Proposed Legislation Aimed to Aid Housing Developers
A new bill seeks to cut taxes on affordable housing grants to help address Vermont's critical supply shortage.
Updated on Sept. 24, 2026 in Residential
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Senator Peter Welch has introduced the Supporting Small Affordable Housing Developers Act to provide tax relief for developers working on affordable projects. The proposal aims to incentivize construction to help meet the state's need for up to 36,000 new units by 2030.
Why it matters
Current tax laws treat development grants as taxable income, which has led to significant financial losses for small-scale developers. This change is intended to stabilize the economics of building affordable housing amidst rising costs.
The bill addresses a tax burden that saw developers like Village Ventures incur $500,000 in taxes on a $1.1 million grant, contributing to a $400,000 loss on a Bradford property. This comes as Vermont requires 24,000 to 36,000 new units by 2030.
The players
Senator Peter Welch
The U.S. Senator representing Vermont who recently introduced legislation focused on housing and rural development.
Village Ventures
A developer that reported significant financial losses while attempting to build affordable housing in Bradford.
The details
Under current federal law, grant funds used for construction are classified as taxable income, even when the project costs exceed the final appraised value. This bill proposes excluding these housing grants from taxable income and exempting earnings from the sale of state-level tax credits. By removing these tax barriers, the legislation aims to prevent small developers from facing heavy losses when building affordable housing in rural areas.
Timeline
2019: Median home sale prices in Vermont began a 40% increase.
2022: Village Ventures received $1.1 million in federal grant funds.
September 2026: Senator Welch introduced the Supporting Small Affordable Housing Developers Act.
2030: Target year for meeting the state's requirement of 24,000 to 36,000 additional units.
The Home Front
This legislation builds upon the regulatory framework introduced by the FARM Home Loans Act earlier this year. It signals a move toward federal tax code adjustments meant to bridge the gap between high construction costs and the urgent demand for affordable inventory.
Residents should track how this legislation influences local housing start permits in their area, as an increase in new construction could eventually stabilize inventory levels. If you are involved in or considering a local community land trust or development project, consult with a tax professional regarding how potential federal code changes may affect future grant-based projects.
The takeaway
The proposed tax relief is designed to offset the financial risks that currently discourage small developers from pursuing affordable housing projects. Homeowners and local stakeholders should monitor this legislative progress as a key indicator for potential supply growth in the coming years.
Further reading
Learn more about the local market in our Residential section.
Source note: This article includes information reported by Vermont Business Magazine.
Live Poll
Should grants used for affordable housing construction be exempt from federal income tax?
