I'm generally predisposed against looking at government for quick fixes. But I can't not think similar to you on housing. The government has already been dumping trillions of dollars into the housing bubble over the past several decades mainly just bidding up existing stock, putting us here. (the greatest trick Nixonite/Reaganite looters ever pulled was convincing us money "loaned" into the financial industry is distinct from "government spending")
Rather than the disastrous approach of goal-blind subsidized mortgages, that government money needs to be directed to projects that accomplish deliberate policy goals. What VT would seem to need here is low-frills, semi-shared style housing for younger people that haven't really chosen a path in life but will be attracted by the low rent. The market just can't build something like that in VT - if nobody comes, it will be worth nothing. Whereas building the same thing outside Los Angeles will practically guarantee popularity (despite the permit pain), or even just a few hundred miles south as part of the Northeast Megalopolis will be a much surer thing (although more sprawling beige boxes on overwrought postage stamp lawns is still a surer bet, and predictability is the main need of leveraged money)
Also, I feel like there's an analog to your comment about wages in general. General wages were held down so long by MBA cogification, over-management, classism, govt inflation treadmill, etc that now labor in general is too expensive for the free market. Nobody knows how much say working in a chocolate factory should actually pay. And if you're interested in chocolate, you'll probably be more successful starting a website drop shipping someone else's chocolate with your own branding...