The Shutdown’s Impact on HUD & Federal Housing Programs

On Sept. 27, 2013, HUD released a “Contingency Plan for Possible Lapse in Appropriations” if Congress failed to approve funding for the federal government past Sept. 30. Nearly two weeks later, as this issue is being published, Congress still hasn’t been able to pass a bill to fund the government beyond Sept. 30, and this has resulted in a government shutdown. 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

HUD will experience major staffing shortages as only 349 of 8,709 HUD employees (approximately 4 percent) are exempted federal employees. Approximately 96 percent of federal HUD employees in both Washington, D.C., and the 80 local HUD offices will be on furlough. As a result of the shutdown, most federal employees are required to stop work because there are minimal funds to pay their compensation. A limited number of staff are “exempted” from this rule based on the functionality of the program. Exempted employees include:

• Those who are necessary to address emergency situations where the failure to perform functions would result in an imminent threat to the safety of human life or the protection of property;
• Those who perform functions that are funded through fees or under multi-year (as opposed to annual) appropriations;
• Those who perform functions that are related to express authorizations to contract or borrow without an appropriation;
• Those who are necessary to meet the obligations necessary to the discharge of the president’s constitutional duties and powers. This is understood to be employees necessary to interpret statutes, such as the Antideficiency Act, to avoid significant constitutional issues; and
• Those who are required for the orderly termination of agency functions.

Impact on Programs

If a federal housing program was funded through a previous multi-year appropriations bill or funding commitments that extend past the Sept. 30 deadline, then those funds will still be available.

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. Additionally, closings on projects with firm commitments that have a scheduled closing during the shutdown period or closings on final endorsements that have critical external deadlines will be exempted from the shutdown.

Finally, deadlines may be extended for all HUD Notice of Funding Availabilities to ensure basic fairness for all applicants.

Here are program specifics:

Homeless Assistance Grants: This program will continue to operate during the shutdown as it is deemed a “legally exempted activity” that’s necessary to preserve human life and protect property.

Housing Opportunities for Person with AIDS (HOPWA): This program will continue to operate during the shutdown as it is deemed a “legally exempted activity” that’s necessary to preserve human life and protect property.

Disaster Recovery Assistance Programs funded through multi-year appropriations: This program will continue to operate during the shutdown as it is deemed a “legally exempted activity” that’s necessary to preserve human life and protect property.

FHA Multi-Family Development: The following aspects will be considered exempted:

• Closings on projects with firm commitments that have a scheduled closing during the shutdown period; and
• Closings on final endorsements that have critical external deadlines.

During the first 10 business days of the shutdown, the following will apply:

• MAP lenders servicing construction loans may, at their and owners’ and general contractors’ risk, process interim construction draws. HUD will perform or contract for construction inspections on a post-review basis at such time the government reopens. Initial and final draws will not be processed or approved.
• No change orders will be processed or approved.

Section 202/811 Development: The following aspects will be considered exempted:

• Closings on projects with firm commitments with scheduled closing dates during the shutdown period;
• Final closings on projects with critical deadlines; and
• No construction draws or construction inspections will be done in the first 10 days of any shutdown and will be re-evaluated as needed for use of intermittent staff.

Asset Management/FHA and Assisted Housing: The following aspects will be considered exempted:

• Payments under Section 8 contracts, Rent Supplement, Section 236, and PRACS where there’s a permanent or indefinite authority or multi-year funding;
• Renewal and funding of Section 8 contracts and PRACS where there’s budget authority available from prior appropriations or recaptures;
• Payment of PBCAs for work on properties with prior appropriations;
• Management of HUD-owned property and property where HUD is the mortgagee-in-possession; and
• Approval of emergency repairs.

Rental Assistance Demonstration (RAD): The following aspects will be considered exempted:

• Applications for RAD can be submitted through RAD Applications@hud.gov; and
• If you received a Rental Assistance Demonstration Conversion Commitment (RCC) before the shutdown and your closing is scheduled, the closing process will continue.

Impact on Public Housing Agencies

Public housing agencies won’t shut down and may spend pre-existing appropriated federal funds. HUD won’t be able to provide any additional federal funds. State and local housing agencies may continue to spend federal funding like vouchers, HOME Investment Partnership Programs, and CDBG funds, though they won’t be able to receive any additional funds.