Impacts of the Government Shutdown on HUD Programs

On January 4th, the U.S. Department of Housing and Urban Development (HUD) released a memorandum intended to explain how payments will proceed to Assisted Property Owners who provide affordable housing units to families across the United States. They assured owners that, while the Department’s spending authority expired on December 21st, interim activities would continue for the first thirty business days. This would include payments for Section 8 contracts, rent supplement contracts, Section 236 agreements, and Project Rental Assistance Contracts (PRAC), among others, “on an as needed basis to ensure ongoing viability of assets and preservation of affordable housing…contingent on budget authority being available from prior year appropriations or recaptures.” It was not immediately clear if or how that would continue past the thirty-day mark, possibly because, at that time, it seemed unlikely we would surpass it [1].

However, we are now well into the longest partial government shutdown in U.S. history, which started on December 22nd, and broke the previous record of twenty-one total days on January 12th [2]. As it drags on further, the negative impacts of the shuttered agencies and unpaid workers begin to compile, proving that “shutdowns don’t get bad linearly; they get bad exponentially,” as noted by Sam Berger, of the Center for American Progress via Bloomberg Businessweek.This occurs as agencies, like HUD, that have been stretching leftover funding to provide services continue to run through what money they have left, ensuring that services will continue to see increasing interruptions; and families that dipped into their savings burn through their rainy day funds. And it compounds when the organizations and families they were supporting burn through their savings as well [3].

While federal workers are rationing insulin [4], picking up part-time jobs and temporary positions [5], and are being encouraged to sell their unwanted possessions to make ends meet [6], the effects of this extend far beyond federal workers and their families. It is also spreading beyond the D.C. metro area with larger concerns than the unruly lines at the TSA security checkpoints. It is diminishing faith in the economy broadly [7], risking the continuation of economic growth that has been ongoing since the Obama presidency [8], and raising alarms that a continuation of this state will increase the chances of experiencing a recession [9]. The longer this goes on, the greater the likelihood that the shutdown will cause lasting damage to the country at large, and the individuals and families who make up its core.

The negative impacts of the shutdown have not been felt uniformly. Rather, it disproportionately harms those who are already the most vulnerable, and who rely on imperiled federal services for basic necessities at risk of interruption. This includes the millions of Americans that receive benefits through the Supplemental Nutrition Assistance Program, or SNAP commonly referred to as food stamps (though an obscure rule has allowed the U.S. Department of Agriculture to pay February benefits early) [10], and HUD’s rental assistance programs.

In North Carolina, the interruption in HUD assistance has the potential to be particularly disruptive. Across the country, 1,150 federal project-based rental assistance contracts that are up for renewal have expired since the shutdown began or will expire by the end of this month [11]. Project-based contracts can make up to 20% of a public housing agency’s Housing Choice Voucher (HCV) funding, and are tied to specific properties where owners agree to set aside a set number of units for a set number of years. Project-based HCV’s were developed to help low-income households find appropriate housing in situations where high barriers exist, such as extremely competitive rental markets or if the household include individuals with disabilities [12]. Despite being a relatively small state, North Carolina lays claim to close to 100 of those, which homes over 4,000 housing units, ranging from studios to four bedrooms apartments, per the HUD Multifamily Assistance & Section 8 Database.

Typically, HUD rental assistance programs are open to individuals below an income ceiling tied to a percentage of the Area Median Income (AMI), often set to 80% AMI. HUD agrees to contracts where they will make up the diff10erence between 30% of the family’s adjusted income, often treated as the definition of affordable housing rates, and the Fair Market Rent (FMR) value of the unit that the project is indexed to, which is largely dependent on the immediately local market. Of the properties that are at risk, the FMR rent ranges from a high of $875 a month for a studio apartment to a high of $1,779 a month for a four bedroom. While it is impossible to know the full exposure for the properties without further information on how much money the tenants are contributing themselves (which, again, is defined by their household income), it is safe to assume that many of these properties are at risk of facing deficits in the tens of thousands should HUD funding lapse.

CASA Underwood - Durham, NC
Affordable housing units in Durham, NC

Many housing authorities and low income housing advocacy groups worry that this will push properties to “resort to either significant rent hikes or evictions of these lowest-income renters,” as noted by Diane Yentel, President and CEO of the National Low Income Housing Coalition, via NPR. The emphasis on the lowest-income renters is significant, as it is those with the lowest incomes that will become the most costly as HUD payments halt, and will have the hardest time finding comparable housing. This is echoed by other groups, such as the National Association of Housing and Redevelopment Officials, who’s CEO, Adrianne Todman, quoted via CNBC that public housing organizations are “scrambling to calm down landlords so they don’t begin eviction proceedings.” Many, like Ellen Lurie Hoffman, the federal policy director for the National Housing Trust, do not understand how the Department failed to predict and plan for this problem prior to the shutdown and believes that, as reported by NBC News, landlords “could be pushed to delay critical repairs.” In the same article, Michael Kane, executive director of the National Alliance of HUD Tenants says HUD could be facing an “imminent catastrophe.”

Others, worry about long-term concerns. Some landlords could be driven out of the market entirely, through foreclosure or bankruptcy as owners are unable to meet their own obligations and debts. Others will find themselves unable to negotiate new contracts as they had intended. Mary Cunningham, vice president for the Metropolitan Housing and Communities Policy at the Urban Institute, worries, as reported by NPR, that “the lapse in funding may deter other would-be tenants from entering into a contract with HUD in the future.” This could complicate an already bleak long-term picture for the Department’s commitment to helping low-income Americans secure access to affordable housing. It is not a secret that much of the public housing in America is decades old and in need of major repairs or renovations, and that the current needs far exceeds the stock that is available [13].

That said, HUD has been able to take steps to mitigate the damage. Via the Washington Post, HUD spokesman Jereon Brown stated that their department is “scouring for money,” and are encouraging landlords to use emergency funds before raising rents. Additionally, HUD has notified owners “whose contracts had expired or were expiring in January, providing more detailed instructions on how to request reserve funds ‘if [their] property is not receiving payment or is experiencing an emergency situation’” per NBC News.

There is some evidence that this is working in a limited capacity. I spoke with a representative from the Durham Housing Authority on Thursday, January, 17th, and, at that time, they had not experienced any interruptions in their payments from HUD and were not aware of an immediate risk of the possibility. However, other stories show more reason for concern. Once again, this often hits the most vulnerable. Reports from California, Maryland show the shutdown is freezing funding for a number of housing developments funded through the Section 202 program, which serves low-income senior citizens (while this is typically a smaller program, 52 of the developments under threat in North Carolina are partially or fully funded through this same program). Additionally, per a variety of reports, rent hikes are being seen in a number of states, including Arkansas, Louisiana, Missouri, Mississippi, and Arkansas, as landlords become unable or unwilling to makeup funding gaps.

While there is no clear end in sight to the government shutdown, there are indicators that the political tolerance for it might be waning. There is still a chasm between what Trump and the democrats are willing to accepted, and the more evenly divided senate is still unable to pass spending bills with their slight republican majority. However, it does appear that cracks are starting to form in the divided ranks that may portend a viable solution. As the situation will continue to deteriorate in the absence of a deal on capitol hill, it becomes more valuable to make your voices heard to those who have power in the decisions that will unfold.


[1] U.S. Department of Housing and Urban Development, and Lamar Seats. 2019. “Memorandum For: Section 8 Property Owners, Project Rental Assistance Contract (PRAC) Property Owners, and Other Assisted Property Owners.”

[2]  Kranz, Michal, and Mariana Alfaro. 2019. “The Government Shutdown Is the Longest in US History. Here’s How It Compares to the 1995-96 Shutdown, Widely Considered the Worst before Now.No Title.” Business Insider, January 18.

[3] Katz, Eric. 2019. “Agencies to Start Increasing Furlough Numbers as Shutdown Drags On.” Government Executive, December 28.

[4] Barrett, Sofia. 2019. “This Diabetic Federal Worker Rationed Her Insulin during the Shutdown Because Debt Was Scarier than Dying.” CNN, January 17.

[5] Brady, Jeff. 2019. “Federal Employees Moonlight To Pay The Bills.” NPR: National Public Radio, January 16.

[6] Lamoth, Dan. 2019. “Coast Guard Families Told They Can Have Garage Sales to Cope with Government Shutdown.” The Washington Post2, January 10.

[7] Tankersley, Jim, and Ben Casselman. 2019. “Polls Show Government Shutdown Is Eroding Faith in Economy.” The New York Times, January 18.

[8] The Editorial Board. 2019. “If You Shut Down the Government, You Slow Down the Economy.” The New York Times, January 12.

[9] White, Ben. 2019. “Recession Warnings Pile up as Shutdown Wraps up Fourth Week.” Politico, January 17.

[10] Luhby, Tami. 2019. “States Race to Distribute February Food Stamps amid Shutdown.” CNN, January 18.

[11] Luhby, Tami. 2019. “HUD Is Trying to Help Thousands of Low-Income Renters amid Shutdown.” CNN, January 11.


[13] Popkin, Susan J., Diane K. Levy, and Corianne Payton Scally. 2018. “America’s Public Housing Program Faces an Uncertain Future.” Urban Institute, December.

About the author: Nora Schwaller is a licensed architect and a second-year Ph.D. student at the University of North Carolina, Chapel Hill in the Department of City and Regional Planning. At UNC, she focuses on resilience and disaster recovery. In this area, she is most interested in the effect of disasters on communities, population displacement, and tipping points for settlement abandonment. Prior to returning to grad school, she worked for an architecture firm in San Francisco, focusing on municipal projects.