Small towns across Vermont are being presented with what housing experts are calling a once-in-a-generation opportunity to build new homes, address long-standing affordability challenges, and reinvigorate local economies that have struggled for decades.
The national housing shortage continues to weigh heavily on affordability, with limited supply driving prices higher across the country. Goldman Sachs Research estimates that “at least 3–4 million additional homes beyond normal construction need to be built to address the shortage in U.S. housing supply and boost affordability.”
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In rural states like Vermont, the challenge is particularly acute. A recent report from AARP Vermont, produced in partnership with Smart Growth America (SGA), found the state will need between 24,000 and 36,000 new homes by 2029 to meet population demand and stabilize housing markets.
To help meet that need, Vermont has rolled out the Community and Housing Infrastructure Program (CHIP) — a statewide tax increment financing initiative designed to help communities overcome one of the biggest barriers to housing development: the cost of public infrastructure.
According to the Vermont Agency of Commerce and Community Development, CHIP is “a statewide tax increment financing tool designed to help Vermont communities unlock housing opportunities by investing in critical public infrastructure.”
Housing advocates say the program could be transformative for small towns that have long lacked the resources to support growth.
In a Rutland Herald op-ed, Samantha Sheehan, municipal policy specialist for the Vermont League of Cities & Towns and a school board member in the Granville-Hancock Unified School District, reflected on how deeply some communities have declined over time. Fifty years ago, she wrote, Hancock “was among the nation's highest producing mill towns.”
Today, however, there are “no mills or manufacturing, not even an operating farm,” leaving the town without basic amenities such as coffee shops, restaurants, sidewalks, bike lanes, stoplights, or lampposts. CHIP, she argued, offers a long-awaited chance to reverse that trend for communities that have been “forgotten.”
“I want my neighbors to age here in dignity and be a part of the community they have invested their entire lives in. I want kids here to have the same academic experience as any other growing Vermonter. That means we need to build more than what we’ve lost. For the first time ever, the state has a plan for us to do just that,” she wrote.
The program was established under Act 69, signed into law by Gov. Phil Scott last June. It created what officials describe as “a project-based form of Tax Increment Financing (TIF) that will enable smaller communities across Vermont to build the housing they need at the scale they need it.”
CHIP officially launched this month and authorizes up to $2 billion in infrastructure investment through 2035, funding improvements such as water, sewer, roads, and sidewalks that directly support housing development.
Crucially, the program allows towns to finance those upgrades without raising local property taxes, instead repaying the investment using a portion of the new tax revenue generated by future development.
Nate Formalarie, deputy commissioner of the Vermont Department of Housing and Community Development, says this structure is especially important in a rural state where many communities simply lack the capacity to shoulder large upfront costs.
“The rapid increase in the cost of housing construction has meant that small developers and homebuilders can’t make a project pencil out if the cost of infrastructure falls to them,” he says. “CHIP unlocks the ability to support infrastructure needs through taking on debt, but it is also project-specific. It allows a town and a homebuilder to collaborate on a specific project and, with the support of CHIP, see it come to life.”
Some communities are already using the program to move stalled projects forward. In St. Albans, city officials purchased the former home of the local newspaper to convert it into a mixed-use development featuring entertainment space, a restaurant, and housing, according to the St. Albans Messenger.
Fair Haven, in Rutland County, has also tapped CHIP funding to acquire a 24-acre former racetrack site for the construction of middle-income homes for sale, according to VTDigger.
Leo Pond, a real estate advisor with Four Seasons Sotheby’s International Realty in Killington, says the program finally addresses the real obstacle many towns face.
“In many communities, the barrier to building housing has not been zoning, and it sure hasn’t been lack of demand, but the upfront cost of extending sewer, water, roads, and sidewalks,” he said.
By allowing municipalities to borrow for infrastructure and repay that debt with future tax revenue, the program “shifts the burden away from current taxpayers and allows the growth to finance itself,” Pond added, fundamentally changing what kinds of projects are financially feasible in small towns.
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Jessica Hartleben, executive director of the Vermont Economic Progress Council, which oversees CHIP, summed up the program’s significance in an interview with VTDigger: “We basically have a once-in-a-generation opportunity here.”
Formalarie agrees, noting that while $2 billion may seem modest elsewhere, it could reshape Vermont’s long-term outlook.
“We have an aging population and are facing demographic decline in the decades ahead, which puts pressure on a whole host of things from schools to roads to economic vitality,” he says. “This program is intended to support smaller towns looking for opportunities to grow their tax base, keep their schools open, and create a brighter future for their communities.”
Under CHIP rules, approved projects can retain a portion of new property tax revenue for up to 20 years. Market-rate developments can capture up to 75% of education tax increment, while projects with at least 15% affordable units can retain up to 85%.
Housing advocates say CHIP could help ease Vermont’s worsening affordability crisis. The Vermont Housing Finance Agency’s Housing Needs Assessment: 2025–2029 found that housing shortages for lower-income households “became more severe with the COVID-19 pandemic and resulting market shifts.”
According to the report, half of Vermont renters are cost-burdened, and “one-in-four pay more than 50% of their income on housing costs,” putting them at high risk of eviction. The lack of supply also contributed to “a tripling of the number of Vermonters experiencing homelessness between 2019 and 2023.”
Formalarie says CHIP allows communities to tackle these issues one project at a time.
“It stands to increase housing supply, allow more families to take root in our communities, increase school populations, and revitalize historic downtowns and villages that have lacked the resources to make these types of housing projects happen,” he adds.
Beyond housing, each project generates construction jobs and expands the long-term tax base — benefits that could ripple through local economies for years.
“Vermont is effectively testing a model for other rural states with a high quality of life and a suffocatingly high average cost of living,” Pond says.
Experts note that states such as Massachusetts, New Hampshire, and New York could adopt similar frameworks, provided they include strong oversight and protections for permanent housing.
“It will be important to design such programs with strong guardrails, public hearings, and housing as permanent residences during the debt repayment period,” says Sain Rhodes, a real estate expert at Clever Offers.
Originally reported by Yaёl Bizouati-Kennedy in Realtor.
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