As Congress navigates a looming funding deadline for the Department of Housing and Urban Development (HUD) and other federal agencies, the country’s federally assisted affordable housing communities face the potential of a government shutdown impacting rental assistance payments and more.
A shutdown of any length is detrimental to HUD-assisted housing because approvals for funding and action on programmatic administration can be delayed; a full recovery from operational disruptions may take months.
HUD Contingency Plan for a Government Shutdown
HUD last updated its shutdown contingency plan in 2023, called the HUD Contingency Plan for Possible Lapse in Appropriations 2023.
Agency Staff and Operations: During a lapse in government funding, 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).
The plan says that only 244 of HUD’s 8,573 staff would continue working full-time as “excepted” employees to perform activities that are essential to operate HUD during a lapse in appropriations. Another 965 HUD employees could be called in on an intermittent basis to work solely on excepted activities, which includes addressing emergency situations that would otherwise result in threats to human life or damage of property.
The majority of the intermittent and excepted staff, as well as a small number of staff positions that are funded outside of the annual appropriations process, are employed within HUD’s Office of Housing, the office that handles HUD’s Multifamily Housing programs like Section 202. However, during previous government shutdowns, very limited staff were available to approve routine housing transactions for Multifamily Housing providers.
Financial Transactions: Notably, HUD cannot enter into new financial obligations during a lapse in government funding. However, legally binding obligations entered into before the lapse remain valid.
The plan states that HUD will make payments under previously obligated Section 8 contracts, Project Rental Assistance Contracts (PRACs), and Performance-Based Contract Administrator (PBCA) contracts. The Tenant Rental Assistance Certification System (TRACS) will be available to process vouchers, provided that appropriate funds have already been obligated. However, previously obligated allocations may be insufficient to support ongoing program operations.
New Contracts and Service Coordinator Grants: HUD will only process contract renewals to the extent that funds are available from prior appropriations (or recaptures). Regarding Service Coordinator grants, HUD funding staff will be available to ensure already obligated grants will be paid, but no new funding can be committed during the shutdown.
As of December 2024, LeadingAge members are awaiting HUD instructions to extend their current Service Coordinator grants for the 2025 performance year, which begins in January. HUD has not yet made grant extensions available and HUD staff will not be available to process extensions during a shutdown, nor will new grant funds be able to be committed.
Safety Inspections through REAC: As for housing safety inspections through HUD’s Real Estate Assessment Center (REAC), where contracts have been obligated prior to the lapse in appropriations, contracted inspectors will conduct the inspection during a shutdown. However, HUD employees will not be able to conduct inspections during a government shutdown unless there is a known threat to life or property at that specific location.
The Real Estate Assessment Center (REAC) Technical Assistance Center (TAC) will be operational, but no other staff will be able to provide technical assistance, for example on the use of REAC’s inspection software. For example, while inspection results can be uploaded during a shutdown, they will not be reviewed by HUD staff. and therefore cannot be released.
HUD’s contingency plan also includes, starting on page 72, an FAQ for HUD stakeholders. FAQs specific to HUD’s Office of Multifamily Housing begin on page 81.
Impacts on LeadingAge Members
Funding Shortfalls: In the case of delayed rental assistance payments from HUD, housing providers may need to utilize accounts set aside for capital repairs and other property upgrades to pay for operating expenses instead.
For example, in instances where funding falls short and monthly voucher requests are not paid on Multifamily Housing contracts, housing providers can request releases of residual receipts or Reserve for Replacement accounts to offset the shortfall. Because limited staff will be available to process those transactions, requests should be submitted to the Asset Management Division Director of the assigned HUD office to ensure they are seen and processed in a timely manner.
A signed form HUD-9250 should be sent showing the request amount, balance in the account, and a certification that the funds will be paid back when subsidy is restored. Previously, HUD has also recommended that housing providers state in the email subject line that the request is for emergency purposes (rather than for routine or non-time sensitive building projects). A list of HUD’s Asset Management Division Directors by HUD Multifamily Region is available here.
LeadingAge recommends requesting a release of funds as soon as a shortfall situation becomes apparent for a particular property. However, in a recent nationwide survey, less than half of LeadingAge affordable housing member respondents said they have access to a Reserve for Replacement account to cover operating expenses for at least one month.
Continuing Resolution: Even if Congress reaches a deal on a continuing resolution, which is a funding bill that extends the previous year’s funding levels for a certain length of time (and usually without critical increases to adjust for inflation), federally assisted housing providers will still feel the ramifications.
HUD may face budget shortfalls under a continuing resolution that extends too long into the spring, causing HUD to delay monthly payments on rental assistance or delay entering into renewed contracts with housing providers. HUD has told LeadingAge that it has sufficient resources under fiscal year 2024 levels to renew contracts for six months into fiscal year 2025, i.e., through March 2025. HUD has not assessed the sufficiency of FY24 funding after this date.
In addition, without full-year appropriations for Service Coordinator grants, the agency will be further delayed in extending the current Service Coordinator grants for the next performance year, which begins in January.
In the November 2024 survey, LeadingAge affordable housing members reported that financial challenges, including HUD funding delays, are among their top three challenges in the coming quarter. Resident mental health challenges and tenant file compliance—including adjusting to major changes under the new Housing Opportunity Through Modernization Act (HOTMA)—were also included in the top three challenges, with resident mental health reported to be the primary concern.
LeadingAge will provide more resources to assist members during any shutdown, as well as during an extended continuing resolution scenario.
Follow the negotiations and related-news via our Updates: Year-End Funding and Policy Negotiations; Agency Contingency Plans serial post.
