Government Shutdown Now into Third Week, Impacts Housing Programs and Tenants

Parts of the federal government have now been shut down for over two weeks, as President Trump continues to insist Congress significantly increase funding for a southern border wall. When the new Congress was sworn in on January 3, House Democrats, now in control of the chamber, quickly moved to end the shutdown by voting on two legislative proposals to fund the government. The House first passed, by a vote of 241-190, a spending package that includes six of the seven remaining FY19 spending bills, including those that fund affordable housing programs administered by HUD and USDA (See NLIHC’s January 2 Update). The House then passed, by a vote of 239-192, a stopgap funding bill for the Department Homeland Security (DHS) that would last through February 8. The DHS spending bill has proven to be the most controversial since it includes funding for the border wall.

Senate Majority Leader Mitch McConnell (R-KY) will not bring the two bills up for a vote in the Senate, however, because President Trump has said he will veto both. Congressional leaders met with President Trump on January 4 in the hopes of reaching a deal to reopen the federal government, but those talks were unsuccessful. According to Senate Democratic Leader Chuck Schumer (D-NY), President Trump threatened to keep the government closed for “months or even years” until he gets his desired wall funding.

Lawmakers and the White House later met over the weekend to again negotiate an end to the shutdown, however those talks produced no sign of a potential compromise. House Democrats are now planning to bring each spending bill included in the House package up for a vote individually.

Shutdown’s Impact on HUD

HUD sent letters to 1,500 landlords on January 4 clarifying what activities will continue to take place during the first 30 business days of the shutdown and how to prevent the eviction of thousands of tenants who live in homes covered by the Section 8 Project-Based Rental Assistance program or Section 202 (for the elderly) and Section 811 (for people with disabilities) programs. According to one of the letters, HUD will continue to make payments under Section 8 contracts, rent supplement contracts, Section 236 agreements, and Project Rental Assistance Contracts (PRAC) on an as needed basis, but only if HUD has available budget authority from prior year appropriations or recaptures. The letter also states that owners of properties with FHA insured mortgages or 202/811 Capital Advances may submit requests for releases from their reserve for replacement accounts to cover funding shortfalls caused by non-payment of monthly rental subsidy. A Washington Post article states that HUD spokesman Jereon Brown says “[HUD] budget and contract staff are ‘scouring for money’ to figure out how to fund the contracts on an interim basis.”

HUD staff have indicated to NLIHC that while resources for project-based assistance are sufficient for January, funding becomes more uncertain if the shutdown lasts beyond this month. If that were to occur, HUD would likely enter short-term contracts or short-fund project owners. Short-term renewals and short funding is disruptive to administrative staff work and destabilizing for private owners and investors in PBRA properties.

NLIHC has also learned that HUD can provide sufficient funding to PHAs to maintain all vouchers in use through January and February, and similarly to fund public housing operations through that time. PHAs will, however, be delayed in receiving funding related to the public housing capital fund to help address pressing capital needs, putting low-income tenants at risk. Additionally, PHAs — particularly smaller PHAs with fewer funding reserves available to them - may not have adequate funding to maintain their own operations.

Shutdown’s Impact on USDA Housing

In rural America, the USDA direct loan programs will not issue any additional funds, including Section 504, 514, and 502.  USDA’s shutdown plan has noted that banks are unlikely to close on these loans until the government shutdown ends, delaying homeownership at best and possibly forcing sellers to look elsewhere. It is not yet clear whether USDA will continue paying rental assistance or vouchers for low- and very low-income tenants. 

NLIHC will keep you updated on the latest news related to the shutdown and its impacts on affordable housing.