BRATTLEBORO-In the past couple of years, when the state was offering developers about $130 million in low-interest housing construction loans, you’d have thought there would’ve been a line.
But while the money was invested in 12 of Vermont’s 14 counties, in Windham County only one developer in Brattleboro and one in Putney took advantage of the opportunity.
“There could be an applicant that we received from Windham County that we didn’t fund, but I’m pretty sure we funded those that we received,” State Treasurer Michael Pieciak told The Commons.
Before this year, Pieciak was using the state’s daily cash balance to invest 10% in low-interest loans for housing, jobs, and affordability across Vermont. The program has loaned out $130 million.
The money supported nearly 1,700 units of high-quality housing for a broad range of Vermonters, including working families, seniors, and those exiting homelessness. The funding also created nearly 200 permanent jobs, and leveraged over $600 million in outside capital, all without raising taxes.
In Windham County, Phase 1 of the Village at Winston Prouty in Brattleboro received $4 million to build 28 units of market and workforce housing. And Windham & Windsor Housing Trust used $700,000 for its Alice Holway Drive Apartments in Putney.
In 2023, Pieciak invested $3 million more of the funds to move hundreds of homes out of flood-prone areas at Tri Park Cooperative Housing and support local infrastructure and resilience improvements to that community.
Two sides of the same coin
The state loan money is generally described as being for “housing, jobs, and affordability,” Pieciak said.
But in this case, affordability means housing.
“Housing is one of the largest costs that people are experiencing in their household budget,” Pieciak said. “Whether you’re a renter, a first-time home buyer, or you own your home, you know the cost of all of those things is immense on your budget. The rents are going up, the cost of buying a first home is going up, and property taxes are going up.”
The key to solving the problem and making price increases level out, or even making them go down, is increasing the supply of housing so that the supply and the demand is more evenly balanced, Pieciak said.
“So from that perspective, we really view the affordability issue as a housing shortage issue,” he said.
“Beyond that, there’s obviously other things that are putting an immense amount of pressure on people’s budgets, like the cost of health care and the cost of groceries and gasoline and all of those kind of things,” Pieciak continued. “But housing is the biggest percentage of somebody’s household budget on average.”
During the last session, the Legislature unanimously approved a 2.5% expansion of the program. Gov. Phil Scott signed the bill, and now Pieciak is accepting applications for the next $25 million in a new program, Invest in Vermont.
And Pieciak would like to see more applications come in from the southeastern part of the state, especially from his own hometown of Brattleboro.
“Brattleboro’s come together to recognize that we need more of a workforce and those workers need a place to live — and we haven’t really built a lot of new units of housing in Brattleboro since I was a kid,” Pieciak said.
“So we also need applications, which means that there [need to be] actual housing developments going on that fit our eligibility criteria. Not all the projects out there would be a good fit for our loans.”
Rates for the low-interest loans awarded from Invest in Vermont program range from 2.5% to as low as 1%, depending on the loan term and project timeline.
The low-cost financing helps more housing projects break ground by offsetting high interest rates and ever-rising costs that otherwise make projects difficult, if not impossible, to finance.
The deadline for applications is Friday, Sept. 4.
Criteria for eligibility
Risk is the first eligibility criteria.
“This is money that we’re lending out that is the state’s cash balance,” Pieciak said. “It’s money that has been appropriated and not yet spent, or money that’s come in from taxes and not yet appropriated.”
He described that state line item as “money that has a destination.”
“There’ll always be a churn in that account. There’s always money coming in. There’s always money going out,” Pieciak said. “So this program is designed to sort of be a second bite at the apple while that money is waiting in our account.”
The idea is to invest this money in Vermont communities instead of Wall Street’s stocks and bonds. But the state needs to make sure that the money is paid back.
“That’s sort of No. 1,” Pieciak said. “We do that both by having an intermediary, which is basically just a financial institution, between us and the developer. So we’re lending to that financial institution that’s been turning around and lending to the developer.”
That strategy gives the state, and taxpayers, “an additional layer of risk guarantee,” he observed.
“Not only does that developer have to pay back the bank, but in the event they don’t, the bank still has to pay back the state of Vermont,” Pieciak said.
Beyond risk, the treasurer’s office is also evaluating how many units of housing each prospective project would provide, and then how much each of these units would cost if the application is funded.
“So, if somebody came to us with a project and said they were only building 10 units of housing, it would probably [be assigned a] lower priority for us than if they came to us and said they’re building 40 or 50 units of housing,” Pieciak said.
On the other hand, if the same developers “came to us and said, ‘On average, we’re building the units of housing at $400,000 a unit,’ that would be of more interest to us than spending $650,000 per unit,” he said.
The state is interested in funding many types of housing, from permanently affordable housing to workforce housing to market-rate housing.
“I always think of housing as sort of a continuum or a spectrum,” Pieciak said, listing the various options consumers weigh in the market: affordable housing, market-rate housing, first-time homebuyer units (some at market rates, others “shared equity units that have an affordability component to them,” he said, and some with “more of a family-style housing”).
“And maybe there’s your penultimate house, four bedrooms or something,” he continued. “And then at some point, you need housing on the back end of that, where people that have raised their family and are looking to downsize can sell and downsize into. So you need enough housing across all of that.”
If there isn’t enough housing in any one of those categories, the other categories can get backed up, Pieciak pointed out.
“For example, you know we don’t have enough senior housing or housing for people to downsize into,” he said, “so a lot of people are living in their big four-bedroom home because they’re sort of stuck at that point on the continuum.”
Windham County still needs housing
Pieciak said he was hoping, with the new available money, to stimulate more construction in Windham County.
“We need to first receive an application, so we have used all of our outlets and avenues to spread the word,” he said.
The state is “looking for certain types of partnerships,” and Pieciak and other state officials are “really interested in projects that are of sufficient scale that our money will make an impact.”
He praised the Village at Winston Prouty project, which will add at least 30 units “and then potentially much more after that” to the Brattleboro area housing stock.
“That’s a really interesting project to us because it has a big scale,” Pieciak said.
For a small town like Putney, the Alice Holway Drive project’s 25 housing units represent a significant number with built-in affordability, he said.
“So [we’re looking to fund] applications that have sufficient scale and an affordability component,” Pieciak said. “We also make loans to market rate units, so we’re pretty flexible.”
Pieciak says his office also has “an eye on housing that’s going to support older Vermonters.”
He also said his office is looking at developing partnerships with local financial institutions.
“We’ve already done this twice,” Pieciak said. “We did it once through our first round of investing, and then the second time through our second round of investing.”
He describes that first round of investing as “a partnership with the Heritage Family Credit Union in Rutland,” for the program Roofs Over Rutland.
“We lent Heritage Family Credit Union $8 million, and then they took that, brought in the credit union’s own capital, and then lent out money on a much smaller scale to smaller developers.”
These were smaller projects — one through seven units — for which the treasurer’s office could not really provide oversight and administration.
“But to have a credit union on the ground that could be the partner?” Pieciak said. “That was a good model, and they built about 90 units of housing through that program.”
The second round was a $2.5 million loan in Bennington done in cooperation with the Bank of Bennington. The program was called Build Up Bennington County.
“Then they brought their own capital at the bank together, and then lent it out throughout Bennington,” Pieciak said.
“We hope that we’ll receive applications in that regard from from Brattleboro and from other places in the state,” he said. “I think it’s a good model for us to deploy our capital locally.”
This News item by Joyce Marcel was written for The Commons.