Updated at 4:46 p.m.
Gov. Phil Scott on Friday vetoed legislation that would have set up a rental registry, and statewide system to enforce property safety standards.
The governor said that the bill, S.79, would “reduce the number of housing options for Vermonters at a time when we are grappling with a critical housing shortage.”
“Most agree we suffer from a critical housing shortage for middle income, low income and homeless Vermonters, but the solution is not more regulation,” Scott said in his veto message to legislators.
Scott argued that adding additional housing restrictions and costs would discourage “everyday Vermonters” from renting out their homes, rooms or summer cabins as a way to supplement their income.
Instead of increasing regulations, Scott said that the state should invest in new and rehabilitated housing across Vermont, and “ease complicated and duplicative permitting requirements” to help expand housing stock.
Democrats, who passed the housing bill during a veto session last week, argued Vermont’s current system for regulating rental properties — which is mostly handled on the local level — is inadequate, and doesn’t provide enough protections for renters who live in poor-quality housing.
Under the bill, rental safety inspections would become a responsibility of Vermont’s Division of Fire Safety.
Democratic leaders said that the rental registry would help improve communication between state officials and property owners, and give the state a better understanding of its rental market, including its short-term rental industry, which has exploded in recent years.
The bill Scott vetoed on Friday also included funding for programs aimed at expanding the housing stock and homeownership in Vermont.
Under the bill, landlords could receive grants of up to $30,000 to fix up existing properties, through the $5 million Vermont Rental Housing Investment Program. In addition, the legislation would create a $1 million fund to provide no-interest $50,000 loans for first-time homeowners.
Scott said that despite his veto, these programs can move forward because they were already funded in the state budget that was signed into law last month.
In a statement on Friday, the Vermont Chamber of Commerce said it was “surprised and disappointed” by Scott’s veto. Amy Spear, the chamber’s vice president of tourism, said the bill would have “ensured a safe rental environment while also moving Vermont toward greater regulatory equity in the lodging marketplace.”
The chamber, which supported the rental registry, has argued that there isn’t a level playing field between traditional Vermont lodging businesses and short-term rentals such as Airbnb properties.
Spear said that during the pandemic, short-term rentals have been exempt from onsite visits from regulators for compliance checks “because they are permitted to operate anonymously.”
“With thousands of [short-term rental] units in Vermont, we believe it is important that these property owners receive communications on how to ensure the health and safety of the traveling public,” Spear said.
The governor said that in the future he could support a rental registry but only for buildings with more than two dwelling units available for rent for more than 120 days per year.
“This will ensure we are differentiating between those renting a unit merely to support household expenses and more professional landlords operating a rental business,” the governor said.
Before the state transfers oversight of rental properties to the Division of Fire Safety, it should further consider the resources and regulatory flexibility the division would need, he said.
As written, the bill would have added five new employees to the Division of Fire Safety to conduct rental inspections. But Scott said he believes the program “would require an even more costly expansion of the bureaucracy in the future, which I could not support.”
He also said the state should examine training needs for the local health officers, who are tasked with conducting housing inspections.
Democratic leaders criticized Scott for killing the housing bill Friday.
“This critical bill provided a long overdue complaint-driven system for protecting our constituents from substandard rental housing conditions,” Senate President Pro Tempore Becca Balint, D-Windham, said in a statement.
“I’m extremely disappointed with the Governor’s actions today, at a time when we should be doing everything possible to guarantee access to decent housing for all Vermonters.”
House Speaker Jill Krowinski, D-Burlington, said the veto “sets us backwards, not forward” in solving Vermont’s housing crisis.
“This bill was crafted to create equitable solutions to our housing crisis, in supporting both renters and landlords, and it passed with broad support from community and business organizations across Vermont,” Krowinski said.
“I have said throughout my time as Speaker that we need to create a recovery plan that works for all Vermonters, and by vetoing this bill, the Governor has taken away resources from our goal of recovery,’ she added.
Republican lawmakers in the Legislature shared Scott’s concerns about the housing bill.
Last week, Sen. Randy Brock, R-Franklin, the Senate’s minority leader called the bill “intrusive” and said it would discourage property owners from putting rental housing on the market.
House Minority Leader Pattie McCoy, R-Poultney, called the proposed first-in-the-nation rental registry “government overreach” and “another attempt to unnecessarily expand the scope of bureaucracy into the private lives of Vermonters.”
Rep. Tom Stevens, D-Waterbury, the chair of the House Committee on General, Housing, and Military Affairs, who supports the bill, said Scott’s concern that the rental registry would lead to less available housing “has no basis in fact”
“If you’re taking money from strangers for a room in your house, you are in a business and you should be held accountable,” Stevens said.
“But there’s no proof that people are going to stop renting because they may be asked or mandated to register their apartment,” he said.
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