Vermont officials have announced an estimated 12 percent increase in statewide property taxes for the coming year—an increase that follows on the heels of last year’s double-digit bump, which varied by municipality but similarly pushed many property owners into significantly higher tax bills. The stated goal of these increases is to sustain the state’s education funding formula. Yet the rising tax burden has a predictable, mechanical effect on housing costs that policymakers rarely acknowledge: when the cost of operating housing increases, the price of housing increases.
This is not conjecture or political framing. It is the basic arithmetic and incentive structure that governs every business transaction, including rental housing.
A Rising Cost Base Becomes a Rising Rent Base
Property taxes are a major component of a landlord’s operating costs. In Vermont—where school spending, declining enrollment, and shifting demographics place heavy upward pressure on revenue requirements—property taxes represent a volatile and unpredictable line item. When those taxes increase 12 percent two years in a row, the cumulative financial impact on property owners is not simply substantial; it is unavoidable.
A rental unit does not exist in isolation. Landlords typically own their primary residence plus one or more rental units, meaning that a statewide tax increase raises the cost of every property they own. The total economic pressure on a landlord, therefore, is not limited to the increases applied to rental structures. Their entire financial baseline rises.
In practice, this means rents must rise not just to cover the increased taxes on the rental property itself, but to maintain the landlord’s overall economic position as other personal and business expenses scale upward.
When Costs Rise, Prices Rise—Unless Someone Absorbs the Loss
There are only three ways to respond to a cost increase. A landlord can raise prices, reduce expenses, or absorb the loss. Housing maintenance requirements, utilities, insurance premiums, and labor costs offer limited room for cuts, and most have also increased over the last several years. The remaining option is simple: rent increases.
A 12 percent property-tax increase does not automatically translate into a 12 percent rent increase. It typically translates into more, because property taxes are only one component of rising expenses. Insurance premiums have climbed significantly in the Northeast, materials and labor for repairs are more expensive, and inflation continues to affect every input in the housing system.
Therefore, if rent increases by exactly 12 percent, the landlord is absorbing the increases in other costs. If rent increases by less than 12 percent, the landlord is effectively subsidizing the tenant’s housing. And if rent rises by more than 12 percent, the landlord is maintaining their underlying cost structure and financial stability.
All three outcomes are possible. But only one is sustainable in the long run: passing through the full increase in operating costs.
Tight Housing Markets Increase the Pass-Through Rate
Vermont’s rental vacancy rate has hovered near or below one percent in many regions, among the lowest in the nation. In such an environment, price sensitivity is reduced. Tenants have limited alternatives, unit turnover is costly and rare, and any available unit is quickly filled—even at higher market prices.
This dynamic increases the pass-through rate of cost increases. When landlords face a fixed rise in expenses and tenants face a scarcity of alternatives, prices adjust upward with little delay or friction. Housing functions like any other market good with a tight supply: higher operating costs become higher consumer costs.
This is not opportunistic behavior. It is the normal operation of a market under stress.
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Policy Choices Create Predictable Outcomes
Vermont’s policymakers often express concern over rising rents and decreasing affordability while simultaneously enacting fiscal choices that guarantee these outcomes. Education funding formulas, municipal spending obligations, and the state’s demographic pressures all contribute to structural tax increases. Without significant cost containment or revenue diversification, property taxes will continue upward.
The direct consequence is that housing costs follow upward at an equal or greater rate.
A state cannot raise the cost of producing a good—housing—and be surprised when the price of that good increases. Nor can it impose multiple consecutive years of double-digit tax hikes and expect a stagnant or declining rental market. Economic cause and effect does not pause for policy goals.
The Result: A Self-Inflicted Affordability Crisis
Vermont’s affordability challenges are often attributed to outside forces: rising national home prices, out-of-state buyers, construction bottlenecks, or demographic shifts. These factors matter, but they obscure the simpler internal driver: the state repeatedly increases the cost of housing production and operation through taxation.
Every additional dollar in cost must come from somewhere, and in the housing market, it ultimately comes from renters.
The cycle is predictable:
- Costs rise.
- Rents rise in response.
- Rent burdens increase.
- Policymakers seek relief.
- New costs are introduced.
- The cycle continues.
Until the underlying cost structure is addressed, no amount of regulatory pressure or rhetorical concern will reduce the price of housing. Vermont’s affordability crisis is not mysterious. It is the mathematically expected outcome of the policies being implemented.
Dave Soulia | FYIVT
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