Updated March 20 – What would a federal government shutdown mean for rural housing?

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Updated, March 20, 2024 – Some parts of the government may shut down briefly this weekend while Congress finishes the process of passing a final funding measure, but the HUD and USDA housing programs will not be affected. Their final appropriations for fiscal year 2024 (October 1, 2023-September 30, 2024) were set earlier this month. HAC has posted more details about USDA’s funding levels here and about HUD’s here.

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The information provided below is still accurate, but is no longer relevant for fiscal year 2024.

Update, October 2, 2023 – A last-minute agreement on a continuing resolution keeps the government running through November 17. It includes a provision allowing USDA to renew Section 521 Rental Assistance contracts as they expire, even if that requires a higher proportion of annual funding than the prorated amount for the first 48 days of the fiscal year.

The next steps towards funding for the entire fiscal year are not yet clear. The House and Senate have proposed different FY24 funding levels for USDA and HUD, and the House voted on but did not pass its USDA appropriations bill on September 28. Follow HAC’s reporting on appropriations in the HAC News (subscribe here) and on our web pages for USDA and HUD funding.

Update, September 29, 2023 – Congress has not made effective progress towards avoiding a shutdown on October 1. USDA has posted updated shutdown contingency plans, including one for Rural Development. The RD plan seems to be essentially the same as the 2021 version HAC originally summarized here. Since the updated plan indicates that USDA will be able to spend Rental Assistance funds so long as it has them, this post has been updated to remove questions about the lack of an advance appropriation for Rental Assistance.

The federal government, or parts of it, close when funding (appropriations) lapses. None of the fiscal year 2024 appropriations bills have been enacted yet, and ongoing differences between factions on Capitol Hill make temporary funding unlikely. A shutdown could begin on October 1, 2023, when fiscal year 2023 ends. If a continuing resolution (CR), or a series of them, keeps the government operating beyond October 1, a shutdown could occur whenever the final CR ends. Federal agencies have prepared shutdown plans.

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.

As HAC considers what a shutdown will mean, some important questions remain open and are included in the analysis below. HAC and other national rural housing organizations have reached out to USDA RD’s multifamily and political leadership with these questions and will update this information when we receive a response.

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 contracts would continue to be renewed during a shutdown “if funding is available,” according to USDA Rural Development’s shutdown plan, dated September 2023.
  • If the agency has used up all its RA funds, “additional servicing options” could be provided to rental properties. When the government closed in December 2018 and January 2019, for example, USDA considered permitting owners to use project reserves to cover costs, but the shutdown ended before a final decision was made.
  • 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 August 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 September 2023, 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 “if funding is available.”

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 August 2023 and were renewed in late August or early September will not be impacted again until they expire in August 2024. How much RA funding does USDA have on hand? How long will that amount last?

The contingency plan provides 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. The 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. Has USDA RD planned for such a possibility this year?

Has RD developed plans for communicating with property owners/managers and with tenants if a shutdown occurs and while it continues?

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.

HUD

HUD’s plan is dated August 30, 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, with wording similar to that used for the Rental Assistance advance appropriations. Thus, if FY24 begins without an appropriation, HUD may have some FY23 funds remaining for staff to continue working at full force, at least temporarily. 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 December 2022, 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

An 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.

 

Administration’s Budget Requests Substantial New HUD Funding

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The Biden Administration’s budget for fiscal year 2025, released on March 11, 2024, includes proposals for HUD and other housing programs – USDA, the Low-Income Housing Tax Credit, and others – that are part of broader Administration efforts to help meet increasing housing costs and address homelessness. If the budget were adopted as proposed, several pieces of this mosaic would be mandatory funding rather than discretionary, and others would be tax credits. Discretionary funds are subject to annual appropriations, while mandatory spending is not, so it is not subject to the caps on discretionary spending imposed by the 2023 debt limit agreement.

Details are provided in the table below.

The recording and slides from HAC’s March 13 webinar on Rural Housing in the Fiscal Year 2025 White House Budget are posted here.

— HAC’s analysis of FY24 appropriations for USDA housing programs is available here. —

Discretionary Funds

The budget would reduce funding for many of HUD’s housing production programs, including HOME, CDBG, SHOP, and Native American housing. It requests a total of $1.053 billion for Native American housing, just barely above the $1.02 billion provided in FY23 and notably lower than the $1.34 billion just adopted for FY24.

Tenant support fares somewhat better. For example, the budget proposes a total of almost $32.8 billion for Tenant-Based Rental Assistance (Housing Choice Vouchers), of which $29.25 billion is intended to renew all existing vouchers. An additional $241 million would provide 20,000 new incremental vouchers. (Separately, the mandatory funding proposals would guarantee vouchers to all extremely low-income veterans and all youth aging out of foster care.)

The budget also requests $30 million for the Recovery Housing Program, which allocates funds to states to provide temporary housing for individuals recovering from substance use disorders, including opioids.

Proposed New Mandatory Spending

The Administration’s proposals for mandatory spending programs cover production of new units, tenant assistance, and homelessness solutions.

  • Extremely low-income housing supply subsidy: $15 billion
    • New Project-Based Rental Assistance: $7.5 billion
    • Preserve distressed public housing: $7.5 billion
  • Innovation Fund for Housing Expansion: $20 billion
  • Housing vouchers for vulnerable low-income populations: $22 billion
    • all youth aging out of foster care: $9 billion
    • extremely low-income veterans: $13 billion
  • First-generation homebuyer down payment assistance: $10 billion
  • Sustainable eviction prevention reform: $3 billion
  • Homelessness grants: $8 billion
  • Emergency rental assistance for older adults at risk of homelessness: $3 billion

Tax Credit Proposals

  • The budget would expand the Low-Income Housing Tax Credit to build or preserve 1.2 million more affordable rental units. It asks Congress to increase per capital credit allocations, reduce the bond financing threshold, and revise the “qualified contract” and “right of first refusal” provisions for future developments.
  • A mortgage relief credit would provide middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years. The White House says that “this is the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on the median home, and will help more than 3.5 million middle-class families purchase their first home over the next two years.”
  • A separate one-year tax credit is intended to assist homeowners who could purchase a larger or more expensive home but hesitate to sell their starter home because of high mortgage rates or high housing costs. A middle-class homeowner would receive a credit up to $10,000 for selling a home below the area median home price in the county to another owner-occupant. The White House estimates this proposal would help nearly 3 million families.
  • A new Neighborhood Homes Tax Credit would allocate credits to developers and other sponsors of new construction or substantial rehabilitation of homeownership units in distressed areas. The White House estimates this would generate over 400,000 homes.

The Administration also proposes requiring each Federal Home Loan Bank to contribute 20 percent, rather than the current 10 percent, of annual income to the Affordable Housing Program. It calculates the change would raise an additional $3.79 billion for affordable housing over the next decade and assist nearly 380,0000 households.

Program
($ in millions)		 FY23 Final FY24 Final FY25 Budget FY25 House FY25 Senate* FY25 Final*
CDBG $3,300 $3,300 $2,900
HOME 1,500 1,250 1,250
PRICE Manuf. Hsg. Prsrv. 225 10 0
Self-Help Hmownrshp (SHOP) 13.5 12 9
Veterans Home Rehab 1 0 0
Rural Cap’y Bldg (RCB) 6 6 5
Tenant-Based Rental Asst. 27,600 32,387 32,756
     VASH 50 15 0
     Tribal VASH 7.5 7.5 5
     Replacemts for 521 RA – – 20**
Project-Based Rental Asst. 13,938 16,010 16,686
Public Hsg. Capital Fund 3,200 3,410 3,312
Public Hsg. Operating Fund 5,109 5,501 5,238
Choice Neighborhd. Initiative 350 75 140
Native Amer. Hsg. 1,020 1,344 1,053
Homeless Asst. Grants 3,633 4,051 4,060
Hsg. Oppties for Persons w/ AIDS (HOPWA) 499 505 505
202 Hsg. for Elderly 1,075 913 931.4
811 Hsg. for Disabled 360 208 256.7
Fair Hsg. 86 86.4 86.4
Healthy Homes & Lead Control 410 345 350
Hsg. Counseling 57.5 57.5 57.5

* These columns will be filled in as the FY25 funding process progresses.

** Up to $20 million would be set aside to provide tenant protection vouchers to tenants who had USDA Section 521 Rental Assistance but are losing it because their building is losing or ending its USDA mortgage.

 

Administration Proposes Small Increases in Many Rural Housing Programs

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The Biden Administration’s budget for fiscal year 2025, released on March 11, 2024, would hold funding at FY23 levels for most of USDA’s rural housing programs. In effect, it would restore the cuts made in the final FY24 appropriations bill, which was passed after the budget was prepared. Details are provided in the table below.

The recording and slides from HAC’s March 13 webinar on Rural Housing in the Fiscal Year 2025 White House Budget, are posted here.

— HAC’s analysis of FY24 appropriations for HUD programs is available here. —

Homeownership Housing

Like last year’s budget proposal, this year’s would eliminate subsidy “recapture” for the Section 502 direct program. Recapture requires that, when a low- or very low-income homeowner with a Section 502 direct loan sells the house or moves, they must repay the subsidy amounts they have received over the life of the loan. The administration estimates that eliminating this penalty for current borrowers would cost USDA $1.12 billion. It also proposes that Section 502 direct loans made in 2025 will not to be subject to recapture.

The budget would require that funding for housing construction or rehabilitation be targeted to projects that improve energy or water efficiency, implement green features, including clean energy generation or building electrification, electric car charging station installations, or address climate resilience of properties.

The budget also proposes three changes that were just adopted in the final FY24 funding bill, which had not been passed yet when the budget was prepared. These include extending the length of self-help and site-development loans from two years to five, and standardizing foreclosure procedures consistent with HUD’s.

Rental Housing

The administration again asks for legislative language to “decouple” Section 521 Rental Assistance from Section 515 and 514 mortgages, so that when a USDA rental housing mortgage ends for any reason, the tenants can continue to receive Rental Assistance. The final FY24 bill authorized a limited pilot to decouple up to 1,000 units of RA, but the budget does not propose any limits.

The budget requests Section 542 voucher funding be used only to renew “legacy vouchers,” $11.79 million in unobligated voucher funds be rescinded, and $20 million be added to provide HUD tenant protection vouchers for tenants “in USDA properties that are unable to refinance, participate in the multi-family preservation and rehabilitation options, or decouple.”

 

Program
($ in millions)		 FY23 Final FY24 Final FY25 Budget FY25 House* FY25 Senate* FY25 Final*
502 SF Direct Loans $1,250 $880 $1,250
     Nat. Amer. SF Demo 7.5 5 7.5
502 SF Guar. Loans 30,000 25,000 30,000
504 VLI Repair Loans 28 25 28
504 VLI Repair Grants 32 25 30
515 MF Direct Loans 70 60 70
514 Farm Labor Hsg. Loans 20 15 25
516 Farm Labor Hsg. Grants 10 7.5 10
521 Rental Asst. 1,488 1,608 1,690
523 Self-Help TA 32 25 32
533 Hsg. Prsrv. Grants 16 10 16
538 MF Guar. Loans 400 400 400
542 Vouchers 48 48 38**
Rental Prsrv. Demo (MPR) 36 34 90
Rental Prsrv. TA 2 1 0
Rural Cmty. Dev’t Init. 6 5 6
Cmty. Facil. Direct Loans 2,800 2,800 1,250
Cmty. Facil. Grants 25 5 22
Tribal Colleges CF Grants 10 8 10
Energy Cmties. Grants – – 10
Cmty. Facil. Guar. 650 650 650

Abbreviations key

  • MF: Multfamily (Rental)
  • SF: Single-Family (Homeownership)
  • TA: Technical Assistance
  • VLI: Very Low-Income

* These columns will be filled in as the FY25 funding process progresses.

** This $38 million is to renew vouchers already issued. Most tenants in USDA-financed rental properties where mortgages end or are paid off would receive Section 521 Rental Assistance under the Administration’s decoupling proposal. An additional $20 million is included in the HUD tenant protection vouchers account to provide new vouchers for tenants “in USDA properties that are unable to refinance, participate in the multi-family preservation and rehabilitation options, or decouple.”

Policy News town

Final FY24 Spending Bill Cuts Most Rural Housing Programs

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All but three of USDA’s rural housing programs receive funding cuts in the final minibus appropriations bill released by congressional leaders on March 3. The bill is expected to pass before funding for several agencies, including USDA, runs out on March 8. Section 521 Rental Assistance, Section 542 vouchers, and Section 538 rental housing guarantees are the only rural housing programs that are not reduced.

— HAC’s analysis of FY24 appropriations for HUD is available here. —

The bill does include a new rental preservation effort supported by HAC and many others. It establishes a pilot program to decouple up to 1,000 Section 521 Rental Assistance units from Section 515 or 514 mortgages. Currently, when one of these mortgages is fully paid off, the tenants lose their Rental Assistance. The bill limits decoupling to situations where USDA determines that a maturing loan “cannot reasonably be restructured with another loan or modification.” Congress’s explanatory statement on the bill “directs the Department to have strong stakeholder engagement and to provide the [House and Senate Appropriations] Committees with monthly updates on the implementation of this policy.”

Other rental housing preservation efforts are reduced, with Section 515 falling from $70 million in FY23 to $60 million this year and Multi-Family Rental Preservation and Revitalization (MPR) cut back from $36 million to $34 million. The Rental Preservation Technical Assistance program receives $1 million, half as much as in FY23, although it was not included at all in the Administration’s budget or the House or Senate bills.

USDA’s flagship Section 502 direct mortgage program, which enables low- and very low-income families to buy their first homes, is cut from $1.25 billion in FY23 to $880 million in FY24. Even Section 502 guarantees, which serve slightly higher income households than Section 502 direct and cost the government very little, are reduced from $30 billion to $25 billion. The self-help housing program, which enables local nonprofit organizations to help families build their own homes, is also cut, from $32 million to $25 million.

This agreement on funding for FY24 – which started on October 1, 2023 – comes just one week before the President’s budget for FY25 will be released, kicking off the process of determining funding for next year.

USDA Rural Dev. Prog.

(dollars in millions)

 FY23 Final Approp. FY24 Admin. Budget FY24 House Committee Bill
H.R. 4368		 FY24 Senate Bill
H.R. 4366		 FY24 Final
502 Single Fam. Direct $1,250 $1,500 $881 $850 $880
    Nat. Amer. SF Demo. 7.5 12 5 7.5 5
502 Single Family Guar. 30,000 30,000 30,000 30,000 25,000
504 VLI Repair Loans 28 50 25 28 25
504 VLI Repair Grants 32 40 25 32 25
515 Rental Hsg. Direct Lns. 70 200 60 60 60
514 Farm Labor Hsg. Lns. 20 50 13 25 15
516 Farm Labor Hsg. Grts. 10 18 5 10 7.5
521 Rental Assistance 1,488 1,650 1,607 1,608 1,608
523 Self-Help TA 32 40 25 32 25
533 Hsg. Prsrv. Grants 16 30 10 16 10
538 Rental Hsg. Guar. 400 400 400 400 400
Rental Prsrv. Demo. (MPR) 36 75 34 35 34
542 Rural Hsg. Vouchers 48 38 48 48 48
Rental Prsrv. TA 2 – – – 1
Rural Cmnty. Dev’t Init. 6 – 5 6 5
Community Facil. Loans 2,800 2,800 2,800 2,800 2,800
Community Facil. Grants 325.5* 87 317* 32 5
    Tribal Colleges CF Grts 10 ? 6 10 8
Community Facil. Guarantees 650 650 650 650 650

* These Community Facilities grant amounts include funds earmarked by members of Congress for specific projects (called “Congressionally Directed Spending” or “Community Project Funding”).

Senate Minibus Includes HUD and USDA

On November 1, 2024, the Senate passed a “minibus,“ H.R. 4366, that includes funding for USDA, Transportation-HUD, and Military Construction-VA. On September 28, the House voted against its USDA appropriations bill.

Senate and House Committees Adopt Different Figures for FY24 USDA Spending

On June 22, the Senate Appropriations Committee passed its version of USDA’s funding bill for fiscal year 2024. Senate appropriators are using the spending limits set in the Fiscal Responsibility Act —  the debt ceiling compromise — while the House is developing spending bills to fit lower caps. As a result, the Senate bill proposes higher amounts than the House for most rural housing and community facilities programs. It would keep most of them at FY23 levels.

Funding Levels

While keeping most programs at FY23 spending levels, the Senate bill would reduce funding for the flagship Section 502 direct mortgage program. It proposes $850 million rather than this year’s $1.25 billion. It would also increase the lowest possible subsidized interest rate for Section 502 direct loans to 2% from the current 1%.

Rescissions

The bill would cancel some funds appropriated in prior years but not yet spent: $3 million in the rural voucher account and $30 million intended for Section 504 grants.

Rental Preservation

The Senate bill, unlike the House’s version, adopts the administration’s proposal for decoupling Section 521 Rental Assistance from Section 515 and 514 mortgages in limited circumstances. When a USDA mortgage is paid off, an owner could continue to receive RA if the property has RA already and there is no other way to preserve the property as affordable housing. Decoupled RA could be provided for a maximum of 15,000 units in FY24.

Other Provisions

The report that accompanies the Senate bill “encourages” USDA to increase maximum grants for the Rural Community Development Initiative from $250,000 to $500,000 and “to allow an advance of 25 percent of grant funds prior to a match being supplied.”

The final section of the bill (Title VII) is separate from the main provisions relating to housing and CF programs but contains several housing-related provisions, including the Section 502 interest rate change (Sections 771 and 774) and rescissions (Sections 732 and 744). It would also extend the terms of Section 523 self-help land development loans and Section 524 site development loans to five years instead of the current two (Sections 761 and 762). It would raise the statutory cap on the number of rural housing vouchers, which has been raised for one year at a time in past appropriations bills, from 5,000 to 10,000.

House Committee Passes FY24 USDA Appropriations

The full House Appropriations Committee approved a fiscal year 2024 funding bill for USDA on June 14, 2023. The committee made some changes in the bill passed by the Agriculture Appropriations Subcommittee on May 18, but none were related to housing and community facilities. The measure retains the housing and CF program cuts adopted by the subcommittee.

New Details on Proposed Cuts

The full House committee released report language to accompany the bill, which provides some details not previously available. The report makes clear there would be a large cut to the pool of funding for standard community facilities grants that would be available through USDA’s competition: the total would plunge by 86%, from $25.3 million in FY23 to just under $3.6 million in FY24. Section 514 loans for farmworker housing would fall from $20 million in FY23 to $13 million in FY24, and Section 516 grants would drop from $10 million to $5 million. Section 504 grants and Section 533 would also decrease.

Like its subcommittee, the House Appropriations Committee states that its $1.607 billion will “fully fund the [Section 521 Rental Assistance] program,” without explaining why the amount differs from the administration’s budget request or whether “all” includes the 27,000 contracts added by the American Rescue Plan Act. (The administration’s total also includes $6 million for RA in new Section 515 units; that amount is not included in the House bill because it would not provide Section 515 funding for new units.)

Disadvantaged Farmers Program Cancellation Proposed

The full House Appropriations Committee adopted an amendment, proposed by Agriculture Subcommittee Chair Andy Harris (R-Md.), to eliminate a program for disadvantaged farmers that was created in the Inflation Reduction Act. The IRA program replaced one created in the American Rescue Plan Act. The ARPA program would have aided “socially disadvantaged” farmers and ranchers because lawsuits previously determined that USDA discriminated against them. Then white farmers and ranchers sued, claiming it was discriminatory to pay people based solely on their race/ethnicity. While those suits were pending, Congress replaced the ARPA program with a new one in IRA to provide payments to anyone, regardless of race/ethnicity, who could show they experienced past discrimination in USDA farm lending programs. It also included grants and loans to improve land access (including heirs’ property and fractionated land issues) for underserved farmers, ranchers, and forest landowners. And it funded outreach, education, research, equity commissions, and other aid.

The House bill also cancels diversity, equity, and inclusion efforts at USDA. During the markup Rep. Harris noted that it would not impact USDA’s civil rights office.

House Subcommittee Releases Rural Housing Funding Bill

On May 18, 2023, the House Agriculture Appropriations Subcommittee approved a fiscal year 2024 funding bill for USDA, proposing to fund many rural housing programs at levels lower than those requested in the administration’s budget, and in some cases lower than the amounts appropriated in FY23 or FY22.

The full House Appropriations Committee scheduled its own mark-up for May 24, then postponed it without setting a new date.

The administration’s budget documents state that its $1.65 billion request for Section 521 would renew all current Rental Assistance contracts, including 27,000 contracts added by the American Rescue Plan Act. The subcommittee’s summary says its $1.607 billion “fully funds existing rental contracts to ensure rural residents will not be displaced,” but does not specifically mention the ARPA units and does not explain the discrepancy between its figure and the budget’s. The administration’s total also includes $6 million for RA in new Section 515 units; that amount is not included in the House bill because it would not provide Section 515 funding for new units.

The House bill would also rescind unspent monies from the American Rescue Plan Act and the Inflation Reduction Act and would prohibit USDA spending on climate-change-related items including energy efficiency.

The Senate has not yet released proposed appropriations bills.

White House Budget Requests Increases in Rural Housing Funding

March 13, 2023 — The White House’s detailed budget request for fiscal year 2024 would increase funding for almost all of USDA’s rural housing and community facilities programs.

View a recording or the slides from HAC’s webinar on Rural Housing in the Fiscal Year 2024 White House Budget, which examined the budget’s contents and what to expect over the coming months.

Initiatives Requiring Legislation

The budget proposes legislative changes for Section 502 direct homeownership loans and for multifamily housing preservation.

For the Section 502 direct program, subsidy “recapture” would be eliminated. Recapture requires that, when a low- or very low-income homeowner with a Section 502 loan sells the house or moves, they must repay the subsidy amounts they have received over the life of the loan. The administration estimates that eliminating this penalty for current borrowers would cost USDA $996 million. It also proposes that Section 502 direct loans made in 2024 will not to be subject to recapture.

Like last year’s budget, the FY24 request proposes to provide HUD vouchers rather than USDA vouchers for tenants who lose Section 521 Rental Assistance when the USDA Section 515 or 514 mortgage ends for the property where they live. The HUD budget includes $20 million for these vouchers. USDA also again asks Congress to “decouple” RA from USDA mortgages so that some tenants can continue to receive RA after their properties’ mortgages end.

Funding Requests

The budget’s proposed $1.65 billion for Section 521 Rental Assistance would enable USDA to renew all of its RA contracts, including 27,000 contracts added by the American Rescue Plan Act.

The $200 million funding level for Section 515 is intended to provide enough for some new construction as well as preservation of existing properties. The Section 521 request includes $6 million to provide RA for the new Section 515 units.

The Rural Community Development Initiative, which funds capacity building for local organizations, would receive more than three times as much funding in FY24 as in FY23. The budget requests a leap from $6 million to $22.8 million, without explaining a particular reason for the increase. (RCDI is a setaside within the community facilities grants program but is not limited to recipients of CF funds.)

The budget asks Congress to authorize foreclosure authority for USDA RD’s multifamily office that would be equivalent to HUD’s.

All housing construction or rehabilitation would be required to improve energy or water efficiency, or address climate resilience.

Some HUD Programs Cut in Final FY24 Spending Bill, But Vouchers Fully Funded

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Some Department of Housing and Urban Development programs will receive increased funding in FY24 under the final minibus appropriations bill released by congressional leaders on March 3. The bill is expected to pass before funding for several agencies, including HUD, runs out on March 8. Fiscal year 2024 began on October 1, 2023.

— HAC’s analysis of FY24 appropriations for USDA housing programs is available here. —

The bill raises funding levels for HUD’s tenant-based and project-based voucher programs, providing enough to renew all expiring vouchers and fund additional vouchers. The Center on Budget and Policy Priorities had estimated the House and Senate bills’ figures for tenant-based Housing Choice Vouchers would end that support for 80,000-112,000 families. Instead, according to the National Low Income Housing Coalition, the final bill will enable HUD to renew those vouchers and add 3,000 more.

Native American housing receives an increase from $1.02 million in FY23 to $1.344 million this year. Homeless assistance funding is higher as well. A few programs, like Community Development Block Grants and fair housing, receive the same funding as in FY23. Others, including HOME, SHOP, Sections 202 and 811, and healthy homes, will have lower funding this year than last. The new PRICE manufactured housing preservation program drops from $225 million in FY23 to $10 million in FY24, but it had seemed likely to get no funding at all.

This agreement on funding for FY24 – which started on October 1, 2023 – comes just one week before the President’s budget for FY25 will be released, kicking off the process of determining funding for next year.

HUD Program (dollars in millions) FY23 Final Approp. FY24 Admin. Budget FY24 House Bill
H.R. 4820		 FY24 Senate Bill
H.R. 4366 		FY24 Final
CDBG $3,300* $3,300 $3,300 $3,300 $3,300
HOME 1,500 1,800 500 1,500 1,250
PRICE Manuf. Hsg. Preserv. 225 0 20 0 10
Self-Help Homeownshp. (SHOP) 13.5 10 10 13.5 12
Veterans Home Rehab 1 4 1 0 0
Rural Cap’y Bldg (RCB) 6 5 7 6 6
Tenant-Based Rental Asstnce. 27,600 32,703 31,132 31,738 32,387
    VASH setaside 50 0 ** 30 15
    Tribal VASH 7.5 5 5 7.5 7.5
     Replacemts. for 521 RA – 20*** – – –
Project-Based Rental Asstnce. 13,938 15,904 15,820 15,790 15,610
Public Hsg. Capital Fund 3,200 3,225 3,235 3,200 3,410
Public Hsg. Operating Fund 5,109 5,133 5,128 5,530 5,501
Choice Neighbrhd. Initiative 350 185 0 150 75
Native Amer. Hsg. 1,020 1,053 1,344 1,082 1,344
Homeless Assistance Grants 3,633 3,749 3,729 3,908 4,051
Hsg. Opps. for Persons w/ AIDS 499 505 505 505 505
202 Hsg. for Elderly 1,075 1,023 913 1,075 913
811 Hsg. for Disabled 360 356 208 360 208
Fair Housing 86 90 85 86 86.4
Healthy Homes & Lead Haz. Cntl. 410 410 345 350 345
Housing Counseling 57.5 66 57.5 57.5 57.5

* This table does not show amounts for Community Projects/Congressionally Directed Spending (popularly known as “earmarks”), which were included in the CDBG account beginning in FY22.

** The bill does not specify an amount for HUD-VASH vouchers but the National Low Income Housing Coalition reports that the broader Tenant-Based Rental Assistance funding in the bill will cover those renewals.

*** This $20 million request is explained in HAC’s summary of the USDA rural housing budget proposal.

 

Senate Minibus Includes HUD and USDA

On November 1, 2024, the Senate passed a “minibus,“ H.R. 4366, that includes funding for USDA, Transportation-HUD, and Military Construction-VA.

Senate Funding Bill Supports Most HUD Programs

On July 21, 2023, the Senate Appropriations Committee unanimously approved a bill to fund HUD for fiscal year 2024. Like the House bill, the Senate’s version maintains aid for tenants. It holds many other programs at their FY23 funding levels, rejecting the House’s proposed cuts to HOME, Section 202 elderly housing, Section 811 housing for people with disabilities, and the Self-Help Homeownership Opportunity Program (SHOP). It includes no funding, however, for the new Preservation and Reinvestment Initiative for Community Enhancement (PRICE) program for preservation of manufactured housing.

House FY24 Funding Bill Supports Tenants, Cuts HOME

The House Transportation-HUD Appropriations Subcommittee approved an FY24 spending bill on July 12 that would maintain funding for tenant vouchers, public housing, and Native American housing programs but would cut programs including HOME, Section 202 elderly housing, Section 811 housing for people with disabilities, and the Self-Help Homeownership Opportunity Program (SHOP).

HOME would be most drastically impacted, with its funding cut by two-thirds, from $1.5 billion in FY23 to $500 million in FY24. SHOP would fall back to the $10 million funding level it had for several years before being increased to $13.5 million in FY23. The Choice Neighborhoods Program would be eliminated and the new Preservation and Reinvestment Initiative for Community Enhancement (PRICE) program for preservation of manufactured housing would be cut from $225 million in FY23 to $20 million in FY24.

The bill would rescind $564 million appropriated in past years for the Lead Hazard Control and Healthy Homes programs but not yet spent.

The bill also proposes to block HUD’s February 9, 2023, Affirmatively Furthering Fair Housing (AFFH) proposed regulations and HUD’s ability to require specific changes to existing zoning laws under its June 10, 2021 AFFH interim final rule.

The Senate has not yet released its FY24 Transportation-HUD appropriations bill, but its version is likely to be substantially different from the House’s proposal.

HUD Budget Proposes to Shrink Small Programs, Expand Support for Others

March 13, 2023 — The administration’s budget for fiscal year 2024 requests funding increases in many HUD programs and calls for legislation expanding support to far more tenants and homebuyers. At the same time, however, the budget would cut some of HUD’s smallest programs, including two that are particularly important for rural residents: the Self-Help Homeownership Opportunity Program (SHOP) and the Rural Capacity Building (RCB) program. Details are provided in the table below.

HAC presented a webinar on “Rural Housing in the Fiscal Year 2024 White House Budget” on Wednesday, March 15. Watch the recording and view the slides here.

Two Steps Back for Rural Places and Native Americans

SHOP and RCB both saw small increases from FY22 to FY23, but the administration’s budget would roll those back for FY24. SHOP grew from $12.5 million in FY22 to $13.5 million in FY23 and would get only $10 million under the budget request. RCB received $6 million for the current year, but the budget would reduce it to its FY23 level of $5 million.

The administration requests no funding for manufactured housing grants through the Preservation and Reinvestment Initiative for Community Enhancement (PRICE), which was created in the FY23 omnibus appropriations bill.

The pool of funding that covers most of HUD’s Native American housing efforts would be increased from $1.02 billion in FY23 to $1.053 billion. But the much smaller Section 184 loan guarantee program, which has $5.5 million in FY23, would be cut to less than one-fifth of that, $905,700. At the same time, the budget asks Congress to expand Section 184, making it available to all Tribal members regardless of where they purchase a home.

Support for Renters

The budget proposes to create new, substantial assistance for tenants through mandatory spending proposals. These efforts, which would not be funded through the annual appropriations process, would need to be approved separately by Congress. That is extremely unlikely to happen in the current political climate.

Proposed mandatory spending would include:

  • $9 billion to provide vouchers for all youth aging out of foster care annually;
  • $13 billion for the estimated 450,000 extremely low-income veteran families
  • $7.5 billion for new Project-Based Rental Assistance contracts for extremely low-income households;
  • $7.5 billion to modernize public housing; and
  • $3 billion for competitive grants to states and localities for eviction reduction efforts such as emergency rental assistance and access to legal counsel.

The budget also proposes to extend assistance to tenants through some existing programs:

  • $565 million for new incremental vouchers for 50,000 additional households, specifically including those who are experiencing or at risk of homelessness or fleeing or attempting to flee domestic violence or similar violence; and
  • $300 million for capital investments in public housing.

The budget proposals for the Treasury Department would expand the Low Income Housing Tax Credit, as well as the New Markets Tax Credit.

Homeowner Aid and Removing Barriers

The administration’s budget calls for $10 billion in mandatory funding for a new First-Generation Down Payment Assistance program to help address racial and ethnic homeownership and wealth gaps. Homeowner assistance would also be supported by $100 million to states and territories through the existing HOME program. HOME’s funding would increase from $1.5 billion in FY23 to $1.8 billion in FY24.

The Community Development Block Grant program would again receive $3.3 billion, including $85 million to continue the “Yes In My Back Yard” or YIMBY program created in FY23 for removing regulatory barriers to housing production and preservation.

 

HUD Program(dollars in millions) FY22 Final Approp. FY23 Final Approp. FY24 Admin. Budget
CDBG $3,300* $3,300* $3,300
HOME 1,500 1,500 1,800
Self-Help Homeownshp. (SHOP) 12.5 13.5 10
Veterans Home Rehab 4 1 4
Tenant-Based Rental Asstnce. 27,370 27,600 32,703
    VASH setaside 50 50 0
    Tribal VASH 5 7.5 5
    Replacemts. for 521 RA – – 20**
Project-Based Rental Asstnce. 13,940 13,938 15,904
Public Hsg. Capital Fund 3,388 3,200 3,225
Public Hsg. Operating Fund 5,064 5,109 5,133
Choice Neighbrhd. Initiative 350 350 185
Native Amer. Hsg. 1,002 1,020 1,053
Homeless Assistance Grants 3,213 3,633 3,749
Hsg. Opps. for Persons w/ AIDS 450 499 505
202 Hsg. for Elderly 1,033 1,075 1,023
811 Hsg. for Disabled 352 360 356
Fair Housing 85 86 90
Healthy Homes & Lead Haz. Cntl. 415 410 410
Housing Counseling 57.5 57.5 66
Rural Capacity Bldg 5 6 5

* Substantial increases in CDBG funding for FY22 and FY23 was driven nearly entirely by the return, after a 10-year absence, of $1.5 billion for the Economic Development Initiative for the purpose of funding Community Projects/Congressionally Directed Spending (popularly known as “earmarks”). In FY23, just under $3 billion is added for earmarks. These figures are not included in the table.

** This $20 million request is explained in HAC’s summary of the USDA rural housing budget proposal.

Policy News from the Administration

HAC Comments on OMB Guidance on Grants and Agreements – December 2023

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The Office of Management and Budget (OMB) put out a call for comments on their guidance for Grants and Agreements, with a lens toward making grants processes more equitable. HAC submitted comments in support of more proactive geographic equity in the federal grants process. In addition to recognizing capacity building and access to capital as two essential equity issues in rural places, HAC’s comments focused on the recommendations below.

  • Instituting a Rural Impact Analysis for New Regulations
  • Investing in Capacity Building and Rural Intermediaries
  • Eliminating, Reducing or Modifying Cost-sharing and Matching Requirements that Disparately Impact Rural Communities
  • Streamlining and Increasing Uniformity in Applications
  • Including or Increasing Administrative and Predevelopment Costs as Eligible Activities in Rural Places
  • Recognizing the Rural Challenges in Metrics and Data Reporting
HAC Comments on OMB Guidance on Grants and Agreements 12.04.23

Debt ceiling compromise limits spending, rescinds some HUD and USDA housing funds

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The Fiscal Responsibility Act – the recently enacted compromise that suspends the debt ceiling until January 1, 2025 – makes fewer cuts than the Limit, Save, Grow Act passed by the House in April, but it almost certainly will limit federal spending on housing aid for the next two fiscal years. In addition to the well-publicized work requirements for SNAP and TANF recipients, reallocation of IRS funding, and revised environmental reviews, the measure includes a variety of other provisions, several of which impact rural housing.

  • It rescinds any unspent funds from the $39 million for Section 502 direct loans and 504 loans that was provided in the American Rescue Plan Act. (The June 8, 2023 HAC News reported incorrectly that $2 million in rental preservation technical assistance funds were also rescinded. The compromise did not rescind any preservation TA monies.)
  • It rescinds unspent monies appropriated by pandemic relief laws for the Emergency Rental Assistance and Homeowner Assistance Fund programs, and funds that were appropriated in the CARES Act but have not yet been spent by HUD for Tenant-Based Rental Assistance, Project-Based Rental Assistance, Native American housing, Section 811, and Section 202.
  • It caps overall FY24 funding for discretionary programs at around FY23 levels. Despite this limit on total spending, specific programs may receive amounts that are higher or lower than their FY23 levels. As it does every year, the appropriations process in Congress will make key decisions for individual programs.
  • Overall discretionary spending can increase only 1% from FY24 to FY25. The annual appropriations bills will set amounts for individual programs.
  • If appropriations do exceed the limits in FY24 or FY25, a sequester would make across-the-board cuts to discretionary programs.
  • Discretionary spending increases are also capped at 1% for fiscal years 2026-2029, but Congress can waive these caps if it chooses. It has no such option for FY24 and FY25.
  • If Congress uses a continuing resolution to fund any part of the government beyond January 1 of FY24 or FY25, funding for that year would be reduced. If a CR were still in effect on April 30, the funding cut would be applied to the entire year.
Home Mortgage Demand Declined in Rural America
Housing Assistance Council

Home Mortgage Demand Declined in Rural America Too

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Signs and Trends from a USDA Housing Finance Product

There have been numerous business and media reports on the slowdown in homebuying and mortgage activity in recent months. This market response is largely related to recent interest rate increases for 30-year fixed mortgages spurred by the Federal Reserve raising its benchmark rates. According to some estimates, the rate of mortgage applications nationally fell by half in 2022. Are mortgage markets behaving similarly in rural America too? Data from the Department of Agriculture (USDA) on its Guaranteed Home Loan product signals that rural homebuyers hit the brakes in 2022 as well. In the last fiscal year, USDA loan guarantees plummeted by more than 40 percent from their 2021 level and dropped well below the 100,000-loan mark to guarantee 72,000 loans.

Download the Research Note.

Affordable Housing and Recovery in Rural Communities, Federally Assisted Housing Opportunities for Residents

Rural Resource Guide: Affordable Housing and Recovery in Rural Communities

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Federally Assisted Housing Opportunities for Residents with Substance Use Disorders and Opioid Use Disorders

Substance Use Disorder (SUD) and opioid misuse have proliferated across the U.S. in the past decade – and rural America has been particularly impacted. Effectively addressing the opioid epidemic and supporting recovery includes a holistic community approach with an essential shared foundation; safe, stable, affordable housing. In an effort to equip local organizations with proper resources the Housing Assistance Council presents its new Rural Resource Guide: Affordable Housing and Recovery in Rural Communities, Federally Assisted Housing Opportunities for Residents with Substance Use Disorders and Opioid Use Disorders.

The guide serves as a resource to housing practitioners seeking to provide homes to households affected by substance use disorders. It presents the federal regulations for federally subsidized housing programs from the U.S. Department of Housing and Urban Development, the Internal Revenue Service, and the U.S. Department of Agriculture.

Download Rural Resource Guide

Rural Resource Guide. Affordable Housing and Recovery in Rural Communities

Resource Guide Launch Webinar


Policy News from Congress

Housing Assistance Council Statement on FY 2023 Omnibus Bill

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This bipartisan agreement maintains funding for USDA’s rural rental housing portfolio and makes a game-changing investment in manufactured housing.

The Housing Assistance Council appreciates Congress continuing to invest in rural communities through the latest omnibus spending bill and hopes that the next Congress will take further steps in 2023 to address the housing crisis in rural America.

The appropriations agreement reached this week makes significant contributions to affordable rural rental housing through the U.S. Department of Agriculture’s housing programs. It also provides $225 million in funding for a new manufactured housing financing and improvement program to be administered by the U.S. Department of Housing and Urban Development.

“This bipartisan agreement maintains funding for USDA’s rural rental housing portfolio and makes a game-changing investment in manufactured housing,” said HAC CEO David Lipsetz. “Rural communities will use this funding to preserve existing affordable housing, build more, and lay the foundation for a better future.”

More than half of all manufactured homes are in rural places. In May, HAC’s Director of Research and Information Lance George testified to Congress that manufactured housing “should continue to be a high-quality, affordable housing option” for rural America.  By creating the first dedicated funding stream targeted to this essential affordable housing stock, this omnibus spending bill takes a critical first step toward achieving just that.

HAC also appreciates the omnibus’s continued support of capacity building programs through USDA and HUD. Congress has long recognized that housing programs only work when there are local partners helping to build, manage, and maintain affordable homes. With a modest investment in the capacity of small towns’ local housing organizations, rural communities can navigate the complexities of federal programs and modern housing finance. As the only national intermediary dedicated solely to rural housing, HAC is gratified to see HUD’s Rural Capacity Building program receive its first increase in program history, from its founding in 2012 at $5 million to $6 million in FY 2023. This will enable HAC and other RCB grantees to provide training and technical assistance to community-based organizations across rural America.

Yet the omnibus leaves too many rural Americans’ housing problems unaddressed. Most of the housing programs at both USDA and HUD enter 2023 with about the same resources they had in 2022, even as mortgage and rent costs are increasing across the country, USDA-financed rental developments are losing their affordability, and homelessness is increasing in rural areas. HAC calls on the 118th Congress to be bolder – to increase support for proven solutions and to innovate. Both the annual appropriations process and the 2023 Farm Bill offer opportunities for action. HAC’s detailed suggestions can be found here and here.

Everyone deserves a safe, healthy, and affordable place to call home. Through the upcoming Farm Bill and the next appropriations cycle, the 118th Congress will have the opportunity to make even more transformative investments that could make that vision a reality.

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