Vermont housing leaders warn federal funding uncertainty would slow construction, weaken services

Vermont housing officials told the House Appropriations Committee on April 16 that federal funding uncertainty — from continuing resolutions, possible congressional cuts and executive actions — could sharply reduce the state’s ability to build affordable housing and to pay for rental assistance and services.

Polly Majer, director of policy and special projects at the Vermont Housing and Conservation Board, said the state’s housing delivery system rests on three linked pieces: rental assistance, capital to build housing, and social services that help tenants sustain tenancies. “The magnitude of what we’re dealing with is gonna have economic ripple effects through our communities,” Majer said, describing how even a short halt in federal reimbursements would put contractors and projects at risk.

Those risks are immediate and concrete, committee members heard. Majer said a one-day freeze in January would have affected about $55,700,000 in federal funds that VHCB administers and had been committed to projects; 18 of those projects were under construction and the pipeline included work to build roughly 567 homes. She and other witnesses listed specific federal programs, timing windows and local examples to show how cuts or delays would cascade from financing to on-the-ground services.

Why this matters: committee members were repeatedly told that rental assistance is primarily federally funded, and that capital for new construction relies on federal grants stacked with the Low Income Housing Tax Credit (a program that becomes less useful if accompanying federal sources fall). Kathleen Burke, executive director of the Vermont State Housing Authority (VSHA), told the committee the continuing resolution enacted in March funded vouchers at a point-in-time level and, based on the agency’s modeling, “we will serve approximately 320 fewer families this year as compared to a year ago at this very same time.” She said HUD has 90 days to provide final budget numbers and the shortfall stems from voucher costs rising while the CR bases funding on an earlier snapshot.

What witnesses said about programs and dollars:

- Rental assistance: Majer said roughly $81,100,000 in rental assistance entered the state in fiscal year 2024 and that Section 8 and voucher programs are highly dependent on federal appropriations. VSHA confirmed the agency administers about $81,000,000 in federal housing assistance and that approximately $130,000,000 in federal housing assistance comes to Vermont overall (as of 2023 figures cited at the hearing).

- Capital for construction: Majer and others described about $27,200,000 in federal funds flowing into housing production in fiscal 2024. Majer mapped how losing HOME, Housing Trust Fund, or other smaller HUD construction programs — or reductions in congressionally directed spending that had been anticipated for the state — would reduce other public financing and, by extension, the amount of tax credit equity that can be attracted to projects.

- Block grants and recovery funds: Alex Farrell, commissioner at the Department of Housing and Community Development, said the state’s Community Development Block Grant (CDBG) program is about $7 million annually and that the $67 million in HUD disaster-recovery funding for flood-affected areas appears, at the time of testimony, to be on track.

- Program examples and local impacts: Majer used the Cambrian Rise development (Champlain Housing Trust as developer) to illustrate the funding stack: CHT was building 40 deeply affordable homes (Majer summarized 30 at very low AMI and 10 at 50% AMI in the affordable portion), with 10 project-based vouchers attached and 10 units designated for households exiting homelessness. Majer said the project is moving forward with current commitments, but argued similar projects in the future will be much harder to finance without federal capital and vouchers.

- Project-based vouchers and developers: Burke explained why project-based vouchers matter for development: “The project based voucher allows a developer to set aside homes for homeless households… [and] provides to the developer a guarantee of operating income for the number of units that have been committed under that contract.” She said those vouchers enable owners to serve the lowest-income households and to designate units for homeless families.

- Community developers and operating stress: Angie Harbin of Downstreet Housing and Community Development described how community-based developers operate thin-margin portfolios across rural counties and how federal grants and developer fees support both building new units and resident services. She said Downstreet operates about 700 affordable homes and 85 manufactured-home lots across three counties and is pursuing a merger to strengthen capacity. Harbin said the organization has roughly $1,200,000 in federally funded annual operating dollars (about 16% of its annual budget) and warned that lost federal operating or services funding will imperil supports that keep tenants housed.

- Nonprofit network and emergency response: Michael Monti of Champlain Housing Trust said nonprofit developer groups and NeighborWorks organizations have been critical in disaster and pandemic response and that congressionally directed spending and NeighborWorks funding have been important supplemental resources. He noted NeighborWorks funding last year was roughly $1,900,000 to the network and warned that those dollars were uncertain going forward.

What agencies are doing now: witnesses described steps to manage risk if federal funds slow:

- VHCB said it drew down $6,000,000 early in the year to protect projects from an anticipated shutdown, is prioritizing federal draws for active work, and maintains a construction contingency/insurance pool to cover rising costs or supply-chain-driven overruns.

- The Department of Housing and Community Development is preparing an action plan for HUD disaster-recovery funds and said it continues day-to-day coordination with HUD’s regional office.

Requests to the committee and near-term needs: VSHA urged the committee to consider resources that preserve voucher commitments and supports for project-based rental-assistance contracts. Burke also emphasized eviction-prevention work and asked the committee to consider extending funding for the Rental Arrears Assistance Fund beyond May to keep the program operational. Community developers asked the state to consider ways to shore up operating supports or a strategic reserve that could be deployed if federal sources were cut or delayed.

No formal votes or decisions were taken at this hearing. Witnesses urged continued state planning and coordination with federal partners as an uncertain federal budget and potential policy changes play out.

Ending: Committee members scheduled additional hearings and said they would continue to examine federal budget timing, tariff impacts and revenue forecasts. Witnesses offered to supply detailed follow-up materials and to return for further briefings as the federal budget process and HUD allocations evolve.