The rapidly rising price of homes in Vermont is a worrying trend. Strikingly, sales of $1 million homes in Vermont nearly tripled in the last year. Home prices overall rose 6.9% statewide from 2019, with most of the growth in prices occurring during the second half of the year, according to Vermont Property Transfer Tax records. Burlington, in particular, is experiencing a housing boom—from January to early March, Four Seasons Sotheby’s International Realty reported a 17.6% increase in Burlington home sales compared to the same time period last year — and a 55.6% increase in home sales from the same quarter in 2019. Many suspect the boom is driven, at least in part, by higher-income households fleeing densely populated areas in other states due to the pandemic. Whatever the case, the pandemic has created the conditions for rapid appreciation of home values.
This increased demand goes along with a slowdown in construction of new homes, pushing up the cost of those as well. According to Multiple Listing Service (MLS) data, the median sale price of newly-constructed homes in Vermont was $388,000 in 2020—up $22,000 from the previous year. A recent analysis ranked Vermont as the #1 least affordable state to buy a new home, comparing resident incomes with the median price of newly-constructed home sales. That’s not a title we want to claim!
The effect of all this is squeezing the market and pricing low-and-moderate-income Vermonters out of homeownership. That in turn puts increased pressure on Vermont’s tight, low-vacancy, and high-priced rental market. The private market system simply does not meet the need for affordable housing, especially when the gap between low incomes and the cost of housing is so high.
There are many facets of this problem, but there are short-term and long-term actions that state lawmakers can take to create the conditions for a more equitable housing market. One simple step that VAHC supports is a proposal to increase the property transfer tax on million-dollar homes. This proposal just passed the Vermont House, and would add .5% for a total 1.75% tax on the sale of these high-end homes, as well as commercial properties above one million dollars in value. This would increase baseline funding toward the Vermont Housing and Conservation Board (VHCB), which supports the construction and renovation of high-quality affordable housing through a variety of programs. While the statute does not direct these funds toward any particular program, VAHC supports allocating increased funding toward an affordable housing tax credit that will fund the replacement of older, substandard mobile homes. This will help low-income Vermonters obtain quality affordable housing and reduce the demand for other publicly funded programs like fuel assistance and weatherization.
“The Vermont Affordable Housing Coalition is in full support of leveraging this new economic activity around the sale of properties valued at a million or above to help those Vermonters who are struggling to have safe and affordable homes for their families,” VAHC Interim Coordinator Brian Pine said in testimony on March 18 to the House Ways and Means Committee. “Those same pressures that were in effect in the 1980s [that] led to the creation of VHCB … are causing rents to rise and home prices to escalate further out of reach for working Vermonters. Those who are buying properties at or above a million dollars can more easily absorb the additional tax levied on the transaction.”
This post is the first of a VAHC series spotlighting affordable housing problems and solutions emerging at the state and national levels in 2021. To see the other posts, click here, and follow VAHC on Facebook and Twitter to see new posts!
*This post has been edited to reflect that the proposal would raise the tax on all property transfer values above one million dollars by .5%, not .75%.*