In 2019, the Vermont Housing Finance Agency (VHFA), Vermont Housing and Conservation Board (VHCB) and the Department of Housing and Community Development (DHCD) of the Agency of Commerce and Community Development initiated a study designed to help ensure that State resources for affordable housing are being used efficiently to meet the housing needs of low-income Vermonters. The primary objectives of this affordable rental housing cost study are to examine factors affecting the cost of affordable rental housing and to provide achievable recommendations to contain or reduce total development costs without sacrificing housing quality or other critical policy objectives. This report builds on prior studies of housing costs in the State, as well as recent national research on cost effectiveness in the affordable housing delivery system. The private market generally can meet demand for rental housing for higher-income households. However, it is difficult—and often impossible—to deliver housing affordable to Vermonters with lower incomes without public subsidy. While affordable housing development costs in Vermont are in line with costs observed more broadly in New England, public resources for affordable housing remain limited and are insufficient to meet the full extent of housing needs. At the same time, labor, material, and other development costs are on the rise. Therefore, it is critically important to identify the key drivers of development costs and to develop strategies to ensure available resources are used effectively.

In Vermont, there are several State agencies involved in financing affordable housing and providing housing assistance. The VHFA, VHCB, and DHCD are the primary State agencies involved in funding the development and preservation of affordable rental housing in the State. These agencies work together with Federal housing agencies, including the U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Agriculture (USDA), as well as with the Vermont State Housing Authority (VSHA), local Public Housing Authorities, and departments of the State’s Agency of Human Services (AHS), to leverage the federal dollars available to Vermont and to help ensure State and Federal resources are targeted effectively. Each State funding agency in Vermont has its own processes and priorities. However, there is a significant amount of coordination among the agencies, and the agencies embrace the shared goals of expanding permanently affordable rental housing, support historic preservation and downtown redevelopment, and promoting energy efficiency in the State. These priorities are formally renewed every five years when the State conducts a Housing Needs Assessment and sets policy priorities in its Consolidated Plan (ConPlan). Many of these priorities are set in State statute. Strategies to contain costs in the affordable rental housing delivery system, therefore, must be balanced against these Statewide policy priorities.