This commentary is by Jason Sorens of Amherst, New Hampshire. He is a senior research fellow at the American Institute for Economic Research and the principal investigator on the New Hampshire Zoning Atlas.
In June 2023, Gov. Phil Scott signed Act 47, a bill to encourage more housing construction in Vermont and make housing more affordable for Vermonters. Members of the growing YIMBY (Yes in My Back Yard) movement cheered. Now the results are starting to come in. Is the legislation working?
Let’s look at new housing units first. In the quarter after Act 47 came into effect, building permits jumpedfrom 486 to 582 (seasonally adjusted). And they remained high. In fact, five of the top six quarters for statewide building permits since January 2020 have come since June 2023. Vermont averaged 501 permits per quarter from January 2020 to June 2023, and since the legislation has averaged 594 permits per quarter, a 19% increase.
That trend goes against the nationwide trend. Nationally, there was an 8% drop in quarterly permits over the same periods, as a result of rising interest rates discouraging developers. So Vermont’s performance really stands out compared to the rest of the country.
Anecdotes from around the state also support the claim that Act 47 is boosting housing. VTDigger and Vermont Public reported last month on several cases of developers increasing the size of projects or launching new ones because of Act 47’s amendments to Act 250.
Act 47 also required towns to allow more housing wherever water and sewer infrastructure exists and limited them from requiring too much off-street parking. These changes went into effect at the same time as the Act 250 amendments, so it’s hard to know which features of the new law had the biggest effect. Most of the Act 250 exemptions will expire in two years, so we might find out then. But it would be risky to let these provisions expire when they appear to be working.
Has all that new housing brought down its cost?
Yes. According to newly released data from the Bureau of Economic Analysis, Vermont saw rents drop in 2023 — in fact, Vermont had the largest drop in housing costs of all 50 states plus D.C. Lower housing costs fed into the rest of the economy: Vermont was the only state to see deflation in 2023. The overall price level dropped by 0.7%. That comes after 2022 saw Vermont suffer through one of the highest inflation rates in the country, at over 9%.
Interestingly, house prices have not dropped even though rents have. According to the Federal Housing Finance Authority, house prices in Vermont grew nearly 11% from June 2023 to September 2024, one of the higher growth rates in the country but down from 18% growth over the previous five quarters.
Redfin’s data are similar, showing 8% house price growth for Vermont from November 2023 to November 2024, compared to 5.4% growth nationally. While the for-sale and for-rent markets are connected, they may have parted ways temporarily because Act 47 mostly freed up opportunities to build for-rent housing, not for-sale housing.
Still, the data show that supply and demand work in the housing market. When the government removes regulations that block new rental homes from being built, landowners build new rental homes, and rents go down as a direct result. Vermont’s housing reforms are working, and it doesn’t come a moment too soon for Vermonters struggling to make ends meet.
Vermont’s homelessness problem could also improve as a result of the new laws. Vermont saw the number of homeless people grow by 5% from January 2023 to January 2024, but that compares to 18% growth in the U.S. as a whole. Bringing new rental units into the market is one piece of the puzzle in solving homelessness.
If Vermont wants to keep making progress, lawmakers could consider making the Act 250 exemptions permanent for downtown and town/village center projects and commercial to residential conversions. These projects are clearly environmentally beneficial, because they concentrate development in low-impact areas that already have infrastructure, so we shouldn’t restrict them in the name of environmental protection. Lawmakers could also pass “starter home” legislation to free up opportunities to build single-family homes for sale.
The housing shortage in Vermont is a big problem, but new laws are allowing the private sector to chip away at it. That’s something to celebrate in 2025.
Read the story on VTDigger here: Jason Sorens: Vermont’s housing reforms are working.