To the editor: Working to solve the housing crisis

During the two years I’ve served in the legislature, Vermont’s housing crisis has been constantly top of mind.

I’ve heard heart-wrenching stories of Vermonters with disabilities facing homelessness, seen tears in the eyes of  constituents on the brink of losing their long-term rental home and unsure of where they would find a new place, and learned time and time again about the teachers, nurses, childcare workers and others who wanted to move to my community to accept a job, but didn’t because they couldn’t find a home.

The legislature has worked to address the crisis. We have invested what funds we could, much of them one-time pandemic-era federal funds intended to keep people housed during the emergency, but also to build more housing, to help bring rentals up to code, and to enable homeowners to build ADUs. We’ve also addressed the regulatory barriers to housing, including through the HOME Act of 2023 and H. 687, the major Act 250 modernization bill that recently passed the House.

But the pandemic-era federal funds have ended, and while regulatory modernization is necessary, it alone won’t fix this crisis. If we intend to ensure that the communities we love remain – that is, that they remain places where a socioeconomically diverse array of neighbors can live, work, and raise their families – we need to commit to making the investments that can truly end this housing crisis. That is why I support the creation of two new revenue streams that would be used to fund a comprehensive, 10-year plan to do so.

The first is an update to the transfer tax, which is a one-time tax paid by the buyer in a real estate transaction. Currently, that tax is levied at 0.5% of the purchase price, up to $100,000, and 1.25% beyond $100,000. Under the House proposal, it would shift to 0.5% on the first $200,000, 1.25% on the price between $200,000-$750,000, and 3.65% above $750,000.

This would result in a decrease in the transfer tax for homes costing less than $750,000, a direct reduction in cost for the vast majority of Vermonters purchasing a home. Further, the increased tax on sales over $750,000 is marginal, meaning the higher rate is charged only on the amount of the sale price over that threshold, with the cost up to that threshold taxed at the lower rates. If implemented, this change would bring in about $17.5 million in additional revenue annually on the sales of properties that cost over $750,000, while reducing taxes for homebuyers seeking houses priced under $750,000.

The second new revenue stream under consideration comes from the creation of a new tax bracket for households with annual incomes over $500,000. Currently, every household with an income over $229,550 is taxed at the same rate, whether it’s a household with two earners each earning $115,000/year, or it’s a household with an annual income of $1 million or more. This proposal would address that lack of progressiveness at the top of our income tax brackets.

This tax would also be marginal, meaning annual income up to $500,000 would still be taxed at the existing rate (8.25%), with only portions of income above the new threshold being taxed at the new rate (11.25%). In other words, if a family earns $510,000, the first $500,000 would still be taxed at 8.25%, and just $10,000 would be taxed at 11.25%. This change would raise $75 million annually for housing, beginning in fiscal year 2026.

In Vermont, middle-income earners actually pay a higher portion of their income in total taxes than higher-income earners. Our system does a good job of ensuring that the lowest-income Vermonters don’t pay more than they can afford. But it doesn’t do a good job of ensuring that same progressiveness from the middle class up. For instance, a family earning $140,000 per year pays a higher share of their household income in taxes than a family earning $1 million per year. This exacerbates the challenges faced by Vermont’s middle class.

I don’t consider these two tax changes on their own, and I don’t take them lightly. I consider them in the context of Vermont’s housing crisis, and in response to Gov. Phil Scott’s recommended budget for the next fiscal year, which proposes a nearly 90% cut to housing investments. That’s unacceptable. Instead of cutting all meaningful investments in ending the housing crisis, the additional revenue from these two tax updates would fund a comprehensive plan to end Vermont’s housing crisis, designed by the statewide experts working to do so everyday.

Any tax proposal must come with deep consideration of the impact it will have on all Vermonters, and how it fits in with our broader need for public investment to build stronger communities. As we continue to confront the housing crisis, these changes can help ensure we build a Vermont where everyone can afford to live and thrive. Our communities are depending on it.

Rep. Mike Rice represents the Bennington-Rutland district (Danby, Dorset, Landgrove, Mount Tabor, and Peru) in the Vermont House. He serves on the Committee on Agriculture, Food Resiliency, and Forestry.