NCSHA Washington Report | October 2, 2025
Our weekly newsletter is arriving a day early due to NCSHA’s Annual Conference starting this weekend.
Take the federal government seriously with respect to what it says it expects to be the impact of the shutdown on its agencies that deal with the housing market.
According to the “lapse of funding plans” posted on HUD’s and USDA’s websites hours before it started Tuesday at midnight, both agencies expect mass furloughs of employees and cessation or delay of most activities that require human involvement, ranging from manual reviews of loan applications to delivery of technical assistance.
HUD’s Federal Housing Administration, its financial engine and a pillar of both affordable home mortgage loan and apartment construction financing, issued a notice to its homeownership business partners yesterday that used the word “limited” no fewer than eight times to describe its shutdown status, as in limited “ability,” “availability,” “services,” and “functionality.”
At USDA’s Office of Rural Development, only certain activities limited to the “purpose of preserving the Government’s property” are certain to continue, with other actions authorized “only as necessary to protect RD’s interest in properties.”
Take seriously organizations that represent important constituencies as they start to assess the seemingly likely prospect of a shutdown of more than a few days.
“A longer delay — especially if it leads to widespread layoffs at federal agencies important to the industry — will have severe and disruptive impacts to [mortgage lenders] and the consumers, end users, and customers they serve,” says the Mortgage Bankers Association.
“For most residents, rent payments and housing services will continue uninterrupted through November,“ writes the National Housing Law Project. “However, if the shutdown continues past the end of November, the situation dramatically deteriorates due to nonpayment to almost all owners.”
Take President Trump seriously, and literally, when he says, “We can do things during the shutdown that are irreversible, that are bad for [the Democrats] and irreversible by them, like cutting vast numbers of people out, cutting things that they like, cutting programs that they like,” and remember the White House has already frozen or clawed back more than $425 billion in funds already appropriated by Congress, according to House Democrats.
Those moves, and similar actions by the White House to override and undo established congressional funding prerogatives, are the real root of the current standoff between the two political parties. Which Senate Majority Leader John Thune said today, “We don’t control.”
Take heart in the fact that the last shutdown, which lasted 35 days, didn’t inflict serious, lasting harm on housing and that the constellation of market participants focused most squarely on lower-income owners and renters, with state housing finance agencies at the center, is nothing if not resilient. Which it will need to be.
Stockton Williams | Executive Director
Washington Report will return October 17.
In This Issue
- Appropriations Lapse; Federal Government Shuts Down; Agencies Operating Per Contingency Plans
- IRS Adopts NCSHA, Novogradac Recommendations in Final Average Income Test Recordkeeping and Reporting Regulations
- HUD Issues 2026 Qualified Census Tract, Difficult Development Area Designations
- White House Announces New Tariffs on Lumber, Furniture, Cabinetry
- HUD Extends NSPIRE Compliance Date
- Senate Banking Committee Advances Hobbs, Kurtz Nominations
- FHFA Proposes New GSE Affordable Housing Goals for 2026 – 28
- Looking Ahead
Appropriations Lapse; Federal Government Shuts Down; Agencies Operating Per Contingency Plans
As of 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 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. While informal discussions among some Senators aimed at ending the impasse are taking place, there have been no significant developments suggesting the shutdown will end before next week at the earliest.
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 another 965 who could be called in on an intermittent basis to work on excepted activities. As a general rule, activities that are to some degree automated, such as Federal Housing Administration 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. For more information, see NCSHA’s blog.
IRS Adopts NCSHA, Novogradac Recommendations in Final Average Income Test Recordkeeping and Reporting Regulations
On September 30, the Internal Revenue Service (IRS) published final regulations implementing recordkeeping and reporting requirements for owners of Housing Credit properties opting for the Average Income Test (AIT) minimum set-aside. The final AIT recordkeeping and reporting regulations replace proposed and temporary regulations issued in 2022, which were published in concert with the final rule implementing the AIT broadly.
NCSHA joined Novogradac’s LIHTC Working Group at the time to urge the IRS not to require owners to report two separate groups of qualified units — a minimum set-aside group and an applicable fraction group — as envisioned in the proposed and temporary regulations when a single group would suffice and to allow owners more flexibility to correct noncompliance in the qualified group of units. The final regulations effectively adopt both recommendations.
HUD Issues 2026 Qualified Census Tract, Difficult Development Area Designations
HUD’s Office of Policy Development and Research released Tuesday the 2026 designations for Qualified Census Tracts (QCTs) and Difficult Development Areas (DDAs). Housing Credit properties in these areas may qualify for a basis boost of up to 30 percent. QCTs are census tracts with a poverty rate of at least 25 percent or where at least half of households earn less than 60 percent of area median income. DDAs are areas with high development costs relative to area median income. The new designations apply to Housing Credit allocations made after December 31, 2025, and to tax-exempt bond-financed buildings for which bonds are issued and placed in service after that date.
White House Announces New Tariffs on Lumber, Furniture, Cabinetry
On Monday, President Trump signed a proclamation imposing a new 10 percent global tariff on softwood timber and lumber and a new 25 percent global tariff on upholstered furniture, kitchen cabinets, and vanities. The tariffs take effect October 14. On January 1, 2026, the tariff on furniture increases to 30 percent and the tariff on cabinets and vanities increases to 50 percent. The White House issued a fact sheet on the new tariffs, stating “an overreliance on foreign timber, lumber, and their derivative products could jeopardize the United States’ defense capabilities, construction industry, and economic strength” and noting the U.S. “has been a net importer of lumber since 2016, despite having the practical production capacity to supply 95 percent of the U.S. softwood consumption.” The tariffs are expected to disrupt the construction material supply chain and exacerbate construction cost increases.
HUD Extends NSPIRE Compliance Date
HUD has extended the compliance date for the National Standards for the Physical Inspection of Real Estate (NSPIRE) in the Housing Choice Voucher and Project-Based Voucher programs from October 1, 2025, to February 1, 2027. This extension is intended to give public housing agencies and property owners more time to adapt inspection processes, train staff, and update systems before full implementation. HUD emphasized the delay reflects feedback from industry stakeholders who requested more time to transition while still advancing the goal of more consistent, standardized housing inspections across HUD programs.
Senate Banking Committee Advances Hobbs, Kurtz Nominations
The Senate Banking Committee Tuesday voted to favorably report the nominations of Ben Hobbs to serve as HUD Assistant Secretary for Public and Indian Housing and Ronnie Kurtz as HUD Assistant Secretary for Community Planning and Development. Both nominees were approved by straight party-line votes, with all Republicans voting in support and all Democrats opposed. In his opening statement, Committee Chair Tim Scott (R-SC) said Hobbs, who previously worked for Scott, has demonstrated strong performance and touted Kurtz’s experience working on housing at the local level. Ranking Member Elizabeth Warren (D-MA) sharply criticized both nominees, arguing Hobbs is undermining federal housing programs in his current position at HUD and chiding Kurtz for refusing to commit to her that he would defend HUD programs from spending cuts. Hobbs’ and Kurtz’s nominations will now be sent to the full Senate for consideration.
FHFA Proposes New GSE Affordable Housing Goals for 2026 – 28
The Federal Housing Finance Agency (FHFA) published Wednesday a proposed rule that would establish new affordable housing goals for the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. The goals require both firms to purchase from certain underserved markets a percentage of the total number of single-family and multifamily mortgages they finance. FHFA last year published the goals for years 2025 – 27, so the new proposal would supersede the goals previously put in place for the next two years.
For single-family loans, FHFA proposes to set the low-income home purchase goal — for loans made to borrowers earning at or below 80 percent of area median income (AMI) — at 21 percent of all single-family loan purchases, down from the current 25 percent goal. FHFA also would lower the very low-income home purchase goal (households earning at or below 50 percent of AMI) from six to 3.5 percent and eliminate an explicit subgoal for lending in minority census tracts. The agency argues that the current goals are infeasible given the lack of affordable for-sale homes available and affordability challenges facing working families and that they encourage the GSEs to engage in fiscally imprudent activities to meet them. FHFA proposes to maintain the multifamily goals at the same level: At least 61 percent of the rental units financed by loans each firm purchases must be affordable to low-income renters and at least 14 percent must be affordable to very low-income renters.
FHFA will accept comments on the proposal until November 2. Please email any feedback for NCSHA to consider in its comments to Greg Zagorski by October 27.
Legislative and Regulatory Activities
- October 15 | House Financial Services Committee | Hearing: Building Capacity: Reducing Government Roadblocks to Housing Supply
- October 15 | Comments Due to NCSHA | Federal Banking Regulators’ Request for Comment on Simplifying and Updating Community Reinvestment Act Regulations
- October 23 | Comments Due | Federal Banking Regulators’ Request for Comment on Simplifying and Updating Community Reinvestment Act Regulations
- October 27 | Comments Due to NCSHA | FHFA Proposed Affordable Housing Goals for 2026 – 28
- October 28 – 29 | House Financial Services Committee | Markup of Various Measures
- November 2 | Comments Due | FHFA Proposed Affordable Housing Goals for 2026 – 28
NCSHA, State HFA, and Industry Events
- October 4 – 7 | NCSHA Annual Conference & Showplace | New Orleans
- October 4, 5:00 – 7:15 pm | Women’s Affordable Housing Network Happy Hour | The Jazz Playhouse, New Orleans
- October 21 – 22 | ProLink Technology Live 2025 | Virtual
Stockton Williams will speak at this event. - October 22 – 23 | AHTCC Fall Meeting | Washington, DC
Jennifer Schwartz will speak at this event. - October 22 – 24 | NAHMA Top Issues in Affordable Housing Conference | Washington, DC
Jennifer Schwartz will speak at this event. - October 23 – 24 | CLPHA Fall Meeting | Washington, DC
Jennifer Schwartz will speak at this event. - October 27 – 29 | Kansas Housing Conference | Overland Park, KS
