UPDATE: Government Shutdown will Impact Crucial HUD & USDA Programs

By: Diane Yentel and Zachary Johnson


*This post updates our article from October 1, and includes new information on HUD and USDA Rural Housing Service programs and our analysis of what Congress and the Administration will do to end the political stalemate. 

For the first time in 17 years, the federal government is partially shutdown as of 12:01 a.m. on October 1. HUD offices officially closed at 1:30 p.m. Tuesday afternoon – at that time, 96% of HUD’s workforce were furloughed, with only 349 out of 8,709 employees remaining on board until the government reopens. All 80 of HUD’s field offices are closed. 

Impact on HUD programs

A limited number of HUD programs will continue to operate during the shutdown, having been deemed necessary to preserve human life and protect property. However, due to minimal staff availability HUD stakeholders should expect substantial delays. The exempted activities include:

  • FHA will continue closings on those multifamily developments with firm commitments that have a scheduled closing during the shutdown period, and closings on final endorsements that have critical external deadlines.
  • Disaster Recovery Assistance Programs funded through multi-year appropriations can continue to be drawn down.
  • Homeless assistance grants, supportive housing for veterans, and Housing for Persons with AIDS (HOPWA) will continue to be funded.
  • The Office of Single Family Housing (OSFH) will continue servicing FHA-held notes and mortgages as well as ensure the continuity of FHA’s REO disposition process. OSFH will also continue endorsing new loans to support the U.S. mortgage market.
  • Ginnie Mae is able to continue much of its work.

Additionally, HUD will be able to continue processing contract payments and renewals for housing choice vouchers, certain project-based rental assistance contracts, Section 236 preservation contracts, HAP payments, and McKinney-Vento contracts through the month of October. Public Housing Authorities should have received their October funding September 30, so they likely have enough funds to maintain programs through the month.

All other HUD programs will cease during the shutdown. HUD will only be able to approve closings for mixed finance deals on an emergency basis. Funding requests for Tenant Protection Vouchers (TPVs) for demolition or disposition of public housing properties or Multifamily prepayments or opt-outs will not be processed. Housing inspections cannot be conducted. Localities will be unable to draw down additional funding from the CDBG and HOME Investments Partnerships Programs. All fair housing programs will be halted. For more information, read HUD’s full contingency plan for operations under a shutdown.

Impacts on USDA Rural Development: Rural Housing Services

Only 12 employees of USDA Rural Housing service are exempted to work during the shutdown. All State Directors and staff are non-exempted, effectively closing all field offices.  The 12 active employees are in the St. Louis Centralized Servicing Center; they will maintain financial system updates, cash remittances and disbursements, and the processing of customers’ funds. No program activities will continue except those “preserving the government’s property”—the $190 billion loan portfolio and other assets. Programs under no-year appropriations (RCDI Grants, Section 521, RMAP, etc) will not continue without appropriation, providing only for “performance of critical contract obligations.” No rural housing loans or guarantees will be issued.

As the shutdown continues, construction will continue to back up and closing on Single Family Housing loans and guaranteed loans will be delayed. USDA warns that an extended shutdown will have negative economic ramifications and further limit the availability of affordable housing.

Next Steps

As to the big question of how long the shutdown will last and how it will be resolved, it is really anyone’s guess at this point. We are in uncharted territory in terms of government shutdowns and Congressional relations. The House and Senate are at a complete impasse, with the Senate (and the Administration) insisting on a “clean” Continuing Resolution (CR) to fund the federal government at current levels through November 15, and the House passing legislation that would tie a CR through December 15 with various attempts to defund or delay the Affordable Care Act, or Obamacare.

There is a real possibility that the shutdown will last significantly longer than a couple of days. On September 30, Congress eased the pressure to reach a swift deal by unanimously passing legislation (which President Obama immediately signed) to ensure the military will continue to receive paychecks during the shutdown period. Separate financing mechanisms for Social Security, Medicare and other sensitive programs mean they are protected from the appropriations shutdown. Veteran’s Affairs officials have said that veterans’ benefits can be processed normally for another two-to-three weeks. Given this, it’s possible that the shutdown will be in place for at least a week and possibly longer. Another item to consider is that in just over two weeks we reach the limit of the current debt ceiling, making it very possible that these two issues become one large battle.

More and more Republicans are publicly questioning Speaker of the House John Boehner’s (R-OH) strategy, and are beginning to call for a vote in the House on a clean CR. Such a measure would  likely pass if brought for a vote.  However, as of this writing, Speaker Boehner insists that he will not bring such a bill to the floor for a vote. Instead, the latest House strategy has been to try passing smaller funding bills and sending them piecemeal to the Senate. Senate Majority Leader Harry Reid (D-NV) has said that these bills will continue to be dead-on-arrival in the Senate.

The Enterprise policy team will continue to monitor the shutdown’s impact on affordable housing tenants, owners and operators over the coming hours and days. We will provide on the @the Horizon blog and via the following Twitter accounts: @E_HousingPolicy and @DianeYentel. Please also feel free to e-mail Diane Yentel and Zachary Johnson with any questions. 

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Author: Housing Horizon

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