Vermont talks endlessly about affordable housing, but it never seems to get built — at least not enough to matter. Towns hold forums. Legislators vote on incentives. Yet a decade later, the state still posts some of the lowest vacancy rates and highest per-square-foot construction costs in New England.

The problem isn’t a mystery. It’s the sum of overlapping systems — well-intentioned, often outdated — that make it harder to build anything small, fast, or cheap.

The Permit Gauntlet

Every project in Vermont runs through at least two layers of approval: the municipal and the state. A developer might win local zoning and site-plan approval, even clear Act 250 review, and still find the Department of Environmental Conservation (DEC) stepping in later with new requirements — stormwater redesigns, additional studies, or wetlands mitigation.

Each delay costs money. Each permit layer brings its own consultants, filing fees, and appeal windows. By the time a modest 10- to 12-unit project reaches the “shovel-ready” stage, the developer has often spent $250,000 to $400,000 — without breaking ground.

That cost kills most small projects outright. The big developers can survive it, but they build at scales that don’t fit rural Vermont. The middle — local builders who might have added 8 or 10 new units in a village center — simply walks away.

Act 250 was born in 1970 to stop uncontrolled resort sprawl and hillside subdivisions. It succeeded at that, but over 50 years it metastasized into a general land-use veto system. Even when a town approves a project, state reviewers can reopen it. And anyone with standing — abutter, neighbor, or advocacy group — can appeal. The risk is enough to keep financing off the table.

Local Bylaws and the Soft Veto

Municipal zoning adds another barrier. Many Vermont towns still zone most of their land for single-family houses on large lots. Multi-unit buildings, even duplexes, are limited to small “village” districts or require conditional-use permits that open the door to subjective hearings.

Local boards rarely say “no” directly; they just demand “more study.” Traffic counts. Drainage reviews. Historical character reports. Each round adds months and thousands of dollars.

Until 2023, most towns still required two parking spaces per unit, even for apartments on sewered lots. The new state law caps it at one, but compliance is uneven. Parking minimums and setback rules quietly throttle density while everyone claims to support affordability.

The Cost Stack

Construction in Vermont now runs $250–$300 per square foot, excluding land. Energy-code compliance adds roughly $15,000 per unit. A small apartment building that might rent for $1,100 a month costs $325,000 per unit to build. The math doesn’t pencil without subsidies.

Affordable housing programs fill the gap — but they come with federal paperwork, wage rules, and deed restrictions that drive up costs again. What was meant to fix affordability ends up entrenching a bureaucratic class that can only afford to build “affordable” housing with million-dollar grants.

Private builders, facing those margins, choose something else: luxury condos, short-term rentals, or nothing at all.

The Vanishing Old Stock

Even if Vermont stopped regulating new construction tomorrow, it would still be losing ground because older homes are being regulated out of use.

Most of Vermont’s affordable housing has never been “built” in the modern sense — it’s old stock. Farmhouses split into rentals, apartments over general stores, duplexes with shared boilers. These buildings carried the state for decades.

But now they fail state occupancy and fire-safety standards the moment they’re rented out. The same building is legal as a private home, but becomes non-compliant if the owner rents an upstairs apartment.

To make an old two-unit conform means:

• Fire-rated walls and doors: $15,000–$25,000
• Sprinklers and new egress windows: $30,000–$50,000
• Rewiring and plumbing separation: $10,000–$25,000
• Septic or water-supply upgrade: $15,000–$40,000

That’s $60,000–$130,000 in mandatory work — just to keep renting units that already exist. For small landlords, that’s the profit from a decade of rent. Many simply give up.

The irony is that none of these upgrades apply to owner-occupied single-family homes. You can live in a 19th-century balloon-frame farmhouse with no sprinklers and ancient wiring, but if you rent the attic to a teacher, you may trigger a six-figure renovation.

The result isn’t safer housing — it’s less housing.

These small-scale, naturally affordable units are disappearing quietly. They aren’t replaced, because the cost of compliance exceeds the building’s value. Vermont loses a dozen of these units for every new subsidized one it builds.

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The Economic Loop

This is how the trap closes:

1. Regulatory layers push up the cost of new housing.
2. Safety and occupancy rules push old rentals offline.
3. Supply shrinks; rents rise.
4. Rising rents justify more subsidies, which increase program complexity and cost.
5. The next project starts even deeper in the hole.

Even well-funded nonprofit developers struggle to make the numbers work. A “moderate” affordable housing project — 20 units, built with tax credits and state grants — now runs $400,000 to $500,000 per unit all-in.

Meanwhile, thousands of old, habitable units sit empty upstairs in farmhouses and village buildings because their owners can’t afford to make them compliant.

The Cultural Factor

There’s another truth Vermonters don’t like to say out loud: most people want affordable housing somewhere else.
They support it as policy, but oppose it in practice — near them, in their town, or where it might alter a view or add traffic. Act 250 and local zoning give that opposition teeth.

The result is a state that prides itself on environmental virtue while exporting its working class to New Hampshire.

The Paradox

Vermont’s housing crisis isn’t born of greed or neglect. It’s the unintended consequence of decades of policy designed to protect everything except the ability to build.

The laws worked when the threat was overdevelopment. Now the threat is underdevelopment. But the machinery keeps grinding, churning out new plans, new boards, new studies — and fewer places for ordinary Vermonters to live.

Vermont didn’t just stop building affordable housing.
It regulated the existing kind out of existence.

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Dave Soulia | FYIVT

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