Subsidies or Shovels? Vermont Grapples with $18.25M Ask to Rescue Failing Voucher Program
The proposal for a major, long-term state intervention lands at the center of a fundamental policy debate: is Vermont's housing crisis best solved with more subsidies or with more supply?
With an immediate December funding crisis averted by federal action, Vermont lawmakers are now facing a much larger and more complex question: should the state spend $18.25 million of its own money to subsidize a failing federal housing program?
The request was the centerpiece of a November 5, 2025, presentation to the House Committee on General and Housing. Public housing authorities (PHAs) asked the state to fund 1,233 federal housing vouchers that are currently authorized but have lost their federal funding.
This $18.25 million “ask” is not a one-time emergency request. It is a proposal for a major, long-term state intervention, and it lands at the center of a fundamental policy debate: is Vermont’s housing crisis best solved with more subsidies or with more supply?
The Root of the Request: A “Downward Spiral”
The reason Vermont has 1,233 unfunded vouchers is a “downward spiral” caused by a 20-year-old federal funding formula that systemically punishes states like Vermont.
Here is how it works:
A Flawed Federal Formula: In 2003, the U.S. Department of Housing and Urban Development (HUD) changed its renewal funding formula. Since then, funding has been based on the number of vouchers in active use (leased), not the total number of vouchers authorized (the number a PHA is supposed to have).
A Massive National Problem: This seemingly technical change has had massive national consequences. A HUD policy analysis notes this shift “has contributed to the loss of funding for more than 250,000 authorized housing vouchers“ nationwide, creating a structural trap for high-cost, low-vacancy markets.
Vermont’s “Spiral”: Vermont is a perfect example of this trap. The 2025 Vermont Housing Needs Assessment identifies a statewide rental vacancy rate of 3%, with Chittenden County’s rate estimated at just 1%.
The Penalty: Because so few apartments are available, many Vermonters who receive a voucher cannot find a landlord to rent from (a low “success rate”). When those vouchers go un-leased, the 2003 federal formula interprets this as low demand and cuts Vermont’s funding the next year. This forces PHAs to “shelve” vouchers, which in turn leads to fewer leased vouchers, which triggers more funding cuts.
The $18.25 million request is, in effect, an ask for the State of Vermont to use its own tax dollars to plug the local hole created by this well-documented, systemic federal failure.
The Core Policy Debate: Two Competing Solutions
The proposal forces lawmakers to choose between two vastly different theories of how to solve Vermont’s housing affordability crisis.
Theory A: The Demand-Side Solution (Subsidies)
This request is gaining traction with housing advocates and key lawmakers who see it as a necessary state-level intervention.
The Argument: Rep. Marc Mihaly (D-Calais), who chairs the House Committee on General and Housing, has already indicated that state funds will likely be necessary to address the shortfall. Proponents argue this funding is a critical lifeline to prevent a surge in homelessness, which has already increased 200% in Vermont since 2020. From this view, the state has a moral obligation to provide immediate stability and keep these 1,233 families and individuals housed.
The Data: The legislative presentation shows this request would be distributed across nine different PHAs, including funding for 635 vouchers at VSHA and 103 at the Burlington Housing Authority, totaling $18,254,911.80.
Theory B: The Supply-Side Solution (Construction)
The opposing policy framework, championed by Governor Phil Scott’s administration, is that the root problem is not a lack of subsidies, but a critical lack of housing supply.
The Argument: This side argues that pouring $18.25 million more in rent subsidies into a 1%-vacancy market will not create a single new apartment. Critics, such as the Ethan Allen Institute, argue this will simply act as an “accelerant,” inflating rents as more subsidized dollars chase the same, tiny pool of available housing.
The Policy: The administration’s solution, detailed in initiatives like Executive Order 06-25, focuses on deregulation and streamlining permits to build the 30,000-40,000 new homes the state estimates it needs by 2030.
What Happens Next?
The November 5 hearing has presented lawmakers with a fundamental, ideological choice for the upcoming legislative session.
The House Committee on General and Housing must now weigh these two competing philosophies. They will have to decide whether to use state funds to provide immediate relief by funding the 1,233 vouchers—effectively creating a state-level bailout for a flawed federal program. Or, they must reject this demand-side approach and focus state resources on the supply-side goal of cutting regulations to spur new construction, which proponents argue is the only long-term solution.