VHFA News

A recent study illustrates how new market-rate housing construction in one part of town, especially in markets with low vacancy rates, improves housing affordability for lower income residents in other parts.  This occurs because newly built homes and low-income neighborhoods are connected to each other via a complex housing ecosystem, according to economist Evan Mast’s recent study for the Upjohn Institute.  Through address matching, Mast traced the chain of moves triggered when new homes are purchased.  

This concept is similar to a game of musical chairs, noted one reviewer:

"We all know the old child’s game musical chairs, where children circle a group of chairs (where there’s one less chair than children). The kids constantly move while the music plays.  But when the music stops, everyone has to sit down. Whoever doesn’t find a seat and is left standing is removed from the game.  Tight housing markets are like that: if there aren’t enough houses (chairs) someone ends up on the outside looking in, and in markets it’s not the slowest kid, but the poorest household."

Many Vermont communities have very low vacancy rates. The rental vacancy rate in Chittenden County was 2.8 percent as of 2017, while healthy housing markets have vacancy rates closer to 5 percent. When vacancy rates are low, homebuyers and renters must compete for a limited number of homes, allowing sellers and landlords to charge higher prices. 

Low vacancy rates are driven by an insufficient housing stock relative to the area population. Vermont and most of its communities have witnessed a dramatic decrease in residential construction since 1980.  Since 2010, the state’s housing stock has increased by a mere 0.16 percent each year.   

Check out your town’s rate of home building on the Vermont Housing Data website’s community profiles.

The annual Burlington Young Professionals (BYP) survey conducted by the Lake Champlain Regional Chamber of Commerce reveals that 33 percent of young adults surveyed plan to move out of the area within the next four years. Among the most common challenges cited were the high cost of living, lack of job growth opportunities, and a lack of affordable housing.

The survey included 500 participants between the ages of 22 and 40 living or working in the greater Burlington region. 56 percent were renters. Survey respondents ranked the City of Burlington as the top place where they would ideally like to live in Vermont, citing work opportunities, culture, and sense of community. Yet only 30 percent of renters and just 14 percent of homeowners actually live in Burlington. Of the surveyed homeowners living outside of Burlington, 27 percent have purchased a home outside of Chittenden County entirely.

Respondents reported that the cost of housing was a major concern that could prevent them from staying in the area long term. In particular, respondents reported that they wanted to purchase a single family home rather than a condominium. The median single family home in Chittenden County cost $336,000 in 2018. This is unaffordable with the median income of $52,000 reported in the survey, even assuming a two-earner household. High home prices are compounded by a amount of significant student loan debt among young professionals, with average $424 in monthly student loan payments for those who completed the survey.

One survey participant wrote, “My spouse and I are currently living in a condo that I purchased by myself in 2015. Now that we are expecting our first child, we are looking for the jump to a house; however, the cost of a reasonably sized affordable housing & yard PLUS daycare costs in excess of $12k per year is preventing us from leaving this condo.”

This imbalance between incomes and home prices can make it difficult to save enough to purchase a home, especially for first-time buyers. Fortunately, Vermont Housing Finance Agency’s homeownership programs can help young homebuyers, including down payment and closing cost assistance up to $5,000.