(The Center Square) — Vermont is pumping more than $55 million into boosting its housing stock amid a shortage of homes that officials say is hurting the state’s economy.

State Treasurer Mike Pieciak said the allocation is the largest housing investment under the “10% in Vermont ” program. He said it will leverage an estimated $340 million in new capital to “support” the cost of building 1,100 housing units.

“Our lack of housing is holding back the full potential of the Vermont economy,” Pieciak said in a statement. “More housing means critical occupations like nurses, teachers, and first responders will be able to find homes in the communities they serve and businesses will be able to hire new workers to expand their businesses.”

Under the disbursement, at least $50 million will be diverted to the Vermont Housing Finance Agency, $5 million will go to the Vermont Economic Development Authority, and $500,000 to the Northern Forest Center, the treasurer’s office said.

“Even though we’ve seen record investments and construction over the past seven years, we know there’s much more work to do, which is why initiatives like this are so crucial,” Gov. Phil Scott said in a statement.

Under the program, the Treasurer’s office can spend up to 10% of the state’s cash deposits on economic development and job creation in the form of low-interest loans.

The state’s average daily cash balance has grown substantially in recent years, Pieciak said, which allowed his office to significantly increase the amount available for investment.

Of the $50 million allocated to the Vermont Housing Finance Agency, $14 million is set aside for new affordable housing; another $14 million for “economic impact housing” focused on supporting Vermont’s economic and employer housing needs, and another $6 million for small and emerging developers who build housing in “underserved” communities.

At least $6 million is earmarked for storm resilience and sustainable innovation, focusing on homes and buildings impacted by the devastating July flooding.

Vermont has some of the highest housing costs in the nation, with the average price of a single-family home increasing to $425,000 in August, according to the Vermont Association of Realtors latest report. That’s a 20% increase over the same month last year, the association said.

Meanwhile, closed sales continue to see double-digit declines, falling by nearly 28.4% since last year. There were 555 single-family residential home closings in August, the report notes.

Pieciak cited recent data showing that Vermont’s housing vacancy rate is one of the lowest in the country while median rents are some of the highest, which is a key driver of homelessness.

“So more permanent housing is critical to reducing homelessness and supporting Housing First policies for effective mental health and substance use disorder treatment,” he said.