What you need is to include a single line to tell cloud-init to append to sshd_config rather that replace the whole file, i.e append: true.
So your cloud_init.cfg file will look like this:
- path: /etc/ssh/sshd_config
The ChrootDirectory must contain the necessary files and directories to support the user's session. For an interactive session this requires at least a shell, typically sh(1), and
basic /dev nodes such as null(4), zero(4), stdin(4), stdout(4), stderr(4), and tty(4) devices. For file transfer sessions using SFTP no additional configuration of the ...