This commentary is by Ali Jalili, a retired Foreign Service officer who served with the State Department all over the world, primarily as an economic officer.
Lt. Gov. Zuckerman makes it clear in his latest opinion piece that he doesn’t like “profiteering developers”, a term he uses pejoratively multiple times. Presumably he prefers developers who put in their time, effort and capital… out of the goodness of their heart?
Those types of developers (e.g. Habitat for Humanity or the Champlain Housing Trust) are great and wonderful and should be supported and applauded. But the vast majority of housing, like the vast majority of goods and services in our economy, is produced by for-profit companies.
That’s the way capitalism has provided the mind-blowing abundance we enjoy today.
Developers, even much more so than many other businesses, make long-term bets, risking large amounts of capital, investing years of time, effort and expertise, in hopes of making profits. Yes, when those bets pay off, developers can make huge profits. But if it were easy, everyone would be doing it, right? Being a developer is hard. From the planning, to the logistics, to the financing, to the community engagement, developing housing at scale is a long slog.
In Vermont, it has been especially hard, with the state choosing to make development difficult, expensive and time-consuming in service of the perfectly reasonable goal of maintaining the state’s bucolic vibe and natural landscape.
The state has been successful. We have no real “cities” to speak of other than Burlington, which is about the 900th (yes, 900th) largest city in the U.S. within the 208th largest metropolitan area. There is no chance of Vermont becoming “overdeveloped” anytime in the next few decades, even if we realized and surpassed the mostly wildly optimistic development goals.
The lieutenant governor does realize we need more housing and suggests even higher taxes on the tiny sliver of very wealthy Vermonters, with that money used to “create affordable housing.” The mechanism for “creating” housing is unclear, but I assume it would involve developers.
Are the developers going to forgo higher profits elsewhere to build housing that generates a lower rate of return? Doubtful.
So the money would presumably be used to subsidize the development of lower-than-market-rate housing, with those subsidies ultimately ending up in the pockets of those same developers.
Would the state own that new housing? Governments have a terrible track record of owning and managing housing. If not, do the owners of those newly built subsidized houses then get to turn around and sell them at the market rate for a profit? These are the types of issues that arise when the government tries to meddle too deep in the market.
I think a better strategy is to make it as easy, streamlined and cheap as possible for developers to do what they do, and to get out of their way. We should be doing our utmost to work cooperatively with existing developers in the state, and we should be trying hard to attract new ones.
We have an aging population and are not an attractive state for most millennials, especially the innovative and ambitious ones an economy needs to thrive. We need to attract people, especially young people, by the tens of thousands — annually! To do that, we need to be building housing on a massive scale. That will require developers who are capable of securing billions of dollars of financing to build tens of thousands of units in the coming years.
It’s an achievable goal. But it’s only achievable by encouraging, and not vilifying, our friends the “profiteering developers.”
