This commentary is by John Vogel of Williston. Now retired, he was a longtime clinical professor at the Tuck School of Business at Dartmouth College.
The shortage and cost of housing in Vermont is a problem we can solve. Other states are showing us how.
In Minneapolis, apartment rents have declined by 4% over the last five years, according to an NBC News story, while they have soared an average of 22% across the United States. In Texas, total development costs for new apartments are half of what they are in Vermont (based on my discussions with real estate companies). That’s why developers can charge $800 a month in rent for new apartments and still make a profit.
How did these places do it?
In Minneapolis, they reduced rent and decreased homelessness by creating incentives for new construction. Between 2017-2022, Minneapolis expanded its housing stock by 12%. The key driver behind this growth spurt was apartments. A full 87% of these new homes were in buildings with 20+ units. As economists will tell you, increasing supply generally causes rent to stabilize — and sometimes even decline.
To spur this new construction, the Minneapolis City Council adopted three key policies:
Minimum parking requirements for new developments were eliminated. By first reducing and then eliminating on-site parking requirements for new apartments, the Minneapolis City Council enabled developers to build more densely and save costs, especially if the site would otherwise require underground parking.
Taller buildings in commercial corridors were encouraged. Minneapolis created zoning districts near transit and along commercial corridors where developers were allowed to build three- and six-story buildings. On lots adjacent to light rail stations, zoning permitted 10- to 30-story buildings.
Minimum building heights were required in high density zones. Most zoning regulations focus on maximum building heights. First in Korea, where land is scarce, and currently in downtown Minneapolis, developers are required to build to a minimum height so that prime sites can house more people.
Minneapolis made it cheaper and easier to build apartments. Politicians withstood scathing criticism from loud NIMBY voices — and developers responded.
Regulatory improvements are not enough. Minnesota also backed up this program with financial resources, including a $1 billion omnibus housing bill. This legislation, which passed in May 2023, provides funding for housing infrastructure as well as the development of workforce housing and other housing priorities.
What can we learn from Texas? Why does development cost twice as much in Vermont?
Texas has some natural advantages — land is plentiful, flat and generally less expensive. Also, the influx of new families means developers can build large complexes, and benefit from economies of scale.
There is also a less obvious but significant reason: the number of immigrants who work in construction. According to the American Immigration Council, only 17% of the Texas population are immigrants, but they make up 40% percent of the construction workforce. Also, according to the Council, a whopping 39.7 percent of all entrepreneurs in the building industry in Texas are immigrants.
These newcomers bring skills or a willingness to learn, innovation and a strong work ethic.
Vermont is short on people with construction skills, which is a key factor in the high price and slow pace of new developments in Vermont.
Is there a way to draw fresh faces to Vermont and welcome them with opportunity? Can we partner with organizations that help to settle new Americans? Reach across borders? Provide training or sponsor apprenticeship opportunities? Should we begin that conversation?
In June 2023, the Vermont Legislature and Gov. Phil Scott took a significant step toward increasing the supply of housing. The HOME Act (Act S.100) modified parking requirements for priority housing and offered a 40% density bonus for affordable housing in areas with public water and sewer.
In 2024, the Legislature took further action and passed H.687 — which modernized Act 250 — smoothing the way for more housing projects and less duplicate regulation.
This bold legislation is clearly a step in the right direction. But, if Vermont really wants to increase its supply of housing, it needs additional legislative action. It also needs to press forward in creative and potentially controversial ways.
Read the story on VTDigger here: John Vogel: Tackling Vermont’s housing shortage.