review process many consider onerous, expensive and unnecessary in communities with robust zoning.

Environmental groups such as the Vermont Natural Resources Council are willing to loosen such rules for downtown areas in exchange for stronger protection of forests. Developers of large projects would have to show that their projects "will not result in an undue adverse impact on forest blocks, connecting habitat, or rare and irreplaceable natural areas."

Scott opposes this provision because it adds a regulatory requirement for housing when, he said, the state should be simplifying the path to construction.

The House threw the Senate something of a curveball late in the session when it added a change to how Act 250 is administered. The House version calls for revamping the Natural Resources Board, which oversees Act 250 reviews. Regional commissions would continue to handle some permits, but major projects and appeals would go straight to a professional Environmental Review Board. Appeals have been handled by the state's environmental courts since 2004.

Officials from environmental groups praised the changes in the governance structure as long overdue, but a group of Vermont's mayors, city managers and development professionals blasted the plan as likely to hinder housing development.

"In this time when Vermont faces a severe housing crisis, returning to a system similar to the previous dysfunctional and inefficient appeals process is the wrong way to go," warned the group of more than two dozen, which included Weinberger and Montpelier Mayor Anne Watson.

During the press conference on Tuesday, Weinberger urged lawmakers to pass many of the housing reforms and programs under consideration but not what he called the "very problematic provision" changing how Act 250 appeals are handled.

And while Act 250 is often credited with maintaining Vermont's rural character, Weinberger turned that around.

"The character of Burlington is very much being threatened by our current housing crisis," he said, "and this governance reform of Act 250 would threaten Burlington's character by taking us backwards."

The session is expected to conclude this week. But if lawmakers wanted to override any of the governor's final vetoes, they could hold a special session in coming weeks.