There was a glut of housing pre-covid in this area where houses had literally been sitting on the market for years in some cases. It's amazing how picky we were able to be when shopping around for housing, listing agents would send multiple follow up emails and phone calls for a house we saw that we had really had no interest in buying, trying everything they could to make it seem appealing. Now its get us your best and final 3 days after it's listed.
Many service industry, blue collar, etc were still priced out even back pre 2020. (At least in Manchester/Dorset,etc) There were not a ton of long term rentals, but definitely some, those have seemed to vanish with owners wanting to cash out on the market. Most service industry from here live over the border in ENY--Granville, Greenwich, Hoosick Falls when there are rentals and much cheaper housing.
The 250k-500k homes pre covid are the real killer. Those were still in reach for many locals around here--Teachers, law enforcement, steady 2 income family, small business owner, Orvis workforce, etc. Those are now 550k-1Mil at 7% with about half going to CASH buyers. Some of the places where new students have come from in my kids classes--Seattle, Boston, NYC, NJ, DC, Florida, Minneapolis, Los Angeles, CT. They had to add a third class in my daughters 5th grade. The family from Seattle literally just did a Google search and moved here, never had been to VT before. They did a zoom tour of house and bought it no inspection, obviously sight unseen(well in person at least), drove cross country and realized the house had no basement when they went inside and tried to find the door to it. When you are going against 10 offers, you might miss some stuff you would think is standard.(I'm sure there are plenty of remote buying stories like that) Hard to compete in a small town with limited inventory when the buyer pool is national.
There has definitely been a ground swell to get affordable housing options has been mentioned by you and Alex and others. Zoning, Height restrictions, red tape stuff always seems to pop up thought before even getting off the ground.