VT LEG #381569 v.3
S.127 – An act relating to housing and housing
development
As passed by the Senate
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Bill Summary
his bill would establish various policy directives and new programs aimed at increasing the supply,
affordability, and accessibility of housing in Vermont. The bill would also establish a tax increment
retention program for housing infrastructure projects.
Fiscal Summary
As introduced, the bill’s total fiscal year 2026 General Fund cost would be $50.45 million. Of that, $49.7
million would be appropriated for new and existing housing programs, staff positions, and studies, and the
remaining $750,000 would be from two newly created tax expenditures. The version recommended by the
Senate Committee on Appropriations removes the appropriations and tax credits and incentives in the bill,
consistent with the Committee’s typical practice of reflecting spending in the annual appropriations act.
The bill also proposes a program that would have impacts on the statewide Education Fund:
• Sections 16 and 17 would create a new, project-based tax increment financing (TIF) program, called
the Community and Housing Infrastructure Program (CHIP). The proposed program would allow
municipalities to retain up to 100% of incremental municipal property tax revenues and 80% of
incremental education property tax revenues for 20 years to support financing of local projects.
There are too many unknowns to provide a fiscal estimate of the cost of this proposal to the
Education Fund; the fiscal impact depends on the amount of debt incurred, the total size of project
district, and future growth in property tax revenues that would occur under current law. The impact
of the program would also depend on the number of projects that are made possible by Education
Fund dollars versus projects that would have happened in some capacity anyway without the support
of tax increment.
Background and Details
Section 1: Vermont Rental Housing Improvement Program (VHIP)
VHIP provides five-year grants or loans, and 10-year forgivable loans to rehabilitate existing vacant units or
structural elements affecting multiple units, build accessory dwelling units (ADUs), build new residential units
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The Joint Fiscal Office (JFO) is a nonpartisan legislative office dedicated to producing unbiased fiscal analysis – this fiscal note is
meant to provide information for legislative consideration, not to provide policy recommendations.
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April 8, 2025 Ted Barnett, Senior Fiscal Analyst, James Duffy, Fiscal Analyst S.127 – An act relating to housing and housing development 2
VT LEG #381569 v.3
in an existing or new structure, and complete repairs necessary for code compliance. Under the current
program, property owners are eligible to receive $30,000 per unit for rehabilitation of 0-2 bedroom units, and
$50,000 per unit for 3+ bedroom units or creation of new units.
This section would remove tenant selection requirements and replace them with a requirement that rent
payments including utilities shall not exceed fair market rent for the 10-year loans. It also creates the VHIP
Revolving Fund, which would receive funds repaid or returned to the Department of Housing and
Community Development (DHCD) from VHIP grants or forgivable loans and allow DHCD to use these
funds for program expenditures and administrative costs.
Section 2: Vermont Manufactured Home Improvement and Repair Program
The Vermont Manufactured Home Improvement and Repair Program (MHIR) provides funding to improve
existing manufactured homes, incentivize new slab placement, and for infill of more new homes. Up to
$20,000 can be awarded for small-scale capital needs to help infill vacant lots with new homes. Up to $15,000
per grant can be awarded to pay for approved slabs or other site preparation, skirting, tie-downs or utility
connections. This program was originally funded through $4 million in ARPA funding. Section 2 would
permanently place the program in statute.
Section 3: Vermont Infrastructure Sustainability Fund
Section 3 would create a revolving loan fund administered by the Vermont Bond Bank. Loans would be
available to fund:
• Preliminary engineering and planning;
• Engineering design and bid specifications;
• Construction for municipal water and wastewater systems;
• Transportation investments; and
• Other eligible activities to be required.
Funded projects would create reserve capacity necessary for new housing unit development, have a direct link
to housing unit creation, and be owned by a municipality throughout its useful life.
Section 5: State Housing and Residential Services Planning Committee
Section 5 would create the State Housing and Residential Services Planning Committee to generate a State
plan to develop housing for individuals with developmental disabilities. The Committee would create a plan
that includes: a schedule for the creation of at least 600 additional units of service-supported housing,
description of the support needs of individuals with developmental disabilities, anticipated funding needs, and
recommendations for changes in State laws or policies that are obstacles to the development of housing for
individuals with Medicaid-funded home and community-based services. The Committee would submit a
report to various committees of jurisdiction by November 15, 2025.
Sections 16 and 17: Community and Housing Infrastructure Program
Sections 16 and 17 would create the Community and Housing Infrastructure Program, a TIF program that
would allow municipalities to retain growth in incremental property tax revenues to finance housing
development. Municipalities would be able to retain 100% of the municipal increment, and 80% of the
education property tax increment for 20 years after the first incursion of debt. Under current law, TIF districts
can retain 70% of education property tax increment and 85% of municipal property tax increment.
As proposed, tax increment could be used for direct payment of financing incurred to support the project,
and related costs, and for any direct costs of housing infrastructure. Use of increment for direct payments
would be subject to the same public vote provisions as municipal debt incursion for the project. To qualify,
projects would need to meet process, project, and location criteria:
• Process: The project must show it has created a project site, executed a housing infrastructure agreement
with a developer or sponsor, and pledged incremental tax revenues to the project. S.127 – An act relating to housing and housing development 3
VT LEG #381569 v.3
• Project: VEPC will determine whether the projected housing development includes housing.
• Location: The project would also need to be in a Tier 1A, 1B, or Tier 2 area as designed on state land
use or development plans or located within ½ miles of an existing settlement area as defined in 10
V.S.A. § 6001(16).
The fiscal impact of this program to the Education Fund cannot be estimated at this time, since the scope of
program utilization, the intended size of projects, and the amount of development that would occur absent
the program is not known. The bullets below reflect several fiscal costs and considerations:
• As recommended, projects located in Tier 1A, 1B, or Tier 2 that include housing would be able to
retain incremental property tax revenues – the program does not include a “but-for” test to understand
if the project would have happened absent the use of incremental property taxes. Without that but-
for test, the program will incentivize developments that would have occurred anyway, resulting in
forgone revenue to the Education Fund.
• The bill would expand the types of projects that would be eligible to retain property tax increment
compared to current law for TIF districts. Under current law the definition of “improvements” means
“the installation, new construction, or reconstruction infrastructure that will serve a public purpose
… including utilities, transportation, public facilities and amenities, land and property acquisition and
demolition, and site preparation.” This bill would expand that definition to include “the installation or
construction of infrastructure that will serve the public good,” and add digital infrastructure, public
recreation, commercial and industrial facilities, and flood remediation and mitigation to the above list
of permitted infrastructure projects. This provision, along with a lack of a but-for test increases the
number of projects that could qualify for this program and the potential amount of education property
tax increment that could be retained.
• The program would retain a larger percentage of incremental education property tax revenues
compared with the current tax increment financing program, which retains only 70% of incremental
revenues. With a higher retention percentage, potential costs to the Education Fund are also higher.
• Statewide grand list growth is currently high. In fiscal year 2025 and 2026, equalized grand list growth
is expected to be approximately 14%. If project sites are large enough to capture property value growth
from adjacent parcels with existing development, the growth from those parcels would be retained in
service of CHIP project costs instead of going to the Education Fund. This capture of existing growth
would represent forgone revenue to the statewide Education Fund.
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The full fiscal note history is available on the fiscal tab of the bill page on the General Assembly website and can be pulled up
through a bill number search on the JFO page.