Developers are using Vermont’s Rental Revolving Loan Fund to build new workforce housing in the Upper Valley.
The $10 million state-funded program, which began accepting applications in March, was created as part of the Housing Opportunities Made for Everyone, or HOME Act. The act, signed into law June 2023 by Republican Gov. Phil Scott and sponsored by the Senate Committee on Economic Development, Housing and General Affairs is meant to “enable new opportunities for housing development,” according to act’s description on the state’s website.
The revolving loan fund aims to provide loans to create housing for renters who make too much to qualify for the usual cap of traditional affordable housing, but not enough to easily find housing that is affordable to them.
“If you go back 20 years, apartment buildings like this wouldn’t need a subsidized interest rate on a loan, but now projects across the state are not penciling out,” said Maura Collins, executive director of Vermont Housing Finance Agency, or VHFA, a state chartered non-profit that allocates the fund. “The rent has to be so high that it’s too high for the market so developers just can’t move forward and the housing just doesn’t get built.”
To qualify for housing developed using the fund, a two-person household would have to make a combined annual income of between about $53,000 and $123,000, and could expect to pay somewhere between $1,100 and $1,600 in rent, according to data from VHFA.
The fund is “revolving” because over the next decade, as developers repay the loans — which have an interest rate of between 0% and 2% — that same money will be loaned out for new projects.
“The money stays doing the same thing,” Collins said.
VHFA received 16 applications totaling more than $21 million in requests. The VHFA board of commissioners prioritized new developers who had secured investments from area employers or municipalities of 5% of the total project cost, and are not eligible for other sources of state and federal funding. The board also looked for projects proposed in underserved, and rural communities that would meet the needs of renters on the lower end of the annual income threshold.
Of the first nine projects approved for loans, two are in the Upper Valley.
In Fairlee, construction is underway to renovate an old barn attached to Chapman’s General into a mix of eight one-bedroom and two-bedroom apartments. Co-owner Travis Noyes, who lives in New York but whose family has owned Chapman’s for about 150 years, said the units will go for $1,500 to $1,850 a month, including utilities. He said he hopes they’ll hit the market in July.
Noyes received $326,000 from the revolving loan fund for the $1.5 million renovation project.
“This program is t he way we were able to start this project and we’re not sure we could’ve d one i t without it,” Noyes said.
In Windsor, the Development Review Board has approved a project by Ben and Grace Machin, owners of Tamarack Vermont Sheep Farm in Corinth, to add a total of eight new one-bedroom and studio units to two multi-family dwellings located at 8 and 18 Union Street.
The Machins, who declined to comment for this story, received a combined $1 million from the loan fund for the Union St. renovations and to add units to two buildings on Chester Road in Springfield, Vt.
The revolving loan fund also is funding projects in the other Vermont communities of Vergennes, Bolton, Bennington, St. Albans, Rutland and Winooski.
Unlike units built with typical affordable housing tax credits, there is no annual income check for tenants living in apartments funded through the revolving loan program. Instead, VHFA checks income levels when a new tenant moves in. This is to encourage tenants’ income growth, Collins said.
Most of the units that will be built using the revolving loan fund have one or two bedrooms. “There’s a natural limit for how long people will want to live in modest apartments,” Collins said. “The market will take care of that.”
Developers are encouraged to utilize employer surveys, completed during the application process, to set rents based on the needs of the area. To ensure the units remain affordable, developers must maintain these rent levels until three years after they’ve paid back the loan.
In addition to middle-income renters, both the Machins and Noyes plan to rent to a variety of residents, including low-income tenants and refugees.
Four of the units in the Fairlee project will be used to house families and individuals coming out of homelessness.
“We have a long family history in Fairlee,” Noyes said. “For us, we want to give back.”
In an October presentation to the Windsor Development Review Board, the Machins described their plan to partner with the Ethiopian Community Development Council’s Brattleboro branch to welcome refugees to the units in Springfield and Windsor.
The nonprofit, also known as ECDC, supports refugees and immigrants when they arrive to the U.S. by picking them up at the airport, enrolling children in schools, assisting in job searches and connecting them with resources. ECDC-VT resettled 178 refugees from seven different countries into Vermont communities from January of 2022 to June of 2023, according to the organization’s website.
There are currently no refugees resettled by ECDC in the Upper Valley, but efforts are underway to build the resources and connections necessary to welcome refugees to Windsor, Joe Wiah, executive director of ECDC-VT, said in a phone interview.
“We work together with the town to find the missing resources and build them and to educate the community on how the resettlement process works,” Wiah said.
When examining whether an area would be a good fit for resettling refugees, the team at ECDC talks to “key players” such as the town manager, police department, local hospitals and housing developers such as the Machins.
Though they are still in the preliminary stages, Wiah said ECDC hopes to resettle refugees first in Springfield and, eventually, in Windsor, as well.
Because of the high volume of applications, VHFA launched the Community Housing Accelerator program. A fund with similar application requirements to the revolving loan fund, but supported by philanthropic investments, the Vermont State Treasurer’s Local Investment Advisory Committee and VHFA funds.
Applications for the fund close Jan. 8, and VHFA anticipates awarding recipients on March 20. More information is online at: vhfa.org/rentalhousing/developers/rrlf-cha.
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