DRM Advocacy Update – Week 6 – 2025

Pulling Out of Vermont’s Tailspin Will Require Infrastructure Investments to Build Housing 

Legislators in both the House and Senate are expected to roll out committee housing bills in the coming week, which will likely contain some components of the Governor’s PATH plan and some version of incrimate financing, with multiple variations of that being served up. 

• Last week we covered the SPARC program, this week, legislators dove deeper into the Housing Infrastructure Initiative (HIT) proposal, and in the past, the legislature has contemplated project-based TIFs, or “mini-TIFs.”
• There are essential differences between each of these proposed successors to the Tax Increment Finance (TIF) program, yet a similar underlying principle. 

Vermont finds itself in a vicious feedback loop in which its population demographic trends and lack of investment in housing are making it more difficult to reverse those very same trends. 

• A recent report by a consultant for Vermont’s healthcare regulator, the Green Mountain Care Board, put at the top of the list of issues to address not healthcare issues, but instead housing and demographic challenges in the state. 

Demographics: Vermont is among the oldest states in the country and shows little promise of reversing that trend. 

• Individuals over 65 are projected to be 1-in-5 Vermonters by 2030 and to exceed 30% of the total population by 2040. 
• A recent article in the Wall Street Journal asserted that pandemic-era gains in population have since reversed themself. 

Housing: Vermont is building only 25% of the new housing needed annually. Vermont’s new targets show a need for over 41,000 additional homes by 2030 and 172,000 by 2050 to meet demand, ease homelessness, attract workers, fill schools, and encourage population growth. 

We need to break out of this cycle and that requires building more housing, yet the state is standing in its own way, often letting the perfect be the enemy of the good. 

A prime example of this is the conversation around TIF and its spinoffs;

• Resistance to expanding the tremendously successful program is often due to concerns that it could divert, at worst, ~$6 million in funds away from the education fund (though it really doesn’t divert anything because growth wouldn’t happen without it).
• So what? The Vermont Education Fund has many programs that actively expend revenue from the education fund, including, but not limited to, the roughly $60 million Current Use program aimed at land conservation and the $160+ million Property Tax Credit. 
• The Key Difference between those programs and TIF is that TIF helps grow the education fund’s tax base, while those erode it. 
• Yet, TIF comes under recurring scrutiny despite its minor and debatable impact while the massive expenditures go untouched. 
• Furthermore, our ongoing education funding crisis is due to our inability to address housing and demographic trends. Per-pupil spending will only increase as we have fewer students in our school and anemic grand list growth has not kept up with the increase in education spending. 

Things will only get worse if we don’t pull out of the tailspin –  

Who pays the taxes?

• An aging population implies lower tax revenues per capita, all else being equal. As the large baby boomer cohort continues to age out of the higher earnings age groups, income tax revenue can be expected to decline.
• Not just income: lower sales tax collections can accrue as well, as spending for the aging population shifts away from goods and toward services, which are not taxed or are taxed lightly. 

Who will do the work? 

• The aging population poses challenges for Vermont’s labor force, now comprising just 50.4% of residents aged 25–64, down from 51.3% in 2020.
• The working-age population is projected to decline by 13% by 2040.  

Dig a little deeper: the shallow view of TIF is not restricted to just its potential diversion of funds. 

• There are secondary and tertiary economic impacts that come from the multiplier effect of this investment that yields sales and use and rooms and meals revenue that the legislature’s Joint Fiscal Office does not include in their analysis. 
• The conversation is often framed in a zero-sum game, in which one community’s use of the program is looked at as if it is at the expense of others, though the grandlist growth experienced by any community contributes to a statewide education fund, and thus, benefits all Vermonters. 
• Finally, it’s often forgotten that these tools are part of a much larger stacking of tools, grants, and financing brought to bear to develop a community and cannot be looked at in isolation. 

Bottom line: the conversations around TIF to date have centered around if the state can afford to do this, however, if we take a holistic, longterm perspective, we see that the question we should  be asking ourselves is if we can afford not to expand such tools. 

• If Vermont is going to survive as a state, we need more people of working age in the state, and for that, the state needs housing abundance.