State housing officials warn federal funding cuts could stall projects, reduce vouchers and services

State housing officials told the House General and Housing Committee on April 8 that potential federal funding cuts and federal staffing disruptions could sharply disrupt Vermont’s integrated housing delivery system, leaving fewer affordable units, fewer vouchers and reduced social services for households with the greatest needs.

Polly Major, director of policy and special projects for the Vermont Housing and Conservation Board, told the committee that a recent agency review found $55,700,000 in federal funds had been committed to projects but not yet disbursed, and that 18 projects were actively under construction — creating 567 units, 162 of them intended for people experiencing homelessness — with another 13 projects dependent on those federal dollars getting paid out.

The warning grew from an overview of how Vermont’s housing system depends on three interlocking components: rental assistance, capital to produce units, and social services. "Each of these legs of the stool leverages and uses federal dollars," Major said. She and agency partners said cuts could undercut all three legs and create cross-cutting failures: fewer homes built, vouchers left unused because people can’t find housing, and a loss of services that help tenants sustain tenancies.

Why it matters: committee members were shown specific program and funding figures to explain how federal actions in coming months could ripple through state- and locally-administered programs. Major and other witnesses laid out a timeline of risk tied to federal actions this year — from a continuing resolution enacted in March through possible reconciliation-driven program reductions in summer and discretionary budget decisions that will be resolved when a new federal budget takes effect Oct. 1 — and described immediate operational risks if federal agencies lack staff to process reimbursements.

Key program stakes - Rental assistance: Major and Kathleen Burke, executive director of the Vermont State Housing Authority, described rental assistance as heavily federally financed. Major said about $81,100,000 in federal rental-assistance funds entered Vermont in federal fiscal 2024. Burke said the Vermont State Housing Authority administers roughly $81,000,000 in rental assistance and serves approximately 9,000 households. Based on current funding projections, Burke said the housing authority expects to serve about 300 fewer households this fiscal year than in the prior year.

- Production financing: Major said federal funds that support housing production in FY 2024 were about $27,200,000 for funds the agencies administer, and that reductions in HOME, the Housing Trust Fund (HTF) or other federal capital sources would widen financing gaps. Major described a Burlington development (a mixed project involving Champlain Housing Trust and Cathedral Square) that will produce 40 new rental homes, including deeply affordable units and 10 project-based vouchers; she said removing rental-assistance or HOME/HTF dollars from the funding stack could create multimillion-dollar financing shortfalls and force higher rents or the loss of units set aside for people exiting homelessness.

- Services and Medicaid ties: Major and Burke stressed that supportive services (often funded via Medicaid) are essential for many subsidized units to succeed. Major summarized the delivery system as "rental assistance to help pay for those homes; capital for construction to do that unit generation; and social services to help households succeed in housing." Burke noted specific targeted programs that rely on case management and Medicaid funding and warned that cuts or policy changes that limit services would jeopardize the long-term viability of some units.

Other programs and state-level allocations - HOME: Witnesses said HOME is especially vulnerable to discretionary funding cuts. VF agencies said HOME had been used at roughly $3,000,000 annually as a stable state allocation used to leverage tax credits.

- CDBG and CDBG-DR: The Department of Housing and Community Development (DHCD) staff reported a regular Community Development Block Grant allocation of about $7,400,000 and described four grant categories (accessibility, planning, implementation, scattered-site/homeowner repair). DHCD also described a $67,800,000 Community Development Block Grant - Disaster Recovery allocation tied to the 2023 flooding; HUD has advised the state to move quickly to program those funds, and DHCD said HUD has assigned about $54,000,000 of that award to Washington County and the town of Johnson and roughly $13,000,000 to other parts of Vermont.

- LIHEAP and other federal staff cuts: Major and others raised staffing disruptions at federal agencies as an immediate operational risk. Major cited recent layoffs that affected staff administering low-income heating assistance; DHCD and other witnesses said reduced federal staffing could delay grant agreements and reimbursements, blocking state disbursements even where federal program authority exists.

Tax credits, markets and tariffs Maura Collins, executive director of the Vermont Housing Finance Agency, and other witnesses described risks in the tax-credit and mortgage markets that undergird construction and homeownership programs. Collins said the median income of residents in federal tax-credit properties in Vermont is about $17,000 a year and that roughly 9,000 tax-credit apartments exist in the state (of about 15,000 government-assisted apartments overall). The state receives roughly $30,000,000 a year in the competitive (9%) low-income housing tax-credit allocation, officials said.

Witnesses warned that changes to corporate tax policy or to investor demand could lower the price investors pay for tax credits, reducing the private equity that currently finances much affordable housing. They also said tariff discussions and supply-chain volatility are already prompting developers and suppliers to build higher contingencies into bids; one national estimate cited to the committee said about 7.3% of residential construction materials are imported and that tariffs could add $7,500–$25,000 to the price of a home nationally.

Longer-term financing: bonds, Fannie/Freddie and mortgage markets Collins and VHFA staff discussed possible changes to the federal role in the secondary mortgage market and the tax status of housing finance bonds. They said an elimination of tax-exempt bond advantages or a privatization or different federal posture for Fannie Mae and Freddie Mac could raise financing costs for mortgages and for state housing finance agencies' lending programs; VHFA said roughly 70% of its mortgages used tax-exempt bonds in the prior year and warned that loss of tax-exempt status or changes to the secondary market could push up costs for low- and moderate-income homebuyers.

Policy risks flagged by witnesses Witnesses summarized policy proposals now discussed at the federal level that could affect tenants: stricter work requirements, elimination of mixed‑status family eligibility rules for some programs, and changes to Housing First practices that couple housing with voluntary supportive services. Kathleen Burke characterized those as speculative policy possibilities under discussion at the federal level and emphasized the difficulty of predicting outcomes without enacted federal policy.

Questions, next steps and state coordination Committee members and witnesses discussed steps the state can take to track and respond to unfolding federal developments. Agencies said they are expediting drawdowns where possible, maintaining supplemental funding pools to close project gaps, and coordinating through the state’s housing recovery working group. Witnesses offered to provide the committee with off‑session briefings as federal budget and policy actions become clearer.

"We like to think about our housing delivery system...as a 3 legged stool," Major told the committee, summarizing the interconnected nature of rental assistance, production finance and services. Committee leadership and agency staff said they would continue to report updates to the committee and explore options to prioritize limited state resources if federal funding is reduced.

Ending: Witnesses left the committee with shared concerns and an offer to return with updated figures and policy recommendations as federal actions (continuing resolutions, reconciliation, and the FY 2026 budget process) evolve.