How the Government Shutdown Impacts Multifamily

Source: Wikipedia Commons

As the partial federal government shutdown―now the longest in United States history―drags on with no apparent end in sight, effects are being felt throughout the multifamily industry, particularly at the U.S. Department of Housing and Urban Development where nearly all staff is not working.

HUD is among the nine federal departments that do not have funding under the shutdown, now in its 25th day. Of approximately 800,000 federal workers affected, 380,000 are considered nonessential and have been placed on unpaid leave. About 95 percent, or 7,109, of HUD employees are deemed nonessential and are not working during the shutdown.

While Fannie Mae and Freddie Mac, which are not funded by the government, are open during the shutdown, those seeking FHA multifamily loans won’t be as lucky. HUD stated most FHA multifamily activities―including accepting and processing multifamily FHA mortgage insurance―would stop during the shutdown. Closings were only expected to be conducted on those projects with firm commitments and closing dates scheduled before the shutdown began Dec. 22 or those with critical external deadlines.

Multifamily Accelerated Processing lenders servicing construction loans and administering non-critical repair escrows were advised they could, at their own risk, process interim construction draws. Contract construction inspections that have been funded will be conducted.

Relying on Budget Reserves for Near Term

A HUD memo to Section 8 property owners and other landlords that receive rental assistance, notes that some activities will continue for the first 30 business days of the shutdown. HUD will make payments under Section 8 contracts, rent supplement, Section 236 and project rental assistance contracts on an as-needed basis, but only if HUD has available budget authority from prior year appropriations or recaptures.

The National Low Income Housing Coalition noted HUD staff indicated resources for project-based assistance were sufficient for January, but funding would become more uncertain if the shutdown goes into February. NLIHC said it was also advised HUD can provide sufficient funding to public housing authorities to maintain all vouchers in use and fund public housing operations through February.

Laurel Blatchford

“The shutdown is putting at risk the 5 million households and 9.78 million individuals―almost 10 million people―living in HUD-assisted housing, including low-income, elderly, disabled, and veteran families,” Laurel Blatchford, president of the national affordable housing nonprofit Enterprise Community Partners and a former HUD chief of staff, told MHN. “To make matters worse, it was already true that only one out of every four households that qualify for HUD assistance receive it, which means there are 15 million households who are eligible but on waiting lists. The shutdown may be hurting them too. With continued funding uncertainty, public housing agencies could be less likely to move families off waitlists, keeping residents from affordable homes that could otherwise be improving their lives. The bottom line is, the government shutdown is exacerbating barriers to opportunity for millions of Americans, whether they are receiving HUD benefits or not.”

Housing Groups Send Letter to Congress

Blatchford’s group along with NLIHC and other members of the Campaign for Housing and Community Development Funding―a coalition of more than 70 national organizations―sent a letter to Congress calling on them to end the government shutdown and pass full-year spending bills that provided funding for affordable housing and community development programs. Republicans and Democrats in Congress are at an impasse over President Donald Trump’s insistence that $5.7 billion in funding for a wall at the Mexican border be included in any spending bills.

 Blatchford noted the impacts of the shutdown on homes for low-income families and communities extend beyond HUD―for example, to USDA and its Rural Housing Service programs administered by the Department of Agriculture.

“USDA direct loan and grant programs will not issue any additional funds for the extent of the government shutdown, including for the Section 502 Single Family Housing Home Loan Program, Section 504 Single Family Housing Repair Program and the Section 514 Farm Labor Housing Loan & Grant programs. We have heard from some of our partners they are unable to service loans, leaving homebuyers, homeowners, and renters out in the cold,” she said.

Blatchford said the USDA also provides rental assistance to 270,000 households. While RA payments should be available for those renewed before the shutdown, approximately 700 RA contracts were not renewed before the shutdown.

“Until there is a deal to reopen the government, RA will not be allocated to those properties where contracts have lapsed,” she said.

In its letter to Congress, the CHCDF also noted that the shutdown could impact the housing of low-wage government workers, like janitors and security guards, who often live paycheck to paycheck and may have trouble paying their rent, putting them at risk of eviction.

“The longer the shutdown continues, the more the lowest income people will be hit,” Diane Yentel, NLIHC president & CEO, stated in the letter.