Equity-Rich Vermont: Why Massive Homeowner Wealth Is Fueling a Housing and Workforce Crisis

Vermont Leads the Nation in Home Equity—And That's Creating Unexpected Problems

Vermont homeowners possess something most Americans can only dream of: extraordinary wealth locked in their properties. More than 86 percent of Vermont homeowners are classified as “equity-rich”—meaning they own at least half of their home’s current market value outright. In Chittenden County, that figure exceeds 91 percent. No other state comes close to Vermont’s dominance in this metric.

But being equity-rich isn’t simply about avoiding foreclosure or staying above water on a mortgage. It’s a comprehensive measure of housing market health that reveals deep structural problems beneath the surface of apparent prosperity. Vermont’s equity concentration has created a paradox: homeowners are wealthier than ever on paper, yet the state faces cascading crises in workforce recruitment, economic competitiveness, homelessness, and generational opportunity.

A Decade of Extraordinary Price Growth

The foundation of Vermont’s equity wealth comes from sustained price appreciation that has fundamentally reshaped the market. Over the past ten years, sales prices for Vermont homes have escalated by an average of 92 percent. A home valued at $300,000 in 2015 now commands approximately $576,000.

By late 2025, the median sales price for a single-family home statewide reached $435,000, reflecting a 5 percent year-over-year increase. While this represents a cooling from the double-digit gains seen during the pandemic years of 2020-2022, the price floor remains dramatically higher than pre-pandemic levels.

This appreciation has created unprecedented paper wealth for existing homeowners. But it has also decoupled housing costs from local wage growth. Between 2019 and 2024, the median home price rose by 55 percent while household incomes increased by only 15 percent.

The Lock-In Effect: When Moving Becomes Irrational

High equity levels have created what economists call the “lock-in effect”—a phenomenon that effectively paralyzes the housing market. This occurs when homeowners who might otherwise move choose to stay put to preserve ultra-low mortgage rates they secured during the pandemic.

Nationally, nearly 80 percent of mortgage holders carry interest rates below 5 percent, with roughly one-quarter locked in below 3.5 percent. In Vermont, where equity levels are even higher, the economic incentive to stay is overwhelming.

Consider a homeowner with a 2.66 percent mortgage and 60 percent equity in their property. Selling and purchasing a comparable home at current market rates near 7 percent would roughly double their monthly payment—even for a property of equal or lesser value. For many families, moving has become financially irrational regardless of job opportunities, changing needs, or life circumstances.

Market Stagnation Despite High Prices

The consequence is a market that feels frozen despite elevated prices. While inventory saw a modest uptick of 11.7 percent in late 2025, Vermont maintains only 2.6 to 3 months of housing supply—well below the 4 to 6 months considered necessary for a balanced market.

The shortage of starter homes is particularly acute. Owners of these properties are often the most locked-in by favorable financing terms, preventing the traditional housing ladder from functioning. Young families cannot move into mid-range homes because those homes aren’t being vacated by seniors who might otherwise downsize to condos or assisted living.

The financing mix reflects this dysfunction. Repeat buyers now have a median age of 62 and frequently use massive equity from previous Vermont homes to outcompete younger buyers reliant on conventional or FHA financing. Meanwhile, the median age of first-time homebuyers has climbed to 40 years old—an all-time high that represents a significant loss in long-term wealth building.

Direct Impact on Vermont’s Workforce and Economy

The equity trap extends far beyond the housing market into Vermont’s economic competitiveness. Employers in the 2025 Vermont Business Climate Survey rated the state’s overall business climate at just 2.86 out of 5, identifying housing affordability and workforce availability as primary constraints on growth.

The connection is direct: businesses cannot recruit the talent they need because potential employees cannot find affordable housing. Major employers across healthcare, education, manufacturing, and hospitality report that job candidates frequently decline offers because they cannot secure housing within a reasonable commute.

The crisis is particularly acute in the construction industry—the very sector needed to build out of the shortage. Carpenters and electricians often cannot afford to live in the towns they serve.

For renters hoping to become homeowners, the situation is dire. In 2019, a renter at median income could afford approximately 50 percent of homes on the market; by 2024, that figure dropped to 33 percent. The number of renters with sufficient income to purchase a median-priced home collapsed by 62 percent—from 24,500 households in 2021 to just 9,320 in 2024.

The Demographic Divide: Wealth Concentrated in Aging Population

Vermont’s equity-rich status is heavily concentrated in the Baby Boom generation. Approximately one-third of all Vermont households—nearly 90,000—are headed by someone aged 65 or older. This demographic maintains a 79 percent homeownership rate.

While this contributes to neighborhood stability, it presents a looming crisis of housing quality and accessibility. An estimated 44,000 households headed by Vermonters aged 55 and up are considered low-income, earning less than 60 percent of the area’s median income. These homeowners are frequently equity-rich but lack liquid capital to maintain aging properties or retrofit them for accessibility.

Approximately 75 percent of Vermont’s housing stock was constructed before 1990, before modern accessibility standards. As the population ages, the rate of ambulatory disability increases from 10 percent for those aged 65-74 to 25 percent for those 75 and older. Without cash flow to install ramps, grab bars, or stairlifts, many equity-rich seniors remain trapped in unsafe environments.

Property Tax Pressure on Paper Wealth

The equity-rich designation becomes particularly complicated when combined with Vermont’s high property tax burden. In December 2025, the Vermont Commissioner of Taxes projected that residential homeowners would face a statewide average property tax increase of nearly 12 percent in 2026. This would bring the cumulative five-year increase to approximately 41 percent.

This creates acute pressure for equity-rich but cash-poor residents, particularly seniors on fixed incomes. While they may own properties valued at $500,000 or more with no mortgage, their property tax bills escalate at rates far outpacing Social Security or pension adjustments.

Vermont’s income sensitivity system attempts to address the inherent unfairness of taxing property value rather than income. However, recent legislative changes through Acts 183 and 454 are fundamentally altering the education funding formula, introducing new complexity. Starting July 1, 2025, the state implemented a statewide adjustment factor to equalize the impact of town-level appraisals.

The system can create “tax cliffs” where modest increases in income trigger disproportionate tax jumps. A household earning $89,999 may pay approximately 2.56 percent of income in taxes, but earning just one dollar more can nearly double net tax obligation on a $350,000 house due to lost eligibility for certain credits.

Supply Crisis: Building Our Way Out

To stabilize the market, Vermont is projected to need between 36,000 and 41,000 new housing units by 2030. Achieving this would require constructing approximately 8,000 homes per year—triple the state’s current output.

The barriers are substantial. The median cost of a new home rose from $388,000 in 2020 to $624,000 by 2025. Even with regulatory streamlining, the private market struggles to produce starter homes at price points affordable to middle-income families.

The Vermont Chamber of Commerce has identified regulatory modernization as the most urgent priority for the 2026 legislative session. Act 250, the state’s landmark land-use law, is frequently criticized for creating redundancies and delays that add significant costs to residential developments. Current proposals seek to streamline permitting, halve review times, and provide exemptions for high-density developments near village centers.

Strategic investments are also targeting infrastructure bottlenecks. A one-time $40 million investment in water, sewer, and stormwater systems is intended to unlock stalled housing projects in town centers. There is growing focus on Accessory Dwelling Units as a way to leverage existing equity-rich properties—allowing homeowners to build small rental units that provide supplemental income while increasing rental stock.

Regional Market Variations

While the statewide narrative focuses on high equity and limited supply, local dynamics vary significantly. Chittenden County remains the most competitive market, where single-family homes often sell for over $540,000. However, by late 2025, even this market showed cooling signs, with homes taking 26 percent longer to sell than the previous year.

A “school district premium” has emerged as a major pricing factor. While statewide median prices grew by roughly 5.8 percent in 2025, specific districts saw double-digit appreciation while others stagnated. This reflects growing willingness to pay premiums for properties in districts with high educational outcomes and reliable infrastructure.

The Homelessness Paradox

The most painful irony of Vermont’s equity-rich status appears in its homelessness statistics. Vermont has the second-highest per-capita rate of homelessness in the country, with approximately 51 per 10,000 residents experiencing housing instability. Between 2019 and 2023, the number of Vermonters experiencing homelessness tripled.

Half of all Vermont renters are currently cost-burdened, paying more than 30 percent of income on housing. One in four pay more than 50 percent. Low-income households, particularly BIPOC Vermonters, are disproportionately affected by the tight market.

As homelessness increases, state spending on emergency housing and healthcare rises, contributing to pressure for higher property taxes. The lack of service-enriched housing for elders with mobility challenges and individuals with mental illness or substance use disorders has pushed social service systems beyond capacity.

What Happens Next

The consensus among economists and real estate experts for 2026 points toward continued rebalancing. Home prices are expected to rise modestly by 2 to 4 percent—a return to sustainable historical norms. Inventory is forecast to increase by 5 to 10 percent as easing mortgage rates draw some sellers back into the market. Mortgage rates are predicted to stabilize in the low 6 percent range, providing slightly more purchasing power than in 2024.

However, the lock-in effect will likely persist until significant life events force sales or new construction begins meeting pent-up demand. The state’s aspiration to build 36,000 units by 2029 remains daunting, requiring what advocates call a shift from a “scarcity mindset” to an “abundance mindset.”

The 2026 legislative session is expected to focus on four core areas: fiscal stewardship to control tax growth, regulatory modernization to shorten development timelines, workforce and housing alignment, and maintaining industry competitiveness.

For Vermont homeowners, the equity-rich designation represents a double-edged sword. While it provides a buffer against financial collapse for the current owning generation, it has created a frozen market that penalizes younger residents, the workforce, and vulnerable populations. Converting paper wealth into a fluid, accessible housing market remains Vermont’s central economic challenge—one that will determine whether high homeownership rates reflect a thriving middle class or an aging population trapped in an increasingly unsustainable status quo.