Subsidies and incentives for affordable home construction for nonprofit or private builders

VERMONT - With many Vermonters feeling stuck because of the increasing costs of homes and the dire lack of availability, officials announced a new program to build more moderately-priced homes across the state. The Missing Middle-Income Homeownership Development Program will provide subsidies and incentives for home builders to construct or rehabilitate modest homes affordable to Vermont homebuyers at 120% of the area median household income or lower.
Administered by VHFA, the program is open to nonprofit and private home builders. Eligible types of housing units include one- to four-unit houses, manufactured or modular houses, condominium units, and houses or apartments owned by cooperative housing corporations. The program includes both a construction loan guarantee as well as a development subsidy for program-eligible homes. Additionally, the program includes a subsidy for income-eligible buyers that reduces the home sales price. At least one-third of the program funds will support the shared equity model of home ownership to provide deeper affordability.
Gov. Phil Scott signed legislation in June 2022 that provides $15 million in funding for the program, using a portion of the state’s American Rescue Plan Act funding. The program represents the largest single investment in the state’s history to create new homeownership opportunities by investing in the construction of for-sale homes.
Historic underproduction of housing, rising home sales prices and mortgage interest rates, and extraordinary increases in the costs of construction led to the need for the Missing Middle-Income Homeownership Development Program. Year-over-year home construction costs have increased by more than 12% between 2021 and 2022. In most cases, it now costs more to build a single-family home than the home will appraise for at the time of completion. Median home prices in Vermont have increased from $259,900 to $295,000 between 2021 and 2022. In many areas across the state, homes priced at median prices in good condition for potential buyers are almost nonexistent. National 30-year mortgage interest rates have increased from 2.74% in early 2021 to 5.52% in June 2022, further putting pressure on the cost of buying a home. VHFA estimates that the increase in interest rates priced 13,400 Vermont renter households out of being able to afford the mortgage on a median priced home, a 50% reduction from the number in 2021 who could afford the median priced home.
Builders and developers interested in learning more about the program or applying can visit the program page at www.vhfa.org/rentalhousing/developers/missing-middle-homeownership-program.