President Trump’s recently released fiscal year 2026 “skinny budget” outlines sweeping changes to federal housing policy, including major cuts to the U.S. Department of Housing and Urban Development (HUD) and a dramatic restructuring of rental assistance programs. While presidential budget requests are not binding and require Congressional approval, they serve as clear statements of an administration’s priorities and policy direction.

The president's budget proposes a 44 percent reduction in HUD funding compared to FY 2025 levels, along with the consolidation of existing rental assistance programs such as Housing Choice Vouchers (HCVs), Project-Based Rental Assistance, and Section 202/811 into a single state-administered rental assistance block grant. Not only would this consolidation of major HUD rental assistance programs shift administrative responsibility to states, but it would also reduce federal oversight.

The Trump administration is promoting these changes as an effort to increase flexibility and reduce federal dependency, but housing professionals say the likely result would be significant disruption for millions of low-income renters.

Voucher Cuts, HOME Program Elimination 

As proposed, LIHTC sites would be greatly affected by the elimination of HOME funds and sweeping changes to the Housing Choice Voucher program. The HOME Investment Partnerships Program is a critical source of gap financing that's often layered with LIHTC equity. Without HOME funds, many projects that are currently financially feasible would no longer pencil out.

The Trump proposal also targets the Housing Choice Voucher program for deep cuts and structural changes. According to HUD’s most recent LIHTC tenant data released in August 2023, 18.2 percent of residents in LIHTC properties use Housing Choice Vouchers. And in many jurisdictions, federal and state rules require LIHTC properties to accept HCVs as a lawful source of rent payment.

Under the proposed budget, HCVs would be folded into the new state block grant model, and a two-year limit would be placed on assistance for “able-bodied adults,” after which support would end unless states chose to supplement funding. This limit is expected to apply regardless of rental market conditions or the availability of affordable housing.

State-Administered Block Grant Model

The budget’s proposed block grant system would shift most federal housing responsibilities to state governments. In theory, states would gain the flexibility to design rental assistance programs tailored to local needs. However, in practice, this would mean replacing a nationally coordinated safety net with a patchwork of state-run systems. And many states don't currently have the infrastructure or experience to manage large-scale rental programs.

Unlike current federal programs, which set nationwide eligibility rules and compliance standards, block grants would allow states to determine who qualifies, how much support to provide, and whether any time limits or work requirements should apply. Without strong federal oversight, the level and consistency of housing support would likely vary widely by state, leading to inequities in tenant access and protection.

If enacted as proposed, Trump’s “skinny” budget would represent the most significant rollback of federal affordable housing support in decades. Bipartisan opposition is expected given the extent of the proposed reductions. And although the budget proposal is unlikely to be enacted in full, it sets the stage for contentious budget negotiations and offers a clear look at the administration’s housing priorities, which embody a reduced role for HUD and a shift toward decentralized, state-managed aid.