Proposed Legislation Aimed to Aid Housing Developers

A new federal bill seeks to lower tax burdens for developers working to increase Vermont housing stock.

Updated on Sept. 24, 2026 in Residential

Isometric editorial illustration featuring a stack of timber beams and a small architectural house model, representing affordable housing policy. — Senator Peter Welch introduced legislation to exclude development grants from taxable income to encourage small-scale affordable housing projects in Vermont. AI Illustration. Upload story photo >

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Should grants used for affordable housing construction be exempt from federal income tax?

Senator Peter Welch has introduced the Supporting Small Affordable Housing Developers Act to address the state housing crisis. The bill aims to remove tax penalties on development grants that currently hinder small-scale projects.

Why it matters

Small developers often face significant financial losses because current tax code classifies grant funds as taxable income. This legislation seeks to remove those barriers as the state works to meet a projected need for 24,000 to 36,000 new units by 2030.

A case study of a Village Ventures project in Bradford showed that taxes on a $1.1 million federal grant contributed to a $400,000 financial loss. This highlights the cost burden for developers in a market where home sale prices have risen 40% since 2019.

The players

Senator Peter Welch

A U.S. Senator representing Vermont who introduced the Supporting Small Affordable Housing Developers Act.

Village Ventures

A developer that reported a $400,000 loss on a Bradford housing project due to federal tax obligations on grant funding.

The details

The proposed legislation amends the federal tax code to exclude development grants from taxable income. It also exempts income from selling state-level tax credits from federal taxation. By removing these levies, the bill aims to reduce the financial risk for small developers, who are currently constrained by rising labor and construction costs while trying to house the 4,000 Vermonters facing homelessness.

2019: Median home sale prices in Vermont began their 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 Vermont to fulfill its estimated need for up to 36,000 new housing units.

Money Landscape

The Supporting Small Affordable Housing Developers Act marks a policy departure from current tax code interpretations regarding development grants. It attempts to address the persistent affordability gap in Vermont, where demand continues to outpace supply.

While this bill specifically targets the tax burdens of developers, its success could influence the long-term supply of affordable housing available to residents. For those planning future home purchases or rentals, monitoring these legislative shifts is essential for understanding regional affordability.

The takeaway

Small-scale housing development currently carries high tax risks that can lead to significant project losses. Residents interested in housing access should track local and federal legislative updates regarding development incentives to understand potential future supply changes.