The Government's Quiet War Against Better Housing

On September 6 the Vermont Housing Finance Agency announced a new low mortgage rate for home buyers - 6.8% - and raised its family income eligibility limit to $43,000. The VHFA is obviously responding to a consumer need, which is a function of the demand for housing, family incomes, the cost of homes, and the interest rate.

Underlying this announcement is a desperate housing shortage in northwestern Vermont. The housing vacancy rate in booming Greater Burlington is below one half of a percent. An IBM official has stated that housing is an "emerging business issue" in the area. There are recurring reports of high salaried employees who have declined transfers to the Burlington area because no suitable housing is available anywhere close to their work.

There are plenty of would-be homebuyers with good mortgage credit. Interest rates are reasonable. The problem is that Vermont's housing industry, which ordinarily would be working overtime to produce homes to meet the demand, has been shackled. Indeed, some discouraged home builders are simply packing up and seeking to better opportunities elsewhere.

What has almost put a stop to middle income homebuilding in northwest Vermont is a horde of government rules, regulations, processes, and torments. The most obvious is Act 250. Even developers willing to meet the detailed development criteria of Act 250 do not dare to expose themselves and their capital to a regulatory process with no predictable end, infested with legions of well-lawyered adversaries determined to thwart their every move.

The other major obstacle is local planning and zoning. Once viewed as a way to avoid public nuisances and match growth with needed roads, schools, water and sewer, zoning in developing communities all too often becomes a tool to protect the residents - many of them recent arrivals - against the ravages of newcomers. This leads to "I'm aboard, pull up the gangplank" zoning that puts up every possible obstacle to additional growth.

Then there are the many state regulations that apply even when Act 250 is not involved. Two of the most daunting are wetlands and endangered species. Everybody once conceded the need to protect "wetlands" - swamps full of rushes and bullfrogs. A "wetland" has now become a field that is perfectly dry, but has "hydritic soils" and might harbor a "vernal pool" of snowmelt for a couple of weeks in April. One manufacturer in Bennington had to completely redesign a plant expansion to work around a tiny mudhole in a field behind the plant. To single-minded regulators, every insignificant mudhole is more precious than any imaginable factory expansion.

Endangered species is another potent growth stopper. Woe unto the landowner who finds an endangered bird, snake or insect on or near his property! In nearby New York state a landowner was recently fined for causing "physiological stress" among endangered rattlesnakes, when he put up a small fence to keep them out of the yard where his kids played.

Another major tool of Vermont's sprawl warriors and growth stoppers is "historic preservation". Twenty five years ago this concept won favor when Vermonters acted to preserve important sites from the state's past, like the Isle LaMotte cabin and the old Windsor meeting house. With those popular projects completed, the preservers, desperate to stay in business, have moved on to new concerns.

The game now is "compliance archeology". Whenever anyone applies for an Act 250 permit, "approved archeologists" appear, shovels in hand, to ransack the site for bones and arrowheads. One subdivider in Chittenden County had to spend $50,000 to pay for their time and test pits before he qualified for a permit. A small hydro plant developer in Thetford was ordered to protect a 19th century farmer's dump. Although Act 250 requires the state to meet the burden of proof on historical preservation, the Division of Historic Preservation simply refuses to sign off until the applicant has financed its survey out of his own pocket. Ironically, if the "approved archeologists" for whom this is a full employment program actually find anything of interest, it is given back to the landowner.

Fifteen years ago a Federal study concluded that needless government regulations added on the order of 15% to the cost of all kinds of housing . The number in Vermont has to be far higher than that national average. Vermont Homebuilders executive Kevin Dorn says that his members could build and immediately sell thousands of $125,000 units of various types across northwestern Vermont - but for the nearly insuperable obstacles posed by governments. He worries that with powerful housing demand and little housing being built, the state, declaring a housing crisis, will move in with a government home building authority.

The state and local government quiet war to depress efficient mass market homebuilding is driving up the cost of what little housing there is. At the same time a state agency (VHFA) is offering lower interest rates to increasingly higher-income buyers so they can afford the higher prices resulting from the short supply.

A vastly preferable policy would be to drive down the government barriers, let private homebuilders meet the demand, and send those same home buyers to get unsubsidized mortgages from private lenders. If Vermont fails to choose this alternative, decent new housing will soon be available only to the custom building rich, the welfare poor, and the increasingly subsidized families who used to, and ought to, be able to pay their own way.

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September 2000