Nation's Fastest-Shrinking State: Vermont Loses 0.3% of Population Amid Aging Crisis and Housing Stagnation

Vermont has experienced what demographers call “negative natural change”—more deaths than births—every year since 2016, and new housing is blocked by regulations from the days of rotary phones.

Vermont lost residents for the second year in a row, with new Census Bureau estimates showing a 0.3% decline between July 2024 and July 2025—the highest percentage decrease among all U.S. states. While national attention has focused on migration patterns, the story in Vermont is more fundamental: deaths are outpacing births every year, and the state can’t build enough housing to attract the newcomers needed to offset those losses.

The Mathematics of Natural Decline

Vermont has experienced what demographers call “negative natural change”—more deaths than births—every year since 2016. Between 2022 and 2023, the state saw 5,072 births against 6,876 deaths, creating a natural loss of 1,804 people. Preliminary 2024 data showed a similar natural decrease of 1,723.

This isn’t a temporary trend. Vermont has the third-highest median age in the country at 43.5 years. As the Baby Boom generation continues to age, demographers expect this natural decrease to accelerate. Without a significant and consistent influx of new residents to offset these losses, the total population must contract—it’s simple arithmetic.

To maintain zero growth, Vermont needs nearly 2,000 new residents every year just to break even.

Housing Development in “Paralysis”

The only way to offset natural population loss is through migration—people choosing to move to Vermont. But that requires housing, and Vermont’s housing production has been characterized by state leaders as being in a state of regulatory paralysis.

Governor Phil Scott has formally criticized what he calls “reflexive opposition” and “picayune process objections” from interest groups as a form of “obstruction” that creates “endless opportunities for delay.” He argues that even when developers secure permits and financing for hundreds of units, expensive infrastructure requirements often prevent projects from reaching completion.

The regulatory friction comes from multiple sources. Act 181 was designed to modernize Vermont’s land-use laws, but feedback indicates that “Tier 1” adoption—areas that would be exempt from Act 250 review—is lower than anticipated because developers fear inheriting old, restrictive permit conditions from prior decades.

Meanwhile, a new “Road Rule” taking effect in 2026, intended to limit forest fragmentation by regulating roads and driveways longer than 800 feet, is seen by business advocates as a “massive new jurisdictional trigger” that could further discourage development in transitional areas planned for growth.

The Numbers Don’t Add Up

Vermont currently permits only 2,654 housing units annually, while experts suggest 7,500 or more are needed to stabilize the market. The Vermont Housing Needs Assessment projects the state needs between 24,000 and 36,000 new homes by 2029.

When regulatory complexity prevents this level of construction, net migration cannot reach the levels necessary to cover the natural birth-to-death gap. The result is the 0.3% population decline reported in early 2026—a logical outcome of a system where new residency is suppressed by what business leaders call a “cloudy” policy environment.

The Labor Force Feels the Squeeze

The demographic squeeze is most visible in Vermont’s labor market. The state’s labor force dropped below 350,000 for the first time in 29 months in December 2025, according to Commissioner Kendal Smith.

This decline is particularly concerning because it’s happening despite Vermont hovering near record-high total population levels. The composition of that population is shifting away from working-age residents toward retirees. Vermont ranks 50th nationally for residents aged 25-44 as a percentage of the population.

The state’s unemployment rate held at 2.6% in December, but this figure can be misleading. The unemployment rate is a ratio of those looking for work to the total labor force. If workers retire or leave the state, the unemployment rate may remain low even as the actual number of workers declines.

Geographic Inequality

The population changes aren’t distributed evenly across Vermont. Growth has historically been concentrated in towns within a 50-mile radius of Burlington. Chittenden County remains the population hub with 170,000 residents and a 0.8% growth rate since 2020.

Conversely, counties like Rutland and Bennington have seen absolute declines—1,219 residents and 1.2% respectively. This “two Vermonts” dynamic means that statewide statistics often mask severe rural depopulation occurring in southern and northeastern parts of the state.

The Housing Crisis in Numbers

The severity of Vermont’s housing shortage is reflected in its homelessness statistics. Between 2019 and 2023, the number of Vermonters experiencing homelessness tripled, giving the state the second-highest rate nationally.

The Vermont Housing Needs Assessment found that half of all renters in the state are “cost-burdened,” meaning they pay more than 30% of their income on housing. One in four renters pay more than 50% of their income on housing.

This financial strain directly correlates with population decline, as lower-income residents and younger families—the very demographic groups Vermont needs to offset its aging population—are priced out of the state.

The CHIP Response

In response to the crisis, Vermont has launched the Community and Housing Infrastructure Program (CHIP) under Act 69, authorizing up to $2 billion in infrastructure investment through 2035. The program specifically targets the upfront costs of water, sewer, and roads that often prevent small developers from pursuing housing projects.

The mechanism allows towns to borrow for these improvements and repay the debt through the tax increment generated by the new housing, theoretically avoiding increases in local property taxes. However, the program’s success depends on whether it can overcome the regulatory barriers that have slowed development.

Changing Demographics

Despite the overall population decline, Vermont is becoming more diverse. Between 2010 and 2022, the white (non-Hispanic) population share dropped from 94.4% to 91.9%, while the Hispanic/Latino population grew the most, increasing by 5,566 individuals.

Projections for 2025-2029 suggest that Black households will rise by 38%, Asian households by 36%, and Hispanic households by 25%. This diversification represents a critical component of the state’s potential demographic recovery, as younger, more diverse families could fill the vacuum left by retiring Baby Boomers.

The Fiscal Dimension

Governor Scott’s January 2026 budget address framed the situation as a fiscal “pincer.” Federal funding that supported programs during the pandemic is shrinking, just as costs for healthcare, education, and energy are escalating.

With state spending up more than $3 billion in five years and a shrinking tax base, Vermont faces pressure to either raise taxes or cut social programs—both of which could further accelerate population loss.

What Happens Next

Vermont’s demographic trajectory depends on whether the state can solve its housing production problem before natural population decline becomes entrenched. The CHIP program represents the most significant intervention to date, but its success requires coordination between state agencies, municipal governments, and private developers.

If Vermont cannot increase housing production to at least 7,500 units annually, migration will remain insufficient to offset natural losses. The state would then face a self-reinforcing cycle: fewer working-age residents mean a smaller tax base, which constrains infrastructure investment, which limits housing development, which prevents migration—leading to further population decline.

The next critical milestones will be the 2026-2027 housing permit data and whether towns successfully implement CHIP projects. Population estimates will continue to be released annually by the Census Bureau, but the underlying trends—births, deaths, and migration patterns—provide earlier indicators of whether Vermont has broken out of its demographic pincer or settled into long-term contraction.