 Good morning. This is the morning meeting of the House Appropriations Committee on March 31st and we're pleased to have as a guest this morning of Seth Leonard who is with the Vermont Housing Finance Agency and as members know that Mr. Leonard when we are doing the budget we are on such a sprint that we can it is hard for us to take the time to pause and really understand programs and and so that's what we're hoping in that you can help us with now that we're not sprinting said we're when she noted we're kind of walking and sitting and just help us understand the proposal for the so-called missing metal and what it will accomplish how you know the ends and outs of that. So I turn it over to you. Wonderful. Thank you. Thank you for the invitation to be here. It's an honor. And can't start without sharing deep gratitude and appreciation for all that you have done on an annual basis for the state of Vermont. But I know especially right now your jobs have been especially difficult. So thanks for all your hard work. And just to go through who I am again my name is Seth Leonard managing director of community development for Vermont Housing Finance Agency. I manage our lending programs in the multifamily and single family development side also asset management compliance and our research and communications and community relations departments as well. I have slides that I shared with the committee and I understand that you all prefer just to pull them up yourselves or look at printouts instead of me sharing screens. And to go through all those would be about 30 minutes. Is that is that an OK time frame or would you prefer me to condense that down to allow for additional discussion with the window you have 30 minutes is fine and we'll try to let you get through it and we'll hold some time for questions after. Okay. Great. And am I right that I will not share screen right you all have a copy of the slides. We all have our devices and I pulled up and I see a couple of my colleagues B H F A building access to home ownership. Perfect. Yeah. I'll reference a few graphs so that that's helpful if you have that handy. Yeah. So thank you very much. So I think most presentations and discussions usually end with resources and research. But I think a really important part of understanding this proposal is knowing that there has been a lot of work and time and thought put into and policy development conversations that support a number of the items in S 226 and many of the solutions and ideas didn't come out of thin air that thin air they were from measured pressures that we've seen in the housing market and from measured need that we've seen in the housing market for some time so you've got a list of those research pieces and slides and hopefully links to them but you'll see at the top is a housing needs assessment link. That told us before the pandemic set in in Vermont. We had 90,000 Vermont renter and homeowner households who are paying more than 30% of their income on housing costs. That's what we would call cost burden households and that 39,000 of those households or 16% of all Vermonters were paying more than 50% of their housing costs. So we had an affordability issue prior to the pandemic that's been exacerbated by the conditions inspired by the pandemic. You see a link to a cost study that we performed in 2019 and released an early 22 pre pandemic again, the highlighted that as a state we were already seeing tremendous pressures on our housing community development fields from a well defined combination of permitting regulatory and process barriers. Yes, that's part of the part of the feedback you'll hear from builders and developers in terms of why we aren't maybe reaching our housing building and development goals. But there were already also emerging labor and material costs which will spend a good amount of time today talking about as well. And then a to 2021 report that focused on land use regulations at a local level where we had 22 of 69 responding towns indicate that they don't have zoning less than a half acre for a lot sizes anywhere in their community which is speaks to the challenges of sometimes placing the right homes in the right places as we like to say to be sure that we're doing responsible growth and development. And then you have a 2021 report called the state of development Vermont and if you have time to read one I think for for this conversation this is a particularly helpful one. And a lot of the slides and discussion today in this program are really a continuation of discussing what that paper is pointing out is which is in the housing development field we've really run into a perfect storm of chronic lack of meeting our production goals are are inability to produce enough housing units as a state along with pressures created by the pandemic related to cost and labor especially and those those things all building compound off of each other. And it's made it's made the challenge now a lot of people are rightfully calling your crisis. So, and just a quick plug to the timeless resource and all this research ages but housing data org does not so if you aren't using that site to great place to see ladies and grace in terms of research housing data and information. The next thing I want to point out is just a little a list of the existing programs to help home buyers so if you're falling along at home that'd be that next slide three, which is a list of the various resources we have available in Vermont we have about $60 million in a given year after we convert all the federal and state tax credits into equity we have about $60 million to spend on affordable housing. And now we spend between $1.9 and $2.9 million of those dollars on single family investments as a state so you can see the overwhelming number of investments go towards multifamily housing development and primarily are the majority of our resources for single family have gone towards down payment assistance which I would qualify as being a demand side thing helping people compete in the existing housing market. And that's important because what the missing middle proposal really is is it's trying to change the market a little bit it's it's we're trying to increase the inventory of homes available to buy to make those borrowers who might otherwise be totally rely on down payment assistance, more competitive in that environment. So as you walk through those various programs that this state has done. It's also worth noting that at various times that our states faced either economic or environmental crises. We have invested one time state or federal funds or increased our programming for housing investments as a result of those, those will crisis is of the past. The state tax credit program is probably the most recognizable to folks the state's investment affordable housing tax credits that is paired in some cases for multifamily projects with the federal for 4% low income housing tax credit for multifamily rental apartments, but also has the home ownership portion, which over its history has created $14 million and in state tax credit tax credit equity that's gone for tone ownership and VHFA manages that program. And it's included over $6.6 million in stick built homes, remembering that a portion of those state credits also go towards down payment assistance and also support a manufactured home replacement program out of that state credit pool. That credit pool has consistently been increased in response to various crises, including Hurricane Irene probably most most recently when a large boost was done for the program. In 2008 we use the federal funding programs called harp to make investments in 74 homes that were purchased and rehab across the state similar to the VHIP program honestly that you have also probably had some inner interactions within some cases. But that program was extremely successful good example of using that the federal relief for that type of program. I mentioned to you'll see a slide. If you're following along again number six that talks about our response to hurricane or tropical storm excuse me Irene. And the fact that since that one time and increase in the investment that we had in state tax credits has been enacted. We've been able to replace 263 manufactured homes across the state that are owner occupied so that's tremendous achievement from that program and it's had a really sustained benefit to Vermonters in some cases making sure people are getting out of floodways and environmentally hazardous situations and in some cases just replacing dilapidated homes that otherwise would not not be safe and fit to live in and otherwise would not get replaced. We've also invested as as an agency and as a state in preservation of manufactured home communities where possible manufactured home communities are the largest source of uns traditionally unsubsidized housing in our country and Vermont's no different. You would end up with over 7000 people if you combine all the manufactured home communities in the state it would ranked as one of our larger towns or municipalities and it's been an important part of our home ownership investment portfolio. And then traditionally via to face participated in over $18 million in home ownership construction. Now if I compare that to what we've done on the multifamily side. We do $18 million in construction lending in a year on multifamily but there is a pattern in history of our investments in that area to try to inspire a single family investment single family home development. But by and large in comparison especially to the rental side of things it's it's been pretty low in terms of what we've invested for home ownership in the state. Again, if you're following along slide nine show points out that the single family down payment assistance program has now helped over 1300 Vermonters since 2015 and that's probably been also the bailiwick program for the state in terms of what we've relied on to really support Vermonters and accessing affordable home ownership. One thing that's been really clear that we haven't moved the needle effectively on if you're following along again slide 10 is this frustrating craft that shows you our current breakdown of home ownership rates by race and white loan households experiences 72% home ownership rate while black or African American households in Vermont are experiencing a 24% ownership rate. This is at a time where our country just shattered the record for what we would call tappable home equity. There's $9.9 trillion in homes and tappable equity across the country. So if you think about the fact that home ownership in our country right wrong, you know, don't agree with it myself that it's the vehicle for wealth and and generational transference of resources, but there's a reality that it is, and it provides stability from a financial standpoint for a lot of families. And when you see this kind of imbalance in the percentage of home ownership between, between races that's that's extremely concerning because that means that 24% of households versus 72% for for black and African American families aren't getting access to something that as a country accounts for about 30% of the total wealth that households have. So that's a that's a disturbing trend and one that we think inventory has a lot to do with and availability and opportunities for purchasing. When we do focus on demand side and we send borrowers into the market for to participate. We need to also be aware of what the market's doing and the next few slides walk you through what we're seeing as a country we just crossed $400,000 for the at the median home sales price. Vermont's not quite there yet, but we are on our way. So the first graph here shows you a little bit that the prices have climbed precipitously. So prior to the pandemic, we were experiencing medium home price increases of about 2 to 3%, but from 20, 2020 to 2021, we jumped up to 10%. And now over the course of the COVID-19 pandemic, the price points for homes have jumped up 19%. And I think we would all agree that the household incomes over monitors have not done the same thing. So home home price doesn't exactly match up with household growth observed in and since it's that another area. So Chittenden County, for example, has the highest prices median prices between $385,000 for a single family home and $425,000 for a single family home. Meanwhile, in the Northeast Kingdom, Caledonia, Essex and Orleans, we still have median sales prices around $153,000, but we're seeing new growth that's been really interesting to see because traditionally, if you look at slide number 12, we would see a real imbalance across the state and where we see home price growth. But what this is showing you is actually the cost increases that have been experienced in the graph where it shows you where home prices are going has been statewide. It's not been located to a couple markets and it's popped up in some really interesting places that would be hard to predict. And there is certainly, you know, some of the recreation and tourism sites like Menden, Dover, Ludlow and Warren are high up on that list. But there's also been increases that have been really, we would say out of whack in places like Addison, Barry and North Hero, where there aren't as high a percentage of second homes or seasonal or vacation homes. So that's been interesting to watch. And we would argue has a lot to do with slide 13 about home home construction and our inability to really add enough units. Vermont's projected home home growth between 2025, according to the housing needs assessment was projected to be about 0.18%. That's well over a percent lower than where we have been in the past and is really near stagnation and that that accounts for homes that are aging We have the second oldest housing stock in the country and going off the market in addition to just the inability to build enough new homes. So, you know, we're losing a certain number of homes because we have a whole older housing stock and not adding enough new. And the call it encouraging if you want. I was on a call yesterday with the other housing finance agencies across the country and heard that right now there are accounted for proposals across the country to spend about $2 billion of state and local fiscal recovery and housing efforts across the country. You all in Vermont have been leaders. We've been leaders on making sure that we prioritize those investments. But there's a lot of discussion about how to get at the homeownership piece of things as well. We obviously work a lot on rental but we're really interested in this. And there's been a falling for from the federal level about the worthiness of these investments to and so when we approach the homeownership program development. We thought looking at the federal proposal called the neighborhood homes investment act was a really great place to start and you've got a couple slides that break down the way that that program looks the neighborhood home investment act is essentially matching up homeownership investments to the way low income housing tax credits work on the rental side of things. So you've probably have all heard about the 9% or 4% low income housing tax credits for rental developments. Our largest pool of resources year over year that we have a non pandemic ARPA and one time spending times to develop multifamily housing and this would replicate that but provide funding for single family home development. We really focused on how we could prepare for that program and build something that would prepare our state to take it on should it pass. It was part of build back better. It's really hard to say what's going to happen with that federal program. But we still think it's really smart to model any kind of state investments in homeownership to something that will translate easily to that because if you think about it we won't be standing up a brand new program if this federal opportunity passes. Which we think will provide about $8 million or so every year to the state in terms of funding to support single family housing. So we thought about preparing for that we want to increase opportunities specifically for households below 120% am I Typically our homeownership programs have focused more at the 80% level of ownership and sometimes lower so that was a little higher. But maps to what the Neighborhood Homes Investment Act and the federal side was seeking to achieve to. We want to support large and smaller scale developments that could meet needs across the state we can't build 100 new homes in every community. But there are a lot of projects out there that need help and would like to add some affordable units that are four, five and six and good fits for their community. And we would like to be able to scale program that's easy enough and has few enough administrative barriers to be able to reach those homes to or those communities as well. And that's about that creation of accessibility to. So the high points on the Neighborhood Home Investment Act, what is basically that the federal program would create funds where we could subsidize up to 35% of the construction cost of either building a new home or acquisition rehabilitation of a home. So that would mean a builder on the acquisition rehabilitation side could buy a home that's in disrepair repair it and then sell it back and the subsidy would help both take on the repairs that it was sold for a more affordable price than what we're seeing in the market right now. That particular program set is targeting households up to 140% AMI area media income and I'll show you what the prices look like in a second for that sorry to use jargon and have an acronym on there. But we have said 120 has felt better from a priority standpoint for the state and matches a lot of other programming that we do. So there are geographic limitations on the Neighborhood Home Investment Act proposal on the federal side that we're not big fans of and we've been working with our congressional district delegation to be sure that those get changed or fixed to meet but the nice thing about what we're proposing with the state funds the missing middle proposal is there is no geographic limitation for us other than making sure we build in smart places responsible growth and spread it across the state to the are the best of our ability. And then this is a big topic when it comes to this subject which is how is the subsidy retained if there's a state or federal resource going into a home. What's our expectation in terms of its future affordability and what's going to happen to that subsidy for the Neighborhood Home Investment Act. It's pretty loose there's a reduction in the amount of required recapture from a from the appreciation in other words the game that a borrow might realize the neighborhood homes value as it increases over time that they don't receive a full windfall of it in the beginning but it reduces over time how much equity they get to take with them from that appreciation. They get full access to the equity. I want to say that in this in the Neighborhood Homes Investment Act the sweat equity so if you've paid your mortgage down blank number you realize all all of that equity but if there's an increase in the cost there's a calculation that federal program that restricts that. So we took all that information that housing data kind of where we have been as a state and that Neighborhood Homes Investment Act information and put together the missing middle program and it focused again on that same benchmark number of not exceeding 35% of total development costs for a home to buy it down to allow purchases to occur for household affordable at 120% AMI and I'll show you what that number looks like in just a moment. It's based off of two stages of subsidy being needed. The first is called the value gap. The value gap is the difference between what it costs to build a home right now and the appraised value. So you've probably seen some news stories from what it looks like to build a home right now when builders are even building modest homes and with their best building methodologies possible right now given where costs are from labor and materials in particular. They cannot build a home for what it will appraise for it costs too much. So what would happen with the program is it would first address that value gap and fill the difference between what it costs to build a modest home and what its actual value is so that really level sets the builder from the beginning to the marketplace so they're not over the price on that home further by selling it for what it actually costs them to build and in many cases it would actually map back to what it's worth and what its value is. The second is an affordability gap which is to say that despite where appraisals are right now. That's still not affordable because of the lack of inventory and where we're seeing prices occur so what is happening is transactions are getting cash only buyers multiple bids and they're going way above their appraised value for sales to right and as a result the markets kept pushing those home values up and up. So what we've said is in addition to getting to that appraised value there would be an affordability gap that will allow the program to provide a subsidy that would further push the value or purchase price of the home down to that number that's affordable to somebody at 120% So that value gap will get a modest home down to its appraised value. That appraised value still may not be affordable to somebody at 120% AMI. The affordability gap would step in as a secondary resource. The affordability gap what we've said would then be retained in the home as a permanent subsidy and would buy down the price for future buyers. There is in the Senate side of things there was a little discussion or quite a bit of discussion about you know should there be an option for the buyer to be able to pay that subsidy back instead of have it pass on to the next buyer should we require the next buyer to be income qualified and those are all things that there were questions about on the Senate side of things. What's proposed is that the subsidy remain in the home make the home affordable for future buyers. I'll show you some math on that too. It layers well with existing programs. It does not require on face the use of the exact model of shared equity that we've historically used and supported with the state tax credit program. It is opening up the opportunity for different solutions or more multiple solutions. The shared equity program can sometimes struggle and in other areas of the state outside of Chittin County and we would really like to see the opportunity for builders nonprofit and for profit in those areas to try other approaches and other calculation methodologies when they try to think how to make homes affordable into the future. There's a second portion of this program which is a construction access capital access program. I actually don't want to spend a lot of time on this today because I think it can it can confuse it a little bit but I wanted to just note that as we talk to builders and developers. One of the things they cheered for was also help us on the construction side because getting up front capital will help us build more homes. And so we've partnered with my housing and conservation board to create a $2 million pool that will provide construction guarantees to Vermont banks and credit unions who are making loans to home builders that will reduce some of the cash that they have to set aside as security when they start their projects and also increase the amount that they can borrow because it will provide a credit enhancement of sorts to their construction loans. So that maybe they can add a couple more homes to the projects that they're working on and those those homes that that program applies to have to be program eligible. So in terms of eligible homes for what's being proposed it's single family homes single family homes though can contain between one and four units as long as its owner occupied. It can be a condominium unit a house or apartment or a cooperative. So one thing to note is it could be a percentage if you're building six homes you don't have to use the program for all six homes. You could have for market rate homes and include two program homes so the subsidy would only assist you with those two homes and same thing in a condo development. And that's a pretty great tool when you think about the fact that there are a lot of municipal municipalities across the state that have asked builders to build a certain percentage of their homes at an affordable price but are actually providing them any kind of financial resources to get there. And that can sometimes cause the other homes around there to bear the cost of those affordable units and just drive their prices up even more which is in a great formula. The eligible costs can include land acquisition pretty much every hard construction costs you can think of and a lot of the soft costs associated with the development of single family homes. The affordability levels I talked about are posted on our website. We have a affordability chart. This is actually what's used for other state programs when you talk about reaching affordability levels to. And I have a little arrow there because we think that that's really the sought the sweet spot statewide for the program so you can think about what that looks like. And it's getting those homes available at the 319 500 to 255 500 range outside of Chittenden County. And then within Chittenden County, that 100% AMI levels where we think the sweet spot is for the program. So, you know, we fund projects right now with state tax credits that sometimes the units will cost, you know, close to $400,000 in some cases to build. But the final sales price to the borrower is $170 $180,000 that's for our program right now. This would not go that deep on face. However, when this program steps in and gets that sales price down to 319 500, it could be layered with other traditional resources from Vermont Housing and Conservation Board, or from BHFA. If a developer decided to do that and when to layer in those resources and reach deeper. So we think it's a great tool to get home affordability down to 120 100% AMI. And then there are programs that will drive it down even lower, especially to hit those 80% AMI levels. So that's the target in terms of where we think the sweet spot is and where we think the real need is. We have built priorities around this program that have talked about how we're going to and we've built underwriting guidelines and resources internally. But these program priorities stand tall in terms of how we would analyze projects and give you a good sense if you're falling alongside 20 and 21 especially. So this is the first location again geographic to distribute a little bit about we are not interested in this being a sprawl program we want to make sure that it's thoughtful where the homes are going. We want to ensure that homes are modest, it's not to build large homes which right now in this marketplace that's where builders are being pushed to right now. A lot of builders have said I don't like building the stuff I'm being asked to build right now I want to build stuff like this and this could help me do that. Deeper affordability will be will be considered as will energy efficiency and the development and if there's a historic nature of the project to which we do have some buildings that could possibly do that. The program guidelines include construction cost size limitations and profit limits for builders. And those are all part of a standard review of a project so there are there are guard guard rails on this and the numbers that we're going to be using for that. We'll use the survey data from the National Home Builder Association, along with what we compile about what a modest home looks like in Vermont and what's appropriate for different size bedrooms and households. So I talked a good bit about the subsidy definitions but want to provide a slide there for you so because I think that's helpful that value gap. Think about it as the difference between the cost to build the home and the appraised value. The affordability gap is okay you've got the appraised market value that still may not be affordable to those households were trying to reach. So let's subtract off the affordable sales price for that target median income, and then that subsidy retention would be either repaid or reduced to the next, the next buyers from a price perspective. And so the way the mechanics of it work in the subsidy example I've got both a new construction and an acquisition rehab there for you to see if you had a 400,000 home that cost $400,000 to build. And I got to tell you right now that's that's sounding pretty good in terms of costs because it's it's really hairy out there when it comes to looking at costs, but cost to build a home $400,000. If the appraised market value or $375,000 of appraisal said that's what the home's worth the value gap would be $25,000. And then if we looked at our chart and said we want to reach that 100 to 120% am I level that means we're going to need to get that home down to 319 500. And that that says our affordability gap subsidy would be around 55,500. And just to say this allow this very closely models a very real development that we did in Woodstock. Just this year, building some homeownership unit so it's very close to that in terms of the numbers. And then the final price and sale subsidy total from the program would be 8080,500. But it's that 55,500 that would be passed on to that next buyer that would reduce that number so the buyer would get an appraisal or excuse me the seller would get an appraisal if they decide to sell the home in the future. And then we would subtract that 55,500 from that appraisal and say that's the maximum sales price that's what's being proposed in the program. I do want to note that the Senate included language, referencing am I for future households. And that's where what we will probably ask for is an opportunity to have to say the seller will either offer it for sale to reach the am I level that they bought it from so whatever that sales prices at the time our chart will adjust or pay the subsidy back so we can spin it in another home. But that's that's a piece that's going to need to get ironed out as it's moved over the house in terms of some of the language that came in last minute from the Senate. And this was an acquisition rehab example on there to if you're calling along the side 24 which is if you bought a home that was in disrepair for $220,000. And this is really for builders to buy the home not for an individual to take on that responsibility themselves, and it cost $180,000 to rehab the home, the value gap again because their praise value would come in at 375 would be $25,000 and the affordable subsidy would be $55,500. So those numbers all look the same. It's just showing that instead of that new construction costs equal $400,000. If you combine the cost to buy the home with rehabilitation. It's got the opportunity to help bring homes online that aren't in great shape across the state. I put on there in terms of subsidy retention requirements. I'm happy to talk through I realized that I'm at my time, and then also just share shared a real life example of a development it's in Jericho the builders that mind us telling that story now but where they were in the community in town to build homes that have emerged maximum purchase price of 343 500, but it's $370,000 to build the home, and it, they've got to do. They've got to do two duplexes, or excuse me two homes one duplex of the total six total homes there have to reach that affordability level. And just to be really blunt about what this builders faced with doing as a result of that affordability requirement which is really well meaning and is a great idea from the town, but we just don't have resources to step in and help. As a state, they're just going to add that price on to those other market rate units they're going to throw in slightly nicer cabinets and countertops and this is their quote, and they're going to, they're going to put the price into those market rate units and charge more for those. And that that's not the intent of that policy that's not what we'd hope to achieve when we say the town's affordability inclusionary zoning can be a great idea and a great tool for you. Yeah, so I'm apologize I think I'm a minute or two over so I want to I want to pause and see how I can help best. Please do not apologize. I feel an awful lot better informed now else. If I watch this YouTube a couple times and maybe I'll finally get it in my brain. Thank you. That was very, very helpful few questions here. Thank you. I have two questions. So thank you for coming in. And I agree. I'm feeling much more informed throughout the presentation you talk about a praise value a praise value, you know, really important because that's as much as you're ever going to get from the banks, unless you are, you know, capable of, in other words, that's as much as you're going to be able to buy the house for unless you have funding above that level to be able to to pay more for the house. So the affordability the the piece of a praise value is really important. And you talk about the the concept I think you mentioned Jericho one of the last things you discussed. Sure, great idea. But if those homes are going to be purchased by individuals that need to take out a home loan, and the builders are on the market value units. You know, that's where they're, they're getting their costs for the units that are being affordably billed. They're overlaying their costs over there if those units don't appraise at a point where someone can buy them. So what's happened, how is that being addressed. That's my first question and I just have a question that about the $60 million you talked about the, like the second slide you went into but please first first you know how is that being addressed the appraise piece. So, so just to say this aloud and I don't want to make this the boogeyman but we've seen a 38% increase in the purchases that have occurred from out of state buyers, and it is safe to say that more of those out of state buyers are high cash borrowers. So in my personal story, I can see a house from my window that was purchased in 2016 for $195,000 by a friend of mine, and she put that house on the market and the realtor said I think around 275 in 2021 is the right price for you. So she put that home on the market for 275. The home ended up appraising for 285 as negotiations started with a buyer but they she had multiple offers. The home ended up selling for 334. And the seller, the buyer came in and just said I can make up the gap with cash on the appraisal. I don't mind. So you're absolutely right. And what's more frustrating right now is individuals who have government sponsored loans, USDA rule development, HUD loans, VHFA loans and down payment assistance programs are less competitive in those environments because as you said, our programs just won't even allow them to get into that kind of trouble where they're upside down on the value of the home right away. But in an overrated market and people ignoring their appraisals, that's extremely problematic. So to answer your question, we do think that's really important. I want to make sure I think I'm answering it. We think it's important to start from that point. Thank you. And then my next question is on slide three programs to help homeowners and buyers. And you mentioned that the $60 million a year. Can you speak more to where those funds are coming from? You know, how does the state of Vermont receive those funds? Sure. I would actually refer to that housing investment report. That's the best place to go. So Department of Housing and Community Development aggregates all those different sources and resources. There's the HUD consolidated plan that tells HUD how we're spending our money and that links to that document. But it's from the federal government in the form of direct investment from HUD programs like home, national housing trust fund. But that number also includes we receive an allotment every year of federal low income housing tax credits that then get sold and turned into equity for multi-family development primarily. And so that number does include those resources. So for example, every year we get in the range of $28 to $31 million in equity from our low income housing tax credit program on the 9% credit side of things. So that gives you an idea of how those resources start stacking together. But the housing investment reports are great resource for that. Thank you. Thank you. Representative Tolano. Thank you. I have a couple of questions I think in sequence. The slide that has home that's titled home construction fails to keep pace with demand. I don't know what slide number that is, but. So first. 13. Thank you. Slide 13. So I had seen somewhere more in an interview saying that we dropped from 3000 units a year in the 80s down to as low as 400. That doesn't quite match with this chart. So the low point in the early 2010 era post Irene right or no post 2008 crash. You know that clearly was a weak point. So, but it but if if 3000 for the sake of argument 3000 had been our average from the 1990 to 2020 that would be 90,000 more units. Whatever the average has been. Let's say it's been 2000. So let's just say it's 1000 net a year. That's 30,000 units net. Am I right so far. I mean like that. I mean, this is a this is a back of the envelope contextualizing questions so it doesn't have to be perfectly, but am I making sense so far. I can follow your reasoning. Yes. All right. So then the slide doesn't say anything about what the demand curve is. So it says fails to keep pace with demand but the data isn't about the man that the data is about permits. And so I'd love to see that offset against aggregating our sense of what the demand is from the housing survey. So that we're looking at those two data points together and we're understanding why there is a market failure or mismatch between demand and total housing. So that's one piece of it. And pivoting to the I think on the later slide it says 15 million for this program. And I'm understanding correctly in order for this to be permanently affordable and therefore to be carried sort of carried forward. We don't ever get that money back it doesn't come back out in any format because otherwise it would defeat the purpose of kind of carrying forward the affordability gap subsidy. Am I right about that? That's correct. Yes. It's proposed to stay in the home and be passed to the next home buyer. OK. And so then if we if the average subsidy was 50,000 then that 15 million would buy us 300 units approximately. Right. And so I'm just looking at yeah yeah I think that's right 300 units at 50,000 would be 15 million I think that somebody double checked me if I'm off by an order of magnitude. Please go on. Okay, so then I'm thinking 300 units for 15 million versus an accumulated gap of at least 30,000 units. And I don't like I can see the value for the individual families that are in the market for housing. Totally get that. I don't understand how you can make any claims about any market impact at all. I don't see how this addresses the underlying systemic drivers that are creating this mismatch in the market. I see 16 different recommendations for systemic interventions. I see in that data report a statement that we cannot say with certainty what causal connections there are above market as an average out of that. I see 16 drivers are relevant. It's not quantified how much of the gap is driven by those 16 drive, you know, drivers and there's no coherent strategy for how with this, at least in this in that report I don't know where maybe it is in the Senate policy how we're getting at the systemic issue at the same time. I guess my question is comment on the relative scale of this impact versus sort of the market claims. Can you provide a demand curve on that slide so we understand, you know, has the, you know, over time is the gap between demand and what the market is producing increasing is a relatively stable but persistent. You know what's going on. Sorry, that's a lot. So, we think about demand, maybe a little differently so the what we do in the housing needs assessment and if you have the opportunity to bring that up by all means page six is a good one to start because it talks about the unmet needs in the state. And at the onset of the pandemic is what we said is it would take about 5800 homes 5800 homes in Vermont to house everyone who's experiencing homelessness to provide enough market absorption that would reduce prices down to the point that we think it would stabilize a high percentage of those households who are cost burden because, you know, in theory, if we add those units in and I understand it is in theory it's all, you know, until you practice it and put those units and you don't know exactly how things are going to respond. But in theory, if we put those in there, it should help stabilize some of those rental costs and demands to if we add those units but most of it is based off of if we provide enough homes for cost burden households to reduce some of the competition for those units that allow for the rents and or the prices being charged by the owners to be to reduce some of the pressure on that. So that would be what I would point to. And in relation to your question about market numbers. And just to be clear, the affordable housing resources, I like to say that we can produce about 200 units in an average year like that's that's about the I think we can do with our year over year resources that we have and the X, you know, there's a lot I could go into how a development pipeline in the state responds to the availability of funding resources. But that's that's a safe bet for me. And we added the one time pandemic resources if you take that 5800 homes that we were trying to get to, if we drop those in alongside our existing resources in the five year period, which is what that 5800 homes were saying in five years we need to get it would get us about, you know, roughly, I think it's about 30% of the way there but that's the affordable housing resources we have to believe and trust that the market will also produce some units as well that's the idea is that there will also be market rate units coming online it's not all going to be affordable housing development, although in some communities, that is the new stuff that gets built that's a reality that we deal with. So, I guess that's the starting point on the demand side of things. In regards to the question of how are we getting at the systemic issues. We don't control the major systemic issues. We can talk about permitting and land use regulations and the impact that, and the trade offs that we have as a state about conservation and what that means for the predictability timeline of a builder and how confident they are that they're going to get a project through and we look at the difference between applications for permits and actual starts and right now that number is more mismatched than it usually is. But it's a good sign that builders are dreaming big and pulling permits it's not a great sign that the pull through rate in terms of the completion certificates for occupancy aren't at the same level. And that's a sign though, not just of regulatory and land use barriers, but also just of construction price increases. And we've just seen exorbitant increases. We had a 10% increase last year in our in our rental housing development pipeline. And this year we're looking at potentially a 20% increase. And I don't need to explain to you all that our resources at the same time haven't grown by that much from the federal government to build house affordable housing right. So we're, you know, we're scrambling to try to find ways to deal with those cost increases. And then, you know, encourage you to talk to nailer and brain that they're, they're a great one to talk about this topic or Jim Bradley at the Home Builders Association who will point to you that builders can't hire people right now. They're having a really hard time doing that and the thing that they point to kind of ironically and cyclically is that the builders and trades people that they need can't afford to live here and are having trouble finding homes. So we do think that some of these homes would fill that range and if you talk to builders $25 an hour and lower is where they are having the hardest time. And we think we could, we could hopefully get at that in some ways on here doesn't solve all the problems, and we don't control all the labor mechanisms and we certainly don't on the supply side of materials, but just to follow things. One is a statement totally understand it's not your responsibility to solve the systemic issues. It's ours. And so I what I, my point was really, I want to make sure, as we look at what the Senate policy is, and we're addressing that they're, you know, that there's lots of questions, but there's clear performance gaps. Just a clarifying question. The housing needs assessment 5800 units is for affordable housing, but the permit slide is for all permits not affordable housing permits right. The 5800 is, is total housing stock so that's looking at all units actually like that's the number that we set off. Sorry, I didn't mean to cut you off sorry go ahead finish your sentence and the permit slide is for all homes as well. Okay, and then, but that 5800 is pre pandemic while we see being, we've seen a real estate spike. It's about the state of people buying second homes, which it, you know, came out of virtually came out of nowhere, and it's been a huge force on the market. And so how much is there anywhere that we're starting to quantify the impact of the that sort of pandemic purchase cycle on those projections. And what I would say to you is is, we're just starting so and I gave a presentation yesterday to the house natural resources committee about this topic. And we do have, you know, quite a bit to say about where things are in terms of building and household sizes and where workers are. But it's too soon to say like what the long term impacts of the others are going to be. So we have some pandemic indicators for housing on the on our website and then we recently I think it was around March the 6 took apart the state's transfer tax data from last year and compared it to several years to try to get at that while also looking at the current home sales data and put together an article that I won't try to summarize here but it's pretty good at at giving our best guesses at what we think the defined pandemic impacts are and what the potential long term ramifications for prices and costs are. Is that something that you would be willing to send along to the committee. Sure, happy to release to me. Sorry. Thank you. Thank you. Thank you very much. Thank you for these concrete examples you gave us at the end of the presentation. It makes more sense to me that way, but on the very last one I'm struck for you actually point out that this that there's still a gap because this number of the maximum purchase price doesn't include the builders profit or his other soft costs and how would those costs be covered. And how would they be covered. Yeah, for another. Just price a higher purchase price. Or is there an agreement that somehow the builder would be subsidized. Sure. Yeah, so this was a rough budget. I think it's a little bit different from a builder who I will say would make their money off of what I would call vertical integration, meaning, or what some people might say is conditions, meaning that they are, they are realizing revenue from the budget analysis that we've built for the program that was actually asked builders to do that and sign off on a, on a cap across all the building process of what their gross earnings would be at the end. So I think the, the point I was making is I don't actually think they can build that home for $370,000. I think probably when they put their profit on there, as you're saying, it's probably, you know, more than the 390s or something like that. I think there's a bigger problem there than even the builder was acknowledging. My concern would be certainly that even even builders who are sympathetic to this whole concept and are being willing to offer a, you know, a very modest profit in order to do this, it would still be difficult to do that without covering some that process certainly. Yes. And the other question I had was, I understand the subsidy stays with the program and it needs to be continued on to the next homeowner. But what if these homes don't turn over very quickly. Do you mean that the individual stay in them for a long time? Right, right. The individual has a great deal and they're going to stay there for 10 years. We think that's a great outcome, frankly. Like that's, that's the ideal outcome. We get, I think people get more uneasy when they think about the idea that's, you know, there's an opportunity for people to realize appreciation and equity from sales. And that's why keeping the affordability portion of the subsidy in the home or getting recaptured back to the program to, you know, do another home with was key. So we think that people staying would be a good thing and we prescribe and subscribe to perpetual affordability as an organization. It's something that we usually strive for in all of our investments too. So as much as we can create, you know, cornerstone for affordability in communities, we think that that's a good thing. But the difference between traditional shared equity is that it promises to sell the home to an AMI level that subsidize later on that subsidy is created by the seller sharing their equity as part of that transaction. And this program is not prescribing that that's a requirement to do that. And as I explained, we think that having optionality for multiple right solutions to that problem is a good idea. And especially as we look outside Chending County. Thank you. Mr. letter, I'd like to, this is Mary Hooper again. I'd like to go back to the kind of the systemic issue that reptilina was raising. And it strikes me to say this very an artfully that our housing partners in the state are absolutely terrific at what what they're doing and the creation of the programs that they've created. I mean, I think every one of our communities has been transformed by the financing that you've helped with by the local housing agencies who figured out how to make it work. But that's, you know, that's only getting that current terms only getting at 30% of the problem over over this five year period. And I'm just fearful that we're going to look back and say, oh my gosh, we still haven't solved it. And it strikes me that in fact it is on the where we haven't been as smart is figuring out how to help communities either lay down the infrastructure necessary to create the zoning or be at the physical infrastructure necessary for housing to be developed more affordably. Arguably, we could if we underwrote permit costs, if we took the same amount of money and applied it to permit costs, that would take probably 30 million 30,000 off of each home cost. So you are really good at the housing development side, but I don't think we're as good on some of the other sides. And can you kind of help. And so one of the things I'm thinking of is, we have lots of investments in water and sewer. If we were laying out in designated downtown, expanding our water and sewer and laying out a road system like we did in the 50s, or 60s and other parts of the country, you can build affordable homes. If we underwrote the permit costs, you could build more affordable homes. Can you help us think about that or help me think about that. Sure. So I have a little cycle I always call the it's the capital absorption sort of cycle of the way things work for how housing development pipeline gets built, and it starts with need. And they're being demand for homes knowing that if you build that home somebody will buy it or somebody needs to live in it, even as a nonprofit developer if you're building subsidized units you need to know that the area has need, and that people will occupy those homes. That has not been a problem in Vermont we have never had a loan or a property in our portfolio default in the traditional sense, and because of, you know, lack of people to live there and need. The second thing is the availability of capital and the capital that has come via ARPA the capital that's come from the housing revenue bond in the past. Those, those tell developers and builders that there's resources for me to use and I need to amp up my efforts to build a pipeline. And then they build capacity internally, and we see additions to staff happening right now to people to keep up with the current ARPA money. But I think what you're getting at is this next piece which is development really thrives off of predictability and process and timelines. And so if I were to take a development budget for you for a single family or multifamily home, I would guess that the permitting costs are actually only about 9% and I can say that definitively on the multi family side it's 9% of the average development that we do. So you could take that cost away, but when units on the multifamily side are costing us now 368,000 per unit to build that 9% isn't a huge isn't a huge number. What the builders or developers would tell you is that it's the opera. It's the cost of uncertainty that happens when there's unclear local process to how their development gets approved and what opposition and obstacles might cause in terms of time and cost delays. So they would point to places where they're just like it, I couldn't take the risk. I wasn't, I couldn't see clearly enough through the fog to start putting money into this thing to really make it move. And a lot of it, when you talk to builders and developers of that starts with those regulatory and permitting processes. So that is absolutely part of the the entire cycle. What gets me excited about 226 and we've been vocal about is we align our investments, typically with the state's designation programs and try to achieve our community development land use regulatory goals as a state not just thinking about housing, but land use patterns and settlement patterns overall. And the bill does have a lot of really good enhancements and investments in improving and evolving the state's designation program providing municipal planning grants so that communities can get pressed. In some cases to doing the right thing when it comes to allowing housing appropriate density, so that we do build build homes in the right places because we're talking about the numbers here today about how many units we need to produce. But when I go and have conversations with natural and conservation folks, there's a lot of, you know, equally balanced concern where it's like where all those units going to go, and are we going to be sure that they go the right places. And I think that's really married to the systemic issues that you're talking about there and I do feel like in Chris Cochran's a great person, Jacob hemorrhage to speak to that that there are some good provisions in this bill to help with that those issues. Thank you. Let me do a follow up and then we have another question. I heard you correctly, permitting costs are on the order of about, or the development costs are on the order of about 9% of a project cost and I think you said, that's not a lot. And I can appreciate that in instruction world that's probably a normal number, but it's also over in is more than the value gap, and it's what two thirds of the affordability gap is that went away. What you were trying to finance would be entirely different. Yeah, and I want to correct myself there because 9% is actually the soft cost bundle that actually also includes architectural and design. I should have quantified that because when you talk to a builder that's the number we focus on when it comes to permitting because a lot of the expenses associated with permitting adjustments actually show up in architecture and design adjustments. So it is a I will, I should have said it's a bundle of services because you're totally right the permitting line item is a percentage of that 9% that was kind of broadly stated sorry about that. Okay, thank you and I've always heard about 10% for the total soft cost that makes sense now representative Yacoboni. A couple of questions to follow up. And this has been helpful out of that the $60 million tax credits. Do you know how much of that comes from the Vermont Treasury. So from a state basis, I'm going to quote the total. I will write back with the exact breakdown of the state credits between rental and home ownership. I've got too many numbers in my head this week I apologize. But the state provides an affordable housing tax credits. On a much lesser magnitude and in percentage than the federal program. So the, the state program creates a couple million dollars in total equity every year for home ownership and rental development, where the federal programs create create a couple 10s of millions of dollars every year for development. Thank you. And then I wanted to go back to the manufacturer homes. Nice manufactured homes. Certainly in my community. I live in one. Very nice. But I'm wondering that market. Isn't it much less than the two to build than the 300,000 range that you speak up. We do see that as an affordable path for home ownership there's yes. The answer is absolutely. They have gotten quite a bit more expensive recently it'll surprise especially when you get an energy efficiency but yes. I would, I'm just curious why wouldn't in a period where, you know, land, labor and materials, the three drivers housing are all at high peaks. They don't fight that fight. And you, you go into a different area. And I realize not everyone wants that type of house, but for many it's adequate. I'm just wondering why wouldn't we go there. I know you have read the material, almost 5600 units over the last two years. Any, any insights on that. Yes. And so this, this proposal is also paired in the 226 bill with a manufactured home community investment opportunity that combines a couple of different things. The first is small scale capital needs to help with things that state programs aren't picking up with for the communities themselves. Representative, I think one of the items you're pointing out is we have lots that are inactive right now that could be active in communities. So from a manufactured home community standpoint, it could help clean up those lots remove abandoned and dilapidated homes and help put together foundations that will then enable the next home owner to access that that lot with greater ease and potentially use the states down payment assistance program at the same time and included in that bill is an expansion of the down payment assistance program for the manufactured home replacement. They could also be used outside of lots on owned land by individuals throughout the state as well. So that is, that's part of the total package for us to. So I realized when we talk about our housing portfolio, it's huge and this is about one segment, everything from section eight, all the different programs that we have. You know, if I were to say, can you show me the distribution of our portfolio. So is there anyone who could do that and behind my question is, I was at a housing conference last night. The family that my wife is working with that's being evicted on Monday. And I think the data said there were 500 children in motels. And one goes towards you take care of the children's need first don't you you mitigate that in a significant way before you start talking about home equity, which is very important. I don't deny that at all. And is that Vermont's policy, shouldn't be Vermont's policy to first go after the, what I call the emergency situations. And then, once that's tamp down whatever the terminology when he was, then you address the others or is it such that you have to multitask you just can't do one. Any insights on that. Sure. Yeah, so first of all, just from a statewide perspective we we say there are 13,900 total government subsidized units for apartments on the rental side of things statewide. And that includes, you know, VH of a as a portion of those in the tax credit program those also include private owners who have portable voucher holders living in their units or rental assistance from the state housing authority. It also includes affordable housing built through USDA role development, and our public housing authorities, which might not be in our quote unquote portfolio from we funded it with tax credits or some other kind of thing but that includes the total universe. And so we keep track on the on the housing data. So if you ever like to like to see the kind of breakdown we try to do that on that site with various views. So let me know if you've got specific questions but we can absolutely break things down for you about apartments and how many homes have been created in things like that the programs. I do think we're multitasking and I think you all have approved some incredibly substantial and very much appreciated investments in one time spending for rental housing development and that we have prioritized that funding towards creating units for those in the most urgent need in homeless households and we work very closely with the agency human services. Most of those projects that are being done with the funding you put through VHCB from ARPA and one time funding also are using tax credit program so we're all working together to get those units built and that all those developers and builders right now are running as fast as they can to get as many units online as quick as they can with those resources that are so critically needed to provide that emergency housing and and make sure people start off with a safe decent home to live in and you're right that that is always first and foremost our priority is that that should be something everyone expects to have the opportunity to be able to have a safe home a safe decent home. We do start there. We do think though that this is part of the market that deserves attention and that as time goes on. Home ownership has really positive net benefits Habitat for Humanities are great entity if you've got time to hear from people to talk about the benefits of the owners of their program which this could be combined with it's it's incredible what can happen to people with that tool as well so we want to do all of that and we think that this is appropriately sized given what we're what we're doing on the rental side too. I don't want to trespass on your time anymore. I personally found this tremendously helpful in understanding this so we're really grateful for you taking more than an hour more than an hour with us so yeah. And we look forward to watching watching good things happen with these investments. Yeah. I appreciate all your work. Thank you. Thank you. Yeah. I'm honored to join you. Thank you. Hope you all have a great day. Good luck with the water bottles to go searching. Okay, committee were next back in here at one o'clock. I looked it up and now I forgotten again. The Justin Kenny on performance government accountability that that conversations so we're back here at one. And then we are on the floor at three. So with that you want to take us offline. Oh, that's right. So and then to a clock with that there was from the Department of Labor so we'll be good. Yeah.