How the Government Shutdown Might Affect the Housing Industry
- Oct 01, 2013
Washington, D.C.—The United States government has shut down as of today, Tuesday, October 1, 2013. While the main issue concerning this shut down is purportedly healthcare, the government shutdown could have wide-reaching effects, especially if it continues for a long period of time. For example, some 800,000 jobs could be affected. Additionally, if the shutdown is ongoing, it has the potential to negatively affect the housing industry.
Fortunately, the housing industry’s resiliency would likely stay strong if the shutdown is relatively quick.
“In the short-term, there may be some potential to weather this, Raphael Bostic, director of the USC Bedrosian Center on Governance and former assistant HUD secretary, tells MHN. “The biggest issue on the production side for rental housing is going to be what does this mean for the way the FHA processes its applications, and also what happens for landlords and property owners who deal with voucher tenants—those who rely on payments from the governments. Probably in the short run, both parties will be fine. Depending on how this goes, we could start to see some real pressure and difficulty in that area. A lot of it depends on does this continue to play out as a stalemate situation or can we find some common ground to come to some agreement on this?”
Bostic is moderately optimistic about the impact the shutdown will have on Fannie Mae and Freddie Mac.
“Fannie and Freddie are already in some degree of flux, so I’m not sure that this changes that dynamic significantly,” he says. “Then again, it’s hard to know how these agencies are going to displace staff when we’re in these furlough situations. So it could be that the people who work on it will do less of that or may [pause on] some of these policy initiatives.”
While it’s unknown how long the shutdown will last, another uncertainty is what will happen once the government is back up and running.
“To me, the most important aspects are around the rental assistance piece, and just the regular functioning of these markets,” Bostic says. “Will the government’s facilities be able to be used in ways that are consistent and common to how they’ve operated in the past? We’ll see. A lot of it depends on how long this goes. If it can be resolved in a relatively short amount of time, then I think the amount of damage will be relatively limited. But I’m not seeing a lot of common ground to reach for right now, which does raise a bunch of issues.”
Hopefully a quick resolution is on the horizon.
“It’s unfortunate that it has come to this,” Bostic says. “Congress had a lot of opportunity to try to figure this out and it’s symptomatic of the new way the government is working out that seems to be focused on living and working in a crisis environment, where some of these crises are self-made. It’s a bit difficult to watch, but it seems to be the way they want to work it, so we’ll just watch it and hope that some semblance of sense comes over these people.”
Bostic continues, “I just hope this thing ends soon, and then we can talk about things that sound more sane.”