The current stable version of the VS Code IDE extension (1.5.1) has a bug when creating a new project.
If the computer name matches the logged in username, it assigns invalid permissions to id_rsa in the created project, then fails with a permission denied error.
The relevant part of the code is
moses/config.py. it feeds
icacls.exe, but icacls will not do the intended friendly name => SID conversion if the string is ambiguous