The Housing Assistance Council is an independent, non-partisan and regularly responds to Congressional committees, Member offices, federal agencies, and policy advocacy coalitions with the research and information needed to make informed policy decisions. Our research work, Rural Data Portal, and Veterans Data Central all provide valuable, educational context to frame the rural policy conversation. If you want to know how a new program or policy could impact America’s small towns and rural places, please don’t hesitate to contact us at policy@ruralhome.org.

Federal government shuts down many functions

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UPDATED as of 8:00 pm Eastern time on Tuesday, October 14.

The Office of Management and Budget (OMB) has posted an updated version of its Frequently Asked Questions During a Lapse in Appropriations, dated October 3, 2025. Several of the questions and answers relate to treatment of government contracts and awards during a shutdown.

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October 1, 2025 — With Congress unable to agree on appropriations bills or a continuing resolution, many government activities stopped at the end of September 30, the last day of fiscal year 2025. The closure is likely to last for at least several days, because the House is not scheduled to be in session until October 6. The last time this occurred, the shutdown lasted a record 35 days, from December 22, 2018 to January 25, 2019.

What activities continue: The administration determines what federal agency functions must be continued during a shutdown. Staff who carry out those essential functions, as well as staff whose positions are not funded through annual appropriations and political appointees confirmed by the Senate, are required to work during the shutdown, but are not paid until the shutdown ends. Other staff are furloughed – they do not work during the shutdown but after it ends they are paid for the time they did not work. If a shutdown lasts more than a few days, determinations of crucial tasks and needed workers may shift.

Agency RIFs: In the last week of September there was significant concern that this shutdown would lead to many federal employees losing their jobs, based on an Office of Management and Budget memo telling agencies to “consider” issuing reduction in force (RIF) notices for employees whose job funding lapsed and whose work tasks were “not consistent with the President’s priorities.”

RIFs and furloughs are different things; a furlough is a temporary layoff with back pay later, whereas a RIF terminates a job, although a RIF’d employee receives a 60-day notice and may be transferred to a different position.

Only a few federal agencies incorporated RIF plans into their shutdown contingency plans, however, and USDA and HUD were not among them. Overall, the current furloughs reportedly impact around 550,000 federal workers, 23% of the current workforce.

USDA shutdown plan: USDA’s current plan has one page devoted to Rural Development. It shows that nearly 83% of RD’s staff are furloughed, compared to 49% of the department’s total staff. “Limited” RD activities will continue, including making Section 521 Rental Assistance payments for contracts already in effect, for as long as the funding is available. RD staff have told stakeholders that available RA funds will cover the program at least until the end of October.

RD does not have authority to renew RA contracts that expire during the shutdown.

According to the plan, the agency will continue servicing loans “only as necessary to protect RD’s interest in properties.” This seems to imply what past RD plans stated explicitly – no new loans, grants, or loan guarantees would be issued during a shutdown.

HUD shutdown plan: HUD’s plan seems to indicate that almost 94% of its employees are furloughed, with 16% of them to be recalled intermittently, but that many of its programs are functioning.

Programs such as HOME, CDBG, and Continuum of Care will continue to disburse funds when funds have been obligated and no further action by HUD employees is necessary. When HUD review or action is required, the department will recall employees “as necessary to avoid an imminent threat to the safety of human life or property.”

Monthly subsidy programs such as public housing, housing choice vouchers, and multifamily assistance contracts, will continue to operate while funding is available. Unlike USDA, HUD does have the authority to renew Project-Based Rental Assistance contracts that expire during the shutdown.

The plan notes that “nearly all of HUD’s fair housing activities will cease during a lapse” in appropriations.

National Flood Insurance Program expiration: The continuing resolution that funded the government from March 15 through September 30 authorized NFIP, so the program expired after September 30. FEMA can continue to pay claims so long as it has funds available, but it must stop issuing or renewing policies.

Long-term effects: At this point, it is difficult to determine how long the current closure may last and what its long-term impacts may be. The Congressional Budget Office estimated that around 750,000 workers could be furloughed every day of the shutdown, with the daily cost of their compensation totaling roughly $400 million.

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NOTE: As of mid-afternoon Eastern time on September 29, 2025, HAC could find no new information about what might happen to rural housing programs in the event of a federal government shutdown. If we receive any news we will post it here.

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Follow HAC’s reporting on appropriations in the HAC News (subscribe here) and on our web pages for USDA and HUD funding.

Federal agencies are required to prepare contingency plans identifying which functions will continue during a government shutdown and which will not. The summary below is based on the most recent plans posted online for USDA, HUD, and the Treasury Department. All of them were prepared during the Biden administration. USDA’s January 2024 shutdown plans are still online, while HUD’s and Treasury’s plans have been removed and not replaced. OMB’s shutdown page refers readers to individual agencies. OMB’s September 2023 FAQs remain online.

A brief federal government shutdown probably would not impact most people who receive housing assistance but, at some point after the first few days, the housing effects would begin to be noticeable. In fiscal year 2019, a record 35-day shutdown from December 22, 2018 to  January 25, 2019 led some owners of USDA-financed rental properties, unaware that the agency had enough Section 521 Rental Assistance (RA) funding to last through January, to threaten to evict tenants who could not pay full rent on their own. Fortunately, Congress reached a funding agreement before any RA renewals were missed that February. (More details about the 2019 shutdown are included at the end of this post.)

KEY TAKEAWAYS

  • A brief federal government shutdown probably would not impact most people who receive housing assistance but, at some point after the first few days, the housing effects would begin to be noticeable.
  • Section 521 Rental Assistance disbursements would continue, but not until the 30th day of a shutdown, and only if funding is available, according to USDA Rural Development’s shutdown plan, dated January 2024.
  • No new rural housing loans, grants, or loan guarantees would be committed during a shutdown.
  • HUD’s monthly subsidy programs – including public housing operating subsidies, housing choice vouchers, and multifamily assistance contracts – would operate only while funding remained available, according to HUD’s September 2023 contingency plan. If they ran out of money during a shutdown, they would cease to operate.

WHAT SHUTS DOWN

USDA Rural Development

Rural Development’s contingency plan, dated January 2024, indicates that State Directors, their staff, and some employees in the Washington, DC national office and the Customer Servicing Center in St. Louis would continue working during a shutdown.

Rental Assistance

RD’s plan says that Section 521 Rental Assistance would continue “only … if a threat to RD’s property interests becomes imminent (day 30) …, and funding remains available under existing rental assistance agreements. … On and after the 30th calendar day of a funding lapse, RD will assign the minimum number of employees needed to disburse Rental Assistance payments, pursuant to the exception for the protection of property (RD’s security interest), on the presumption that, after 30 days, the threats to RD’s property will have become and will continue to be imminent.”

The amount needed for RA can vary considerably from month to month. The RA payments each month are for the RA contracts that expired during that month, and each payment obligates a full year of RA funding. For example, the RA contracts that expired during November 2024 and were renewed in late November or early December will not be impacted again until they expire in November 2025.

The contingency plan does not have a provision – which was included in a previous version – stating that, if the agency has used up all its RA funds, “additional servicing options” could be provided to rental properties. In 2019, for example, USDA was considering permitting owners to use project reserves to cover costs. That shutdown ended before the agency completely ran out of RA money, so they did not have to decide whether to allow the use of reserves.

Loans, grants, and servicing

According to USDA’s contingency plan, no new loans or grants would be committed during a shutdown. No new loan guarantees would be issued under any of the housing programs or the community facilities program. For Section 502 guaranteed loans only, lenders and borrowers could choose to proceed with closing if USDA had already issued a valid conditional commitment. The lender would be assuming the risk until the shutdown ended and a guarantee was issued.

RD activities that are considered necessary to preserve the government’s property would continue during a shutdown, and loans and escrow accounts are considered to be government property. Therefore RD would keep processing nightly updates for each RD financial system, making insurance and tax payments from borrowers’ escrow accounts, and “reconciling and submitting for initial processing” collection activity including amortized payments and payoff activity. Some foreclosure sales would go forward. Servicing of existing guaranteed loans would continue, including processing loss claims.

Disbursements of construction loans and grants would continue during a shutdown.

HUD

HUD’s plan is dated August 2023. It explains that, since 2019, appropriations language has allowed HUD’s salaries and expenses funding to be carried over into the next fiscal year. The plan explains that funds remaining from an expired continuing resolution – such as the CR that ends on December 20 – cannot be used for new obligations. The department’s senior leadership would decide how much of that funding to use and for what functions.

Programs operating with HUD funding that was obligated before a shutdown would continue to operate. Much of the Federal Housing Administration’s and Ginnie Mae’s work would continue during a shutdown. Monthly subsidy programs, however – including public housing operating subsidies, housing choice vouchers, and multifamily assistance contracts – would operate only while funding remained available. If they ran out of money during a shutdown, they would cease to operate.

Treasury

The Treasury Department’s plan, dated September 2023, states that the CDFI Fund’s programs would not operate during a shutdown, without providing any further details.

WHO KEEPS WORKING

Generally, during a shutdown, federal staff in the affected agencies do not work unless their functions are considered essential. Furloughed employees are also not allowed to do their jobs voluntarily while the government is closed. In the past, Congress and the President have usually agreed to pay furloughed employees retroactively after a shutdown ends, but they are not required to do so.

Presidential appointees (i.e., agency officials who were confirmed by the Senate) are not furloughed. They are not paid, however, unless funds for their salaries are appropriated after the shutdown ends. “Schedule C” employees, also known as political appointees (these jobs do not require Senate confirmation), are subject to the same rules as civil service employees to determine whether their roles are essential during a shutdown.

WHAT A SHUTDOWN MEANS FOR GOVERNMENT CONTRACTS

A 2023 Office of Management and Budget document explains that during a shutdown a federal contractor can proceed with work that is not impacted by the lapse in funding. For example, if an agency has already obligated funds representing the entire price under a contract or task order before the funding lapse began, the contractor can conduct the work. At the agency, however, routine operational and administrative activities relating to contract or grant administration cannot continue.

WHAT HAPPENED IN FY19

Fiscal year 2019 began on October 1, 2018 with parts of the federal government, including USDA and HUD, open under continuing resolutions. After a final CR expired, they did close down on December 22. The government reopened on January 25, 2019, under another CR that expired on February 15. A final consolidated appropriations act was signed into law by President Trump on February 15.

USDA Rural Development

The first HAC News issue after the shutdown began, published on January 15, 2019, reported that limited functions were continuing at USDA’s national office in Washington, DC and the Customer Service Center in St. Louis. Loan closings were not taking place and applications were not being processed.

Rental Assistance

USDA RD was able to renew Section 521 Rental Assistance contracts that expired in December and January. If the shutdown had continued, however, the agency would not have had enough money to renew the approximately 700 RA contracts that expired in February and 1,000 in March.

By January 25, 2019, when a deal was reached for a three-week CR, the HAC News reported that USDA was considering short-term measures, such as allowing owners to use project reserves to cover costs, but had not yet finalized any plans or notified property owners/managers. The need for providing information directly from USDA had become clear when managers of USDA-financed properties in Arkansas, Louisiana, Missouri, and Mississippi sent notices to tenants telling them their RA was ending in January and they would be responsible for paying their full rent, then backpedaled when informed by USDA the RA would be paid.

After the shutdown ended, the February 11, 2019 HAC News quoted a notice USDA sent to owners and managers of USDA-financed properties with Section 521 Rental Assistance: “We are pleased to inform you that Rental Assistance for Section 514/515 properties has been obligated through April. … We understand that the most recent lapse in appropriations created anxiety and uncertainty regarding the status of your contract obligations. We are hopeful that this communique and the fact that all contracts are obligated through April will provide you reassurance and operational predictability in your management of these critical low-income resources throughout rural America. Thank you for your partnership in delivering the Rural Housing Service affordable housing mission.”

A January 2019 memo from the National Housing Law Project explained the rights of federally assisted tenants during the government shutdown. NHLP is preparing an updated memo for a possible October 2023 shutdown.

Homeownership Programs

On February 1, 2019, after the shutdown ended, USDA’s single-family programs office announced it would issue new Certificates of Eligibility to all Section 502 direct applicants who had valid COEs on December 21 before the government shut down. The agency did not have enough money to obligate additional Section 502 direct loans until it received funding beyond February 15, however.

Section 504 repair loans and grants were available on February 1. USDA planned to prioritize applicants with immediate health and safety hazards.

Other Impacts

There were additional housing-related impacts from the FY19 shutdown, and only a few are summarized below.

Some HUD Project-Based Rental Assistance contracts expired early in the shutdown, as reported in the January 15, 2019 HAC News. About 21,500 households with average incomes under $13,000 per year were impacted by the expiration of 650 PBRA contracts that ended in December. More were expiring in January and February and HUD would need to determine whether it had funds available to renew them. Property owners could use their reserves, if available, to cover shortfalls. Public housing capital funding was unavailable, and operating funds would not be able to carry public housing authorities beyond February.

The shutdown’s effect in Indian Country was “substantial and unique,” the Center for Indian Country Development at the Minneapolis Federal Reserve reported, although calculating a dollar amount was not possible. Because of the unique relationship between the U.S. and Tribes, Tribal services are often closely tied to federal funding. Government employment is disproportionately high in Indian Country, Tribal staff such as those who plow reservation roads were furloughed, and Tribal education funds were in danger.

Disaster spending, particularly funding for Puerto Rico’s recovery from Hurricane Maria in 2017, was also delayed by the 2019 shutdown. Congress had appropriated $20 billion in CDBG-DR funds for Puerto Rico, but only $1.5 billion of that money was approved before the shutdown, and HUD did not disburse it during the shutdown. HUD approval of disaster spending plans or amendments from California, Florida, Georgia, Missouri and the U.S. Virgin Islands was also put on hold.

 

Policy News from the Administration

HAC CEO Applauds Rural LIHTC Equity Investment Announcement

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On August 5, the Federal Housing Finance Agency (FHFA) announced that the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, can now each double their annual investment in Low Income Housing Tax Credits (LIHTC) to $2 billion. In addition, FHFA is requiring one-half of their total $4 billion annual investment be invested in difficult to serve housing markets and of that $2 billion 20 percent ($400 million) be for housing in rural markets. The Housing Assistance Council (HAC) applauds this move and the significant impact that it will have on driving affordable housing investment to otherwise underserved small town and rural America.

“LIHTC is the biggest driver of affordable housing development in the country, but rural communities often struggle to access a fair and equitably priced share of LIHTC equity,” said David Lipsetz, President and CEO of HAC. “Twenty percent of our country’s population lives in rural places, so we applaud FHFA Director Pulte for requiring that a proportionate amount of GSEs’ LIHTC equity investments in difficult to serve markets target small town and rural America.”

The Housing and Economic Recovery Act of 2008 imposed on the GSEs a Duty to Serve obligation to facilitate a secondary market for mortgages on housing for low- and moderate-income families in three underserved markets: rural housing, manufactured housing, and affordable housing preservation. Starting in 2017, FHFA permitted Fannie Mae and Freddie Mac to reenter the LIHTC market as equity investors, bringing LIHTC investments into their Duty to Serve activities. But until now, no specific set-aside existed for LIHTC investments in Duty to Serve rural markets.

“Over the past half century, federal housing policy—indeed federal policymaking writ large–has been designed with urban and suburban economies at its center,” noted Lipsetz. “Fannie and Freddie have played a positive role building wealth and opportunity through housing, but their business model falters with the low volumes and smaller loans that characterize most rural housing markets. Similarly, LIHTC works most seamlessly in multifamily projects of a size and income-mix that differ from the stock typical of rural communities. In this context, rural America only sees a fair share of investment when national leaders put a finger on the scale. HAC appreciates Director Pulte doing exactly that with regard to the GSEs’ Duty to Serve.”

“Today’s announcement comes on the heels of the passage of the One Big Beautiful Bill Act, which permanently expanded the 9 percent LIHTC allocation, but failed to include bipartisan priorities that would have leveled the playing field for rural and Tribal areas,” noted Lipsetz. “Adding a Difficult Development Area (DDA) designation to rural and Tribal would have provided a 30 percent basis boost that makes full the value of the credits in these underserved areas. Nor did the bill align Opportunity Zone (OZ) and LIHTC ‘substantial improvement’ standards to allow these programs to work well together to preserve and repair rural homes.”

“HAC hopes Congress will build on FHFA’s important action today and finish the job of making the nation’s largest housing and community development tax subsidies work just as well in small towns and rural places nationwide.”

Click here to see how HAC’s Loan Fund has helped our partners combine LIHTC equity and other resources to create and preserve rural affordable housing.

HAC CEO Applauds Markup of Bipartisan Senate Housing Legislation

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Housing Assistance Council (HAC) CEO David Lipsetz Applauds Markup of Bipartisan Senate Housing Legislation

The Senate Banking, Housing, and Urban Affairs Committee announced a markup of a broad, bipartisan housing bill on July 29. The ROAD to Housing Act of 2025 includes legislation from members across the committee, including several rural priorities.

“HAC applauds Chairman Scott and Ranking Member Warren for their remarkable work on the ROAD to Housing Act,” said David Lipsetz, President and CEO of HAC. “Housing is the largest monthly expense for American families, and the housing affordability crisis is as urgent in small town and rural America as in the nation’s cities and suburbs. That’s why it’s so important that the Committee is moving legislation forward on a comprehensive and bipartisan basis.”

The ROAD to Housing Act includes several bills that HAC has been supportive of, most significantly the Rural Housing Service Reform Act, led by Senators Smith (D-MN) and Rounds (R-SD). This bill would provide the United States Department of Agriculture’s (USDA) Rural Housing Service (RHS) with new tools to address the preservation of its critical multifamily portfolio; authorize successful pilot programs; modernize the single-family housing programs; and improve USDA’s internal infrastructure, technology, and reporting.

“We are especially pleased that the bill centers the housing needs of rural communities and the essential role in addressing them played by the USDA’s rural housing programs,” noted Lipsetz. “In addition to the RHS Reform Act, the bill includes important provisions to improve program coordination and align regulatory action across USDA, Department of Housing and Urban Development (HUD), and Department of Veterans Affairs housing programs.”

Over the last several years, members of the Banking Committee have been crafting commonsense, bipartisan legislation to improve our federal affordable housing response, and many of these bills have been wrapped into the ROAD to Housing Act for this markup. HAC is glad to see the committee taking this action.

Bill text and a section-by-section summary can be seen here.

HAC Comments on Proposal to Outsource USDA Single-Family Loan Servicing

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USDA is collecting comments from stakeholders and potential vendors to take over a portion of the single-family loan servicing functions currently handled by the Servicing Office in St. Louis. The Servicing Office was established in 1996 in St. Louis, Missouri as part of USDA Rural Development’s national restructuring effort to centralize loan servicing functions. Over the last three decades, the office has become the core operational center for the single-family programs, managing more than 185,000 active loans and approximately $14.5 billion in outstanding debt. Comments and vendor proposals were due on July 16. HAC submitted comments opposing this privatization of single-family loan servicing. Our comments highlighted that:
  • Servicing for this portfolio is unique due both to the structure of the loan products and the needs of the borrowers served. Any external vendor would have a steep and costly learning curve.
  • Given these unique and complex servicing needs, cost savings of privatization are highly unlikely. Any anticipated cost savings need to be made public before this process moves forward.
  • A better solution lies in adequately staffing the Servicing Office and upgrading its servicing technology.
HAC’s full comment can be viewed here:
Policy News from the Administration

Housing Assistance Council Statement on Reconciliation Legislation

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On July 4, President Trump signed into law a sweeping reconciliation package that includes several important tax and housing provisions—some that mark long-sought progress for affordable housing in rural communities, and others that fail to address persistent gaps in federal support.

“The most positive provisions of this broad and complex bill are the tax incentives that aid community development and housing, including several that recognize the unique housing market dynamics and capital needs of rural communities,” said David Lipsetz, President & CEO of the Housing Assistance Council (HAC). “Unfortunately, these are coupled with measures that will dramatically increase the cost of food and doctor visits for poor, small town families while giving tax cuts to wealthy people living in high income areas and corporations headquartered in far off cities. That hardly seems like a good deal for people living in rural and Tribal areas.”

The reconciliation act’s improvements to the rural housing and community development landscape include:

  • Low-Income Housing Tax Credit (LIHTC) Improvements: The package makes permanent the 12 percent allocation increase for 9 percent LIHTC credits and lowers the private activity bond threshold from 50 percent to 25 percent. These are major wins for housing developers, helping to unlock more financing and expand project feasibility in high-cost or low-income regions, including in rural and Native communities.
  • Targeted Opportunity Zones (OZ) Reform: The bill revises the Opportunity Zones program by increasing basis percentages and reducing the substantial improvement test requirements to 50 percent. It also adds a marginal incentive to invest in small cities, exurban areas, and places with fewer than 50,000 people. Presumably this is to address the failure of the original OZ program to generate activity in rural communities.
  • Permanent Extension of New Market Tax Credit (NMTC): The bill makes the New Markets Tax Credit permanent, providing long-term certainty for lenders and investors in underserved rural areas. NMTCs have played an essential role in bringing grocery stores, health centers, and community facilities to areas where traditional financing does not reach.

 

The affordable housing and community development sector hoped several other broadly supported, bipartisan proposals would be adopted in the bill, but they were left out of the final version. These remaining gaps and challenges include:

  • No Rural Difficult Development Areas (DDAs) Provision: Although contained in the initial House-passed reconciliation bill, the final legislation failed to include a longstanding provision of the bipartisan Affordable Housing Credit Improvement Act that would designate rural and Native communities as Difficult Development Areas for LIHTC purposes. This denied a 30 percent basis boost that would have helped projects in these communities overcome historically lower credit pricing and tighter capital margins. This omission is significant and jeopardizes growth in rural areas.
  • Neighborhood Homes Investment Act (NHIA) Excluded: The Neighborhood Homes Investment Act, which would have supported rehab and construction of owner-occupied homes in distressed rural neighborhoods, was not incorporated into the final reconciliation act. This omission is a particularly painful loss for communities with aging housing stock and no clear source of gap financing.
  • Misaligned OZ and LIHTC Standards: While the Opportunity Zones reforms for rural areas are a step forward, the continued disconnect between the OZ and LIHTC substantial improvement tests leaves many rural revitalization efforts out of reach.
  • Food and Healthcare Made More Scarce and Expensive: Provisions in the bill restrict eligibility for SNAP and Medicaid while reducing resources to veterans and decimating access to rural These cuts will hurt rural families who earn less than is needed to buy food and go to the doctor while still paying their mortgage or rent. Some of these cuts are set to phase in over the course of several years.

“We are grateful to the Members of Congress who championed the housing and community development tax incentives in this massive, fast-moving legislation,” said David Lipsetz. “Hopefully Congress finishes the job on a bipartisan basis later this session, leveling the playing field for all Americans by identifying rural areas as DDAs, adopting NHIA, and aligning OZs with LIHTC.”

Read a more detailed HAC analysis of the final reconciliation act.

Policy News town

Reconciliation Law Supports Some Tax Provisions for Affordable Housing, But Broadly Damages the Safety Net

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The budget reconciliation bill, formerly known as the One Big Beautiful Bill Act, became law on July 4 with President Trump’s signature after a lengthy voting process in Congress. HAC’s review below focuses primarily on the bill’s positives for affordable housing and community development and offers some recommendations for improving them further in future legislation.

Major Non-Housing Provisions Will Impact Affordable Housing

Estimates indicate the law will have significant impacts on federal taxes, deficits, and spending. The nonpartisan Congressional Budget Office calculated that it will add $3.4 trillion to the federal debt over the next ten years. Analyses by the Penn Wharton Business Model, CNN, the Tax Policy Center, the Economic Policy Institute, and others show that the law will provide significant tax cuts for the highest income Americans, fewer benefits for middle-income households, and some negative impacts for those with the lowest incomes. Revisions to Medicaid and the Affordable Care Act mean millions will lose health insurance. Changes to the Supplemental Nutrition Assistance Program (SNAP) will remove food support for millions.

The law increases funding for immigration enforcement. It reduces funding for the Consumer Financial Protection Bureau (CFPB) but does not go as far as an earlier version of the bill passed by the House, which would have eliminated the CFPB entirely. It does not require that public lands be sold to create space for development of new housing, another provision that was in the House bill.

The law also repeals the Greenhouse Gas Reduction Fund and rescinds unobligated funds remaining for the program. It cancels funding for a number of other energy-related programs created in the 2022 Inflation Reduction Act, including HUD’s Green and Resilient Retrofit Program, and cancels a number of energy-efficiency tax credits. Last-minute changes temporarily reduced, but did not eliminate, some of the law’s negative impacts on wind and solar projects. Taken as a whole, these provisions are likely to increase energy costs, with a disproportionately high impact on the lowest-income families because they pay the largest proportion of their incomes for energy.

Some of the law’s negative impacts will be especially significant for rural Americans. For example, while it increases funding for the Rural Health Transformation Program from $25 billion to $50 billion, that will not replace the $87 billion cut from rural hospital funding under the law’s other provisions. Rural communities already face unique health challenges including limited access to care, and closing hospitals can only add to their difficulties.

While HUD and USDA housing assistance programs are not directly affected by the law, the people they serve will feel its effects. States were authorized to use Medicaid for health-related needs, including housing (although the current administration may be rethinking that flexibility). When the proportion of income needed for food and medical care rises, the amount remaining for housing is reduced. People who need Medicaid and SNAP assistance may also qualify for housing aid, so any reduction in support will increase the number of low-income people juggling insufficient dollars to cover basic expenses.

Research has also found that high proportions of people experiencing homelessness rely on Medicaid, that use of Medicaid to provide supportive housing helps people leave homelessness, and that a large-scale loss of Medicaid in Tennessee led to a 24.5 percent increase in completed evictions. Homelessness in rural places has already been growing, with HUD data showing a 12 percent increase in total rural homelessness and a 36 percent increase in unsheltered rural family homelessness from 2023 to 2024.

Low Income Housing Tax Credit Permanently Expanded

The positive news for housing begins with an expansion of the Low Income Housing Tax Credit, which incentivizes private investment in affordable rental housing. The reconciliation law increases the annual allocation for 9 percent tax credits by 12 percent. And it permanently reduces the financed-by test, which requires tax exempt private activity bonds to finance a certain portion of a project in order for that property to be fully eligible to generate 4 percent tax credits. The project proportion, formerly 50 percent, will now be 25 percent. Together, these provisions will expand the impact of the limited 9 percent credits and allow states to support more affordable housing developments within their maximum cap of Private Activity Bonds.

Unfortunately, the final law does not include a provision passed by the House that would have designated rural and Native American areas as Difficult Development Areas, providing projects there with a 30 percent basis boost from 2026 through 2029. HAC strongly supports adoption of this provision in future legislation.

Opportunity Zones are Permanent, With Mixed Results for Rural Places and Absence of Benefits that Target Affordable Housing

While the LIHTC program applies to financing for affordable housing developments, the Opportunity Zone (OZ) incentive is based on geography, offering support for both businesses and housing in underdeveloped census tracts. The OZ program has been successful in producing rental housing, but the units have not necessarily been affordable for low-income residents. OZs have also been used far more widely in urban and suburban areas than in rural places.

The law turns the program from a temporary investment incentive to a permanent one, with OZs to be redesignated every ten years. It establishes revised criteria for tracts to be eligible for designation. It takes steps to increase OZ financing in rural areas, including by providing investments in those tracts with a 30 percent step-up in basis after five years, but does not provide added incentives to support affordable housing. Unlike the Rural Opportunity Zone and Investment Act, a bill proposed in 2023, the reconciliation law does not incorporate persistent poverty measurements into the definition of rural OZs.

The program requires properties being rehabilitated with OZ investments to be “substantially improved.” That has been defined to require the improved value of the property to be 100 percent greater than its pre-rehab value. The reconciliation law drops the threshold to 50 percent. Notably, this is one of the few OZ provisions that is effective immediately.

Further improvements to the OZ program can be made through legislation in Congress next year. HAC recommends that such a bill should:

  • Add enhanced benefits for investments in rural affordable housing developments. While the new OZ legislation provides an enhanced benefit for all rural projects, further enhancements to basis, deferral, and timing benefits should be extended to projects that meet affordability levels similar to those required by the Low-Income Housing Tax Credit program.
  • Require that one-third of the OZs designated in each new round be rural. The first version of the law passed by the House would have included this provision.
  • Reduce the amount of added value in a rehabilitated property that is needed to qualify for OZ investments. While the reduction from 100 percent substantial improvement to 50 percent is significant, the LIHTC program’s requirement is only 20 percent. Rural areas would be well served by making the LIHTC and OZ programs consistent on this point so they could be used together for affordable rental housing preservation. A lower threshold in rural places could also help attract investments there.
  • Adopt a more precise definition of rural OZs than the one provided in the bill. The law’s definition of rural areas includes places with populations up to 50,000, does not take population density into account, and relies partly on a definition of “urbanized area” that is no longer used by the U.S. Census Bureau. HAC recommends use of the rural definition adopted in the Duty to Serve regulations of the Federal Housing Finance Administration (FHFA). FHFA’s rural definition is well suited to the OZ context for several reasons. Like the OZ program, FHFA’s definition is based on census tracts. It was crafted specifically to include rural residents living in outlying counties of metropolitan areas, to remain stable over time, and to be easy to implement and operationalize. Also, it has been adopted by other financing programs such as the Capital Magnet Fund administered by the Treasury Department’s CDFI Fund.
  • Create a State and Community Dynamism Fund to build the “last rural mile” of OZ delivery infrastructure. Recognizing the insufficient OZ activity in rural areas, states have leveraged federal programs, such as those from USDA and HUD, to attract and stimulate investments. These preexisting community development programs are already oversubscribed, however, and likely to be even more stressed if their funding is cut in fiscal year 2026 and beyond. To fill the gap, the bipartisan, bicameral Opportunity Zones Transparency, Extension, and Improvement Act proposes a new and specific $1 billion “Dynamism Fund” to promote OZ funds and projects in lower-income and rural communities. Funding would be distributed by formula to states to support technical and capacity-building assistance, outreach to investors, and other field building activities.
  • Make mission-driven intermediaries as well as state governments eligible for Dynamism Fund grants. The New Markets Tax Credit, which utilizes Community Development Entities (CDEs) to access the program, could provide a model. The Treasury Department’s Community Development Financial Institutions (CDFI) Fund could certify community-based OZ investment intermediaries through a process similar to CDE/CDFI certification. These efforts would strengthen the ecosystem for rural Opportunity Zone investments, ensuring more effective deployment in areas that need it the most.
  • Allow for investments through CDFI and similar mission-driven intermediaries as qualified investments, and remove barriers that would allow those entities to aggregate multi-project investments. Allowing for the placement of investment in CDFIs and CDEs would open the door for mission-focused funds to be developed. These funds could meet the needs of rural projects while offsetting the limiting characteristics of rural projects: scattered, smaller projects, with desperate timelines.

New Markets Tax Credit Gets Permanent Extension

The bill makes the New Markets Tax Credit (NMTC) permanent, providing long-term certainty for lenders and investors in underserved rural areas. NMTCs have played an essential role in bringing grocery stores, health centers, and community facilities to areas that traditional financing does not reach.

Neighborhood Homes Investment Act is Not Included

The final law did not include provisions from the Neighborhood Homes Investment Act (NHIA), which would create a federal tax credit to build and rehabilitate affordable homes. NHIA was introduced earlier in 2025 in both the House and Senate. HAC supports its enactment as a stand-alone bill.

Policy News from Congress

HAC CEO Responds to Tax Proposals

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HAC CEO David Lipsetz supports proposed rural improvements in the House Ways and Means Committee’s proposed budget reconciliation bill.


Earlier this week, the House Ways and Means Committee released and marked up an expansive tax reform package, which includes several significant rural housing priorities. 

“While this tax reform effort is extensive and covers an enormous number of complex issues, we were thrilled to see some long-supported rural improvements to the Low-Income Housing Tax Credit (LIHTC) included in the proposal,” said David Lipsetz, President & CEO of the Housing Assistance Council. “We were also glad to see the focus on improving outcomes in rural communities in the renewal of the Opportunity Zones tax incentive. We look forward to working with the Senate to refine those Opportunity Zone provisions as this process moves forward.” 

For LIHTC, the House tax bill would make the following critical improvements (which had been previously introduced as part of the Affordable Housing Credit Improvement Act): 

  • Designating rural and Native communities as Difficult Development Areas, which would allow them a 30 percent basis boost for buildings placed in service after December 31, 2025 and before January 1, 2030. Rural LIHTC credit pricing is often lower and projects are working within tighter capital constraints due to low tenant incomes and other geographic factors. LIHTC developments in rural and Native areas would be more financially feasible with the introduction of this targeted basis boost. 
  • Extending the 12.5 percent allocation increase for 2026-2029. Congress has not permanently increased 9 Percent Housing Credit authority since 2000. However, Congress provided a modest temporary 12.5 percent cap increase in 2018, which subsequently expired in 2021. This bill would restore into baseline the 12.5 percent cap increase. 
  • Lowering the 50 percent private-activity bond threshold test to 25 percent for obligations made after December 31, 2025, and before January 1, 2030. In order for a multifamily Housing Bond financed development to receive the full amount of 4 Percent Housing Credits it is eligible to receive, at least 50 percent of development costs must be initially financed with tax-exempt multifamily bond authority from the state’s Private Activity Bond (PAB) volume cap. The 50 percent requirement is an arbitrary threshold and lowering that threshold to 25 percent would allow states to produce and preserve more bond-financed developments. 

Together, these LIHTC changes would help improve LIHTC’s impact in rural areas and HAC strongly supports their inclusion in this bill.  

“As this tax reform effort moves over to the Senate, we also hope to see the Neighborhood Homes Investment Act (NHIA) included in the package,” said Lipsetz. “The ‘value gap’ can often be a barrier to home repair in rural places, which have a disproportionately high rate of aging and substandard housing. NHIA would bring private investment to the table to rehabilitate owner-occupied homes through a new and innovative tax credit.” 

Policy News from the Administration

HAC CEO Responds to FY 2026 Budget Cuts

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HAC CEO David Lipsetz warns that proposed federal housing program cuts could worsen the rural housing affordability crisis and undermine economic growth in small-town America.


The White House has released an initial “skinny” version of its Fiscal Year (FY) 2026 Discretionary Budget Request. A full version of the budget request is expected later this month. It is clear from the summary document that the Administration recognizes the unique and urgent needs of our nation’s rural communities. That said, the budget looks to wind down the federal government’s historic role in addressing those needs by dramatically reducing or eliminating most of the housing and community development programs currently in place. Once freed of these public programs, the Administration expects private sector investment and new programs at the state and local levels to drive rural prosperity.

“I am confident the Administration sees and appreciates America’s small towns and rural places. I am also confident that cutting rural housing programs in the middle of a housing shortage is going to drive rents and home prices higher,” said David Lipsetz, President & CEO of the Housing Assistance Council. “The landlords and developers we work with are already seeing prices spike on lumber, appliances and other goods. They can’t afford to lose the federal government as an investor and partner.”

“HAC was excited to see President Trump on his very first day in office direct federal agencies to find ways to reduce housing costs for American families. It is difficult to understand how eliminating the HOME program and reducing Native American housing support, dramatically cutting HUD’s tenant-based and project-based rental assistance, and eliminating USDA’s homeownership program can achieve the goal of cutting housing costs. Rural America is worthy of investment, and the investments made in housing today will return to us tenfold in the future as we spur vibrant rural economies.”

HAC is ready to work with the Administration to invest in rural communities and make good on the promises to build thriving rural economies with plenty of housing at a price rural families can afford.

Read HAC’s full analysis of the Administration’s FY 26 Budget.

Preventing and Eliminating Rural Homelessness in Illinois

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Homelessness and housing related issues manifest differently in rural environments. Highly effective urban solutions aimed at homelessness too often falter in rural America, where service provision is different and those who are homeless are often less conspicuous, but no less in need of assistance.

Recognizing the importance and unique nature of rural homelessness, the State of Illinois is committing resources to help end homelessness in rural Illinois. As part of that effort, the Housing Assistance Council (HAC) partnered with the Supportive Housing Providers Association (SHPA) and the Illinois Department of Human Services to undertake a data and information collection effort that will help inform strategies, solutions, and policies with the goal of preventing and eliminating homelessness in rural Illinois.

Download the document.

Policy News from the Administration

HAC CEO Responds to Executive Order Impacting Rural CDFIs

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I’ve worked in enough small towns across America to know this: rural communities prosper when they have financial partners ready to invest in homeownership dreams and small business start-ups. A recent Executive Order targeting Community Development Financial Institutions has me concerned that rural America could lose access to the $6 billion in business CDFIs generate in their local economies.

For years, rural areas faced dwindling access to financial services. The number of rural headquartered banks fell by over 3,600 since 1995, an astounding 57% decline. Thankfully over that same 30-year period over 500 rural CDFIs have been created, filling gaps in the banking landscape of every State. And they do it effectively, leveraging $8 in private investment for every $1 in federal support. This has been especially helpful for local organizations with projects that are too small or specialized for the remaining banks or distant commercial lenders to finance.

HAC is one of those rural-serving CDFIs. Our work is supported by the resources the recent Executive Order is trying to undermine. We want to continue delivering real results for real people.

  • In Clearfield County, PA, where 45% of grandparents are raising grandchildren due to the opioid epidemic, HAC’s financing helped build the Village of Hope, a multigenerational affordable housing development designed for seniors and youth to live together.
  • In Pahokee, FL, our loan helped Diverse Housing Services breathe new life into Amaryllis Gardens, 44-units of workforce housing for employees of the surrounding farms.
  • In Visalia, CA, HAC’s $12 million in financing to Self-Help Enterprises has enabled over 300 low-income families to help construct their own homes as “sweat equity” downpayments.

The good news here is that the Executive Order is to be “implemented consistent with applicable law and subject to the availability of appropriations.” The CDFI Fund is not a discretionary policy—it’s embedded in federal statutes such as the Riegle Act, the Community Renewal Tax Relief Act, the Housing and Economic Recovery Act, and the Small Business Jobs Act. And funds for CDFI’s were included in this year’s appropriations and continuing resolutions.

It also helps that the CDFI Fund programs were created and supported by bipartisan consensus. Leaders across political lines and branches of government understand that rural America’s need for economic opportunity and stable housing is a shared national priority. We are encouraged by Treasury Secretary Bessent’s recent statement recognizing “the important role that the CDFI Fund and CDFIs play in expanding access to capital” and affirming that “CDFIs are a key component of President Trump’s commitment to supporting Main Street America.” For over 50 years, HAC has worked directly with rural policy-makers — Republican, Democrat, and Independent alike — to make affordable housing a reality. We hope that under the current Administration, the CDFI Fund will continue to be staffed and funded as Congress has legislated.

HAC stands ready to continue serving the millions of Americans who depend on the stability and opportunity CDFIs’ investments create. The path forward must strengthen, not undermine, our ability to serve hardworking rural families. They deserve nothing less.

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50 Years for Rural America

Over 50 years HAC has worked in every U.S. state and the territories. Learn more about what our work means for rural communities.

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