Vermont currently spends more than $34 million each year in state tax dollars on its emergency motel program, a winter-season system designed to keep people sheltered during extreme weather. Legislative reports show that costs for General Assistance Emergency Housing routinely reach the mid-thirty-million range annually, driven by hotel rates, transportation, and administrative overhead.

At the same time, the federal government is changing how it funds homelessness programs. A recent executive order — “Ending Crime and Disorder on America’s Streets” — and HUD’s newly released Continuum of Care (CoC) funding notice signal a decisive national shift. While some national commentators have described these changes as cuts to “Housing First,” the full federal CoC funding pool is actually increasing from roughly $3.6 billion to $3.9 billion. The difference is in how the money must now be used.

For Vermont, the change presents a practical question with significant fiscal implications: Will the state continue spending tens of millions of your tax dollars on motel rooms, or will it adapt to the new federal model and redirect those savings to broader statewide needs?

A National Pivot Toward Treatment, Stabilization, and Public Safety

The July 2025 executive order reframes homelessness as a public-safety, public-health, and behavioral-health crisis. It instructs federal agencies to support communities that reduce encampments, expand treatment capacity, partner with law enforcement, and address open drug use. The policy underscores that public disorder is a legitimate concern and directs federal tools toward communities actively working to reduce it.

HUD’s accompanying Notice of Funding Opportunity (NOFO) reflects that framework. Among the most significant changes:

• A cap on permanent housing funding: No more than 30% of a community’s CoC renewal budget may be allocated to Permanent Supportive Housing, Rapid Rehousing, or joint housing projects.
• Prioritization of transitional housing (TH) with structured programming.
• Expansion of Supportive Services Only (SSO) projects, including behavioral-health outreach, co-responder programs, and case management.
• Incentives for treatment-linked models, on-site services, and recovery support.
• Scoring advantages for communities that reduce unsheltered homelessness, coordinate with public safety, and comply with best practices for encampment response.

Importantly, the NOFO does not eliminate permanent housing. It rebalances the system toward treatment-first pathways, transitional programs, and measurable outcomes.

Federal Funding Is Increasing — and Vermont Could Capture More of It

The total federal funding available through the CoC program is rising by roughly $300 million. States that align with the new HUD framework may receive more funding than before, while states that continue relying on models outside the new scoring structure may find themselves at a competitive disadvantage.

This is where Vermont’s current spending pattern becomes relevant. The state’s emergency motel program is almost entirely funded with state dollars, not HUD dollars. Unlike transitional or recovery housing models, the motel program does not fit into the federal categories HUD is now incentivizing.

By shifting toward HUD-eligible transitional and treatment-based programs, Vermont could:

• secure new federal funds for shelter operations, services, and building conversions
• significantly reduce reliance on state-funded motel rooms
• reinvest the $34+ million currently spent on emergency hotels into broader statewide needs

This dynamic — budgeting by substitution — is standard practice across state governments when federal rules shift.

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Vermont’s Existing Building Inventory Offers a Strategic Advantage

Another factor sets Vermont apart: the state already owns a substantial inventory of buildings suitable for transitional and treatment-linked uses. According to the Department of Buildings and General Services’ 2025 Space Book, Vermont manages more than 3 million square feet of building space, including approximately 268,000 square feet listed as vacant.

Several properties stand out:

Windsor – Southeast State Correctional Facility Campus

With more than 90,000 square feet of rentable space, including dormitories, educational facilities, workshops, and agricultural buildings, the Windsor campus could be adapted into a regional transitional housing and recovery center. Its existing infrastructure supports exactly the kinds of services HUD now funds: treatment, case management, employment training, and structured housing.

Burlington – Zampieri State Office Building

This 82,500-square-foot facility in downtown Burlington is listed as vacant. It could serve as a multi-purpose homelessness services hub, combining SSO outreach, day programs, behavioral-health services, and transitional beds. Its location aligns with HUD’s focus on reducing unsheltered homelessness in urban centers.

Waterbury – State Office Complex

Already home to major human-services and public-safety agencies, the complex could support expanded stabilization units, treatment beds, co-responder teams, or short-term transitional programs. The NOFO emphasizes coordinated campuses where multiple systems work together.

Scattered Vacant State Offices

Buildings in Montpelier, Middlesex, Rutland, and other locations, typically ranging from 2,000 to 6,000 square feet, could be repurposed for family stabilization units, women’s transitional housing, or domestic-violence recovery programs — all high-scoring categories.

Correctional “Halo” Properties

Workshops, barns, and standalone service buildings near active correctional facilities could support re-entry transitional housing or workforce-training programs, again aligning with HUD’s scoring emphasis.

Reducing Encampments and Improving Outcomes

The combination of the Executive Order, the U.S. Supreme Court ruling on Grants Pass v. Johnson, and HUD’s NOFO sets a clear federal expectation: communities should reduce unsheltered homelessness, address street disorder, and expand access to treatment. Vermont’s relatively small homeless population means that even moderate expansions in transitional and recovery capacity could produce measurable reductions in unsheltered counts — a key factor in competitive federal scoring.

If Vermont adapts:

• the state could replace much of its motel-based system with federally funded programs
• more treatment and stabilization capacity could reduce ER burden
• coordinated public safety and outreach responses could reduce encampments
• the state could reduce its annual motel spending and redirect millions elsewhere

A Fiscal and Policy Choice Ahead

Vermont faces a straightforward decision. The state can continue spending more than $34 million annually in General Fund dollars on emergency motel placements. Or it can realign its homelessness programs with new federal priorities and transition that cost into HUD-funded, treatment-linked, structured housing options.

The state owns the buildings.
The federal government is offering the funding.
The need — behavioral health, recovery, and safe transitional housing — remains significant.

The question for policymakers is whether Vermont will choose to adapt quickly and reduce Vermonters’ tax burden, or maintain a parallel system that leaves federal funding opportunities by the wayside.

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Dave Soulia | FYIVT

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