The Government Shutdown's Impact on HUD & Federal Housing Programs

Since the latest continuing resolution, which funded HUD and several other federal agencies in the absence of enacted Fiscal Year (FY) 2019 appropriations bills, expired on Dec. 21, 2018, Congress and President Trump haven’t enacted a final FY 2019 HUD bill. As a result, funding for HUD has lapsed and a partial government shutdown has ensued. It’s not a complete government shutdown, because Congress has enacted some of its FY 2019 appropriations bills such as the one for the Department of Health and Human Services.

In anticipation of a possible shutdown, HUD, in December, released a “Contingency Plan for Possible Lapse in Appropriations 2018.” This acts as a handbook for HUD staff and stakeholders about what a lapse in appropriations would mean for HUD employees and HUD’s programs. We’ll go over some of its major points and point out the broader effects of a prolonged shutdown.

At publication, the shutdown is now in its fourth week and has become the longest one in U.S. history, beating the previous record of 21 days. It’s unclear how long the shutdown will last or the full effects it will have on housing, but here are some of the major effects the shutdown will have on HUD and other federal housing programs.

Staff Shortages

The Contingency Plan provides what staffing levels would be for each HUD office during a shutdown. Within HUD’s Office of Housing, all excepted staff can work on excepted activities only during the shutdown. In the context of shutdown furloughs, the term “excepted staff” is used to refer to employees who are funded through annual appropriations who are nonetheless excepted from the furlough because they’re performing work that, by law, may continue to be performed during a lapse in appropriations.

HUD staff who process funding for the Office of Housing have been designated as “intermittent” staff and, thus, work on an “as-needed” basis under a shutdown to process payments and contract renewals. HUD regional office directors are also classified as intermittent.

According to the Contingency Plan, “In the event of a government shutdown due to a lapse in appropriations, most Federal employees are required to stop work because no funds would be available to pay staff and the government is prohibited from accepting voluntary services. A limited number of employees are “excepted” from this general rule based on the functional activity they perform.” Presidential appointees, who are confirmed by the Senate, are exempt from the furlough.

Of the 7,497 employees at HUD as of Nov. 10, 2018, 2,386 are within HUD’s Office of Housing, by far HUD’s largest office and the one with jurisdiction over all multifamily housing and asset management. The Contingency Plan states that the approximate number of excepted and exempt full-time employees in the Office of Housing during a shutdown would be 103. In addition, a maximum of 300 could be recalled to work as intermittent employees on any given day to work solely on excepted activities.

In HUD’s 10 Regional Offices and 55 Field Offices, the Contingency Plan says a “minimal staff” will be maintained to ensure the safety of human life and the protection of property.

Shutdown’s Impact on HUD Programs

On Jan. 4, HUD sent a memorandum to Section 8 site owners, project rental assistance contract (PRAC) site owners, and other assisted site owners clarifying what activities will continue to take place during the first 30 business days of the shutdown.

According to the memo, 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 memo also states that owners of sites 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 nonpayment of monthly rental subsidies.

In addition, the memo states that during the first 30 business days of the shutdown, HUD will process payments to the Performance-Based Contract Administration program; continue management of HUD-owned and Mortgagee-in-Possession projects; approve emergency repairs related to health and safety; and respond to issues relating to the imminent threat to the safety of the residents, or to the protection of property, in HUD-insured or assisted multifamily projects.

Overall, you may continue to submit materials and applications to HUD, though there may not be staff available to review or process materials during the shutdown. Approvals or closings will be allowed only on an emergency basis.

Here are the broader effects of a prolonged shutdown on affordable housing and community development, including its impacts on specific HUD programs:

Project-Based Rental Assistance

> Section 8 Project-Based Assistance

• An immediate result of the shutdown is HUD’s inability to renew federal contracts for over 1,100 Section 8 Project-Based Rental Assistance (PBRA) sites that have expired since the government shutdown began. Additional contracts will continue to expire in January and February, should the shutdown continue for that long, as HUD doesn’t have funding to renew contracts while the government is shut down.
• Anything less than 12 full months’ funding for project-based Section 8 contracts will limit a site owner’s ability to provide supportive services to tenants, impede or delay critical rehabilitation, or possibly increase rent burdens on fixed-income populations.
• Nearly 10,000 of the 17,723 project-based Section 8 sites are insured by the Federal Housing Administration (FHA). The estimated unpaid balance of the FHA insured debt underlying properties assisted by project-based Section 8 contracts is over $13.5 billion. Without sufficient Section 8 rental assistance, many sites will fail.

> Section 202 Housing for the Elderly

• Contracts that provide ongoing operating subsidies to the nation’s almost 6,700 Section 202 communities are at risk of not being renewed. The Section 202 program provides affordable housing to about 400,000 older adults with average annual incomes of $13,300.
• Two-thirds of Section 202 communities receive ongoing rental subsidies from Section 8 Project-Based Rental Assistance (PBRA) contracts; the other one-third receive subsidies from Project Rental Assistance Contracts (PRACs). HUD’s inability to renew Section 8 PBRA contracts directly impacts older adults in the Section 202 program.

Public Housing

> Public Housing Capital Fund

• Without a full-year FY 2019 Transportation-HUD bill in place, public housing authorities (PHAs) won’t be able to access current year (FY 2019) Capital Funds, which are allocated 60 days after a final spending bill is signed into law. This could have an adverse impact on over 2 million residents, as more than 3,000 PHAs across the country may not have funding available to make critical repairs to units or needed upgrades. The capital backlog was last estimated in 2010 to be $26 billion and growing.
• If PHAs have prior-year capital funds available but require manual approval from HUD, HUD staff is unavailable during the shutdown to approve those expenditures.

> Public Housing Operating Fund

• Though PHAs did receive timely payments for January for the Operating Fund and expect to receive payments in February, if the shutdown isn’t resolved by the end of February, HUD will run out of funding for this critical program, which serves 1.1 million of the nation’s lowest income households.
• The Operating Fund allows PHAs to run public housing efficiently, conduct routine maintenance to units, process tenant applications and prepare units for occupancy, and make small and emergency repairs. Without Operating Funds, PHAs may not be able to provide safe and affordable housing for residents.

Housing Choice Voucher Program

• Like the Public Housing Operating Fund, PHAs did receive funding in January and expect to receive payments in February.
• If the shutdown isn’t resolved by the end of February, PHAs won’t be able to make timely payments to landlords expecting rent subsidies on March 1. This could result in eviction for recipients of rental assistance.
•  Because of the uncertainty around funding caused by the shutdown, PHAs will be unable to approve families on the waiting list for vouchers that have been turned over by families who have exited the program. As a result, these vouchers will go unused.

Grant Programs

• Ongoing review and approval of reports may be delayed, which could eventually delay funding. At some point, the federal government may not have funds available to reimburse local jurisdictions for program and project expenses, which would require cities and counties to halt funding to nonprofit organizations that count on homeless assistance grants, CDBG, and HOME to serve thousands of low-income families with housing, child care, transportation, literacy, health care, and many other services.
• Any grant agreements that weren’t processed before the shutdown would delay funds, causing hardship to local jurisdictions, who count on these funds for housing and infrastructure projects underway and in process.
• Jurisdictions may not be able to process reimbursements for expenditures or any complex transactions that need HUD review to move forward. For nonprofit organizations, contractors, and developers, programs and projects may have to halt, resulting in employee layoffs and termination of critical services to homeless and other low-income households.
• HUD’s website hasn’t been updated with the latest funding notices and information. Funding and application processing for homeless programs may be delayed, resulting in a gap of services for individuals who are homeless and count on rental payments from HUD funding sources.

Frequently Asked Questions of HUD Participants

The following are the questions and answers from within HUD’s Contingency Plan that are of interest to site owners, housing authorities, and tribal entities.

Asset Management and Assisted Housing

Q Will HUD make payments under Section 8 contracts, Rent Supplement, Section 236, or PRACS where there’s a permanent or indefinite authority or multi-year funding?

A For Section 236s, interest reduction payments will continue and Rent Supplement payments from prior year funding and recaptures will continue. HUD will make payments under Section 8 and PRAC where there’s a permanent or indefinite authority or multi-year funding, or where there’s budget authority available from prior year appropriations or recaptures. This includes processing Section 8 and PRAC renewals for expiring contracts and processing amendment funds for non-expiring Section 8 contract renewals.

Q Will HUD staff continue to approve HUD-9250s for releases of residual receipts to offset monthly voucher requests for Section 8 housing assistance payments?

A Yes.

Q Will Section 8 waiver requests be processed?

A For the most part, no. However, for those sites that have received designations by HUD as troubled assets through its rating of insured and assisted assets, minimal staff will be available to provide necessary oversight to ensure that actions can be taken to resolve imminent threats of claim or abatement.

Q Will PBCAs continue to perform their duties?

A Yes, PBCA contracts are funded at this time and they will continue their services as long as appropriated funds remain available.

Q Will HUD continue to process tenant certifications and electronic voucher payment requests?

A Yes. Tenant Rental Assistance Certification System (TRACS) will be available to process vouchers, provided that appropriate funds are available.

Q Will HUD continue to process requests for contract renewals during the shutdown?

A HUD will continue to process contract renewals to the extent that there is budget authority available from prior appropriations or recaptures.

Q Will HUD continue to operate the Multifamily Housing End User Support Help Desk during the shutdown?

A Yes. The Multifamily Housing End User Support Help Desk will respond to questions from users for the following systems:

• Development Application Processing System;
• Integrated Real Estate Management System;
• Tenant Rental Assistance Certification System; and
• Specific questions related to Multifamily Housing Enterprise Income Verification procedures.

Questions from PHAs, Tribal Designated Housing Entities

Q In the event of a government shutdown, will I be able to draw down funding for the Public Housing program, Indian Housing program, and the Housing Choice Voucher program?

A You will be able to draw down funds from LOCCS (Line of Credit Control System) for the purpose of accessing funds for Public Housing (operating subsidies and capital funds) and Indian Housing that have already been obligated in the system and which can be drawn down without further action or review by HUD employees. But funds that haven’t yet been obligated or that require HUD review won’t be available. 

Q How does the federal government communicate with the public during a government shutdown?

A When a shutdown occurs, you should go to the Office of Management and Budget’s website at www.whitehouse.gov/omb/ for updates. The HUD website won’t be updated. Also pay close attention to the media for information on the government reopening.

Q Will PIH staff be able to travel for the purposes of monitoring or to provide technical assistance to Public Housing and Indian Housing Authorities?

A No travel will take place during the government shutdown unless it’s for emergency purposes.

Q Will I be able to use HUD secure systems (including VMS, PIC, and FASS) to make submissions on behalf of my organization during the shutdown period?

A Yes. HUD secure systems will remain available; however, there will be no contractor or HUD staff support for system-related issues, submission questions or approvals, etc. during the government closure.

Q Will announcements for funding under any PIH Notice of Funding Availability (NOFAs) be made during a government closure?

A No awards will be announced during the shutdown.

Real Estate Assessment Center, Physical Inspections

Q If an inspection is confirmed and scheduled, may the inspector conduct the inspection during a government shutdown?

A No. No inspections may be conducted during a government shutdown.

Q Will inspections that have been uploaded into Real Estate Assessment Center (REAC) near the date of a government shutdown be released?

A No. There will be no staff available to review the inspections to make a decision on their release during the government shutdown.

Q Can I still submit an appeal if the government is closed? 

A Yes, you should still mail/submit your request for a technical review (TR) or database adjustment (DBA) within the deadlines specified in the regulation; however, none will be reviewed until after the government reopens. Therefore, a response to an appeal will most likely be delayed.

Q If my PHA or site is scheduled to undergo a physical inspection during a government shutdown, will the inspection still be conducted?

A No. Inspections will resume after the government reopens. The inspector must contact your PHA/site again and renegotiate a mutually agreeable date for the physical inspection to take place.

Shutdown Status

At the time of publication, the government shutdown has entered its fourth week and has become the longest one in the nation’s history. On Jan. 10, House Democrats, who passed a package of spending bills to end the government shutdown earlier in January, voted on several individual spending bills, including one for Transportation, Housing and Urban Development (THUD).

The bill proposed funding levels and policy proposals for affordable housing programs identical to those included in the Senate’s versions of the FY 2019 THUD spending bills and would also provide retroactive pay to federal workers at those agencies. The House passed the THUD spending bill by a vote of 244-180 and the USDA spending bill by a vote of 243-183, with several Republicans voting in favor of each.

However, Senate Majority Leader Mitch McConnell (R-KY) won’t bring the bills up for a vote in the Senate because President Trump has said he won’t sign any spending bill into law until he gets a significant increase in funding for a southern border wall. Congressional leaders met with President Trump on Jan. 9 in the hopes of reaching a deal to reopen the federal government, but those talks were unsuccessful when President Trump abruptly left the meeting.