Appropriations Lapse; Federal Government Shuts Down; Agencies Operating Per Contingency Plans

As of today, October 1, as a result of a lapse in appropriations at the conclusion of Fiscal Year 2025, the federal government is shut down and agencies, including the U.S. Departments of Housing and Urban Development (HUD) and Agriculture (USDA) are operating according to contingency plans established according to legal precedent and Office of Management and Budget guidance. While the immediate impact on HFA activities and operations is likely to be limited, the longer the shutdown lasts, the greater its potential effects may become.

As a general rule, activities that are to some degree automated, such as FHA loan endorsements or disbursements of grant funds already obligated, should continue apace for a period of time. However, most activities that require human intervention, such as manual reviews of loan applications and delivery of certain technical assistance, are likely to cease or be delayed.

HUD

The vast majority of HUD staff are expected to be furloughed during the shutdown. Of 6,105 employees currently, HUD projects designating 244 as excepted or exempt full-time employees, with an additional 143 whose salaries are not contingent on annual appropriations, and an additional 965 who could be called in on an intermittent basis to work on excepted activities.

Public and Indian Housing

The Office of Public and Indian Housing (PIH) will continue to keep open its line of credit system for purposes of disbursing previously obligated funds for public housing; where further review by HUD staff is not required, grantees should be able to draw funds normally.

PIH also will maintain access to a number of systems, including the HUD Central Accounting Program System (HUDCAPS) and Enterprise Voucher Management System (eVMS), which should allow for uninterrupted disbursement of previously obligated funds for Housing Assistance Payments.

The Real Estate Assessment Center (REAC) will remain open for things like inspection inquiries and resident income verification; however, responses that require HUD staff intervention will be delayed.

Community Planning and Development

The Office of Community Planning and Development (CPD) will continue to make previously obligated Community Development Block Grant, HOME Investment Partnerships Program, and Homeless Assistance Grant funds available for draw down by CPD grantees as normal, as long as further review by HUD staff is not required. If further review is required, HUD expects to recall necessary staff on an intermittent basis to approve or deny individual disbursement requests as necessary to avoid imminent threat to safety of human life or property.

CPD IT systems such as the Electronic Line of Credit Control System (eLOCCS) and Integrated Disbursement and Information System (IDIS) will remain operational.

Of note, consolidated plans for annual formula funding programs are deemed approved if not disapproved within 45 days of submission. It is possible a long-term shutdown could result in the automatic approval of consolidated plans, as HUD does not consider review of consolidated plans to be an excepted activity.

Office of Housing

The Office of Housing will consider excepted work that is funded through multi-year or no-year appropriations, including most activities associated with the Federal Housing Administration’s (FHA) portfolio of insured mortgages as well as commitments for project-based rental assistance (PBRA). FHA multifamily production will continue to conduct closings and endorsements of transactions with firm commitments issued prior to the shutdown. Risk-Share Lenders may, at their (and their owners’ and borrowers’) risk, process interim construction or repair draws and release funds from Operating Deficit and Working Capital Accounts to support project operations.

HUD will make payments under previously obligated Section 8 contracts, Section 236 agreements, Interest Reduction Payment contracts, Project Rental Assistance Contracts (PRAC), Section 811 Project Rental Assistance, Performance-Based Contract Administration (PBCA) contracts, and similar rental-assistance-related contracts on an as-needed basis to ensure ongoing viability of assets and preservation of affordable housing. The department will work closely with the Office of the Chief Financial Officer to identify, when previously obligated Section 8, PRAC, and PBCA contract allocations may be insufficient to support ongoing program operations, if any permanent or indefinite authority is available or multi-year carryover funding remains that can be used to fund these assistance programs. If such funds are available, the necessary obligational actions will be taken to make such funds available for timely disbursement, including processing Section 8 and PRAC renewals for expiring contracts and processing amendment funds for non-expiring Section 8 contract renewals.

FHA’s Office of Single-Family Housing and some of its mortgage insurance programs will be operational, but there will be limited capacity for actions that require FHA staff intervention or customer service. The Office of Single-Family Housing will continue to endorse loans, with the exception of Home Equity Conversion Mortgages and Title I loans. It also will maintain minimal operations to service Secretary-held notes and mortgages, support loan servicing and loss mitigation activities, and ensure the continuity of asset disposition processes.

Ginnie Mae’s operations will largely be unaffected.

The Office of Housing Counseling will not have staff on board and will not process requests to draw down grant funds from the Line of Credit Control System.

USDA

Roughly half of USDA’s 85,907 staff members are expected to be furloughed as a result of the government shutdown. A number of significant agency activities will cease to operate during the shutdown including certain payment processing, disaster assistance processing, and technical assistance.

Of the 3,193 Rural Development (RD) employees on staff prior to the shutdown, 2,640, or nearly 83 percent, are expected to be furloughed. The majority of RD activities will cease operating. Only certain activities limited to the “purpose of preserving the Government’s property” will be excepted during the shutdown. These include Section 521 Rental Assistance Program outlays of prior obligations and the RD and Farm Loan Program loan portfolios. RD will disburse funds, issue loan note guarantees, and take other actions “only as necessary to protect RD’s interest in properties.” If the shutdown is to last longer than five days, the number of furloughed staff is subject to change.