NLIHC Submits Comments Opposing Proposed OMB Federal Grantmaking Rule; About 500,000 Comments Submitted

By Sarita Kelkar, NLIHC Policy Intern and Renee Williams, NLIHC Senior Advisor for Public Policy 

On May 29, the Office of Management and Budget (OMB) published its proposal to reshape the framework for federal funding awards. The Notice of Proposed Rulemaking (NPRM), entitled “Regulation for Federal Financial Assistance,” would update regulations across federal agencies, including HUD. The scope and nature of the changes have prompted significant concern, with nearly 500,000 comments submitted. An analysis of 52,322 posted comments found that about 95% of comments in the sample opposed the rulemaking. 

NLIHC submitted a comment letter on July 13 describing how “the Proposed Rule’s injection of political ideology, regulatory uncertainty, and confusion into federal financial assistance—including funds for crucial federal housing programs—threatens to make [the affordable housing crisis] worse,” urging for the rule to be withdrawn immediately.  

Background on OMB’s Proposed Rule  

The Proposed Rule would codify the OMB “Uniform Guidance” governing federal funding awards, with substantial revisions, as regulations (as opposed to guidance). This approach centralizes rules governing federal financial assistance at OMB—specifying at proposed 2 C.F.R. 1.205 that the rulemaking focuses on grants and cooperative agreements, though portions of the OMB regulations would apply to federal financial assistance broadly.  

OMB’s changes, if finalized, would apply across the grantmaking cycle, including application, as well as suspension and termination, with an overarching emphasis on ensuring funding recipients do not run afoul of the administration’s policy positions (see Memo, 6/29). For example, the Proposed Rule would, among other changes, require federal agencies to ensure funds are not used to support disparate impact; diversity, equity, inclusion and accessibility (DEI/DEIA); or “gender ideology.”   

NLIHC strongly opposes the Proposed Rule, and is particularly concerned about how, if finalized, the proposed changes would impact federal housing programs, including by creating confusion and uncertainty for federal funding recipients during an affordable housing crisis.   

NLIHC Comment Letter to OMB  

NLIHC’s comments contextualize the Proposed Rule’s anticipated effects against the backdrop of the affordable housing crisis. The letter also raises concerns regarding fair housing, the insufficient comment period, and impacts on nonpartisan voter registration activities.  

Calling for its immediate withdrawal, the letter emphasizes how: 

• The Proposed Rule would insert doubt into federal housing programs key to building and preserving affordable housing.  

  • When grantees’ access to federal funds depends on following vague conditions (e.g., being prohibited from “encouraging” or “facilitating” DEI/DEIA policies and “gender ideology”) that directly conflict with state and local nondiscrimination laws, grantees are in a “double bind” of either possibly losing federal dollars or running afoul of state and local nondiscrimination protections. The letter notes how the nature of the Proposed Rule makes understanding the implications for each federal housing program difficult.  

  • Under this rulemaking, the predictability of federal funding—a characteristic grantees rely on for their programs—is lost when grants can be arbitrarily terminated for failing to comply with “the national interest.”  

• Fair housing would be directly undermined by this rulemaking. Under the “Fair Housing Act” (FHA), all federal agencies have an obligation to affirmatively further fair housing (AFFH). The Proposed Rule would actively impede this by, among other things: 

  • Prohibiting use of disparate impact liability and erroneously claiming that disparate impact liability, which has been recognized by the U.S. Supreme Court as a tool to uncover discriminatory intent, mandates discrimination.  

  • Threatening future funding for grantees who have historically used disparate impact liability in the past.  

• The Proposed Rule allots a comment period of 45 days that runs counter to HUD requirements. Since the rulemaking seeks to amend HUD regulations, where a 60-day comment period is required, the NPRM fails to provide sufficient time for public input.  

  • NLIHC’s comments also noted that Senator Susan Collins (R-ME) previously made a request to OMB to provide additional time for public comment (see Memo, 7/13), in her own letter expressing concerns about the impacts of the Proposed Rule on scientific research as well as on small and rural communities. 

• Federal funds would be prohibited from going toward nonpartisan voter registration activities. While nonfederal funds could still be used for this purpose, the Proposed Rule raises concerns about chilling participation in lawful voter registration activities and confusing grantees whose programs have voter registration obligations.  

Read NLIHC’s comment letter here.  

Read the Proposed Rule. 

Read the National Council of Nonprofits explainer resource.   

Read NLIHC’s resource regarding possible impacts on housing programs.  

Read additional analysis of the rule here.