On September 30, 2025, the federal government will run out of money unless Congress passes and the president signs a new budget or continuing resolution. On September 19, the US Senate rejected a short-term funding bill designed to keep the federal government open through November 21, 2025. With each passing day, the likelihood of a federal government shutdown on October 1st increases.
In prior years, HUD issued a Contingency Plan that outlined the staff who would continue to work during a shutdown and a plan for how HUD programs would continue to be funded. At the beginning of the new administration, HUD’s Contingency Plan was removed from its website. The White House landing page for agency continency plans is currently blank.
This leaves owners and operators of HUD housing to predict the impact of a government shutdown on affordable housing programs based on previous experience, the most recent of which was in 2019 during the first Trump administration when the federal government remained unfunded for 35 days.
During prior shutdowns, HUD utilized an extremely limited “skeleton” staff to continue only the operations deemed essential, and the impact was felt by all stakeholders involved in HUD’s portfolio.
HUD operational impacts during a shutdown
HUD’s prior guidance estimated that approximately 1,500 of its employees would be retained or intermittently called in during a shutdown under one of the excepted and pre-funded categories. It is unclear how many HUD staff would be retained or intermittently called in if there is a government shutdown in 2025 given the number of HUD employees has been dramatically reduced by more than 30% since February. The four major categories of HUD activities that we anticipate would continue during a shutdown are:
- Responding to immediate needs that impact the health or safety of residents or threaten the protection of property
- Processing of deals that are close to closing (including FHA-insured mortgages that have a Firm Commitment and RAD deals that have RCCs issued prior to the shutdown
- Continued funding of monthly subsidy programs, including public housing operating subsidies, housing choice voucher subsidies, and multifamily assistance contracts, but only for as long as funding remains available
- Already-obligated annual grant programs, including emergency housing for the homeless
Significant agency programs would cease during a shutdown, including the above-listed monthly subsidy programs once funding has run out, as well as most fair housing activities.
Limited HUD staffing means there would be fewer staff to answer questions and participate in daily HUD duties and processes, which would impact daily operations at properties. A shutdown would reach much further than just HUD staff—contract administrators would remain operational for at least some of the shutdown, but other HUD functions would cease or only operate on an emergency basis. For example, previously scheduled and funded NSPIRE/REAC inspections would continue. However, future NSPIRE/REAC inspections would be cancelled unless HUD has reason to believe there is a threat to life or property. CPD funds, including CDBG, HOME, HOPWA, and Homeless Assistance Grants funds, are pre-appropriated programs and as such would be available to be drawn down by CPD grantees.
Transactions requiring HUD approvals, such as approvals of assignments or renewals of Housing Assistance Payments (HAP) contracts and applications for FHA insurance, would be on hold until HUD resumes normal operations, which will delay acquisition and/or refinancing transactions across the country that provide critical capital to affordable housing projects in need.
In past shutdowns, HUD has paused processing transactions involving FHA-insured loans unless the transaction has already received a firm commitment and is very close to closing. FHA Multifamily Production historically has been willing to conduct closings and endorsements only for projects with Firm Commitments or Firm Approval letters and only for as long as Commitment Authority is available. HUD also continued to process RAD conversions during past shutdowns only where a RAD Conversion Commitment or RAD Conditional Approval is already received; however, staffing for these transactions will be very limited and therefore the process is likely to be delayed.
Subsidy contracts impacted during a shutdown
Section 8 project-based rental assistance (PBRA) contracts with expiration dates in the future should not be immediately impacted by a shutdown and should continue to receive monthly payments for at least a few months following a shutdown. HUD should continue to make payments with previously obligated funds until funds are exhausted, at which point payments should be made with any permanent or indefinite authority or multi-year carryover funding that is available.
PBRA contracts that will soon expire may be funded through advanced appropriations, but in the case of a prolonged shutdown, funds could run out. During the 2019 shutdown, which lasted 35 days, over 1,000 HAP contracts expired in the first month of the shutdown and were not renewed until after the government re-opened. HUD authorized owners to use project reserves to cover shortfalls and the impacted contracts were retroactively funded after the government re-opened. Owners should be prepared to use project reserves to cover shortfalls during any prolonged shutdown.
Contract administrators will continue to service PBRA contracts for as long as appropriated funds are available for their activities. The TRACS system should remain online, and owners and managers must continue to process certifications and voucher requests throughout the shutdown.
Voucher programs would also be impacted—public housing authorities (PHAs) will continue operations as normal but PHA funding is dependent on federal funding. As such, PHA operations could become impacted by lack of funding in the case of a prolonged shutdown. Owners should stay in close communication with their local PHAs to understand the plan for staffing and funding during a shutdown and the potential impact to their properties.
Other affordable housing programs across the federal government would also be impacted by a potential shutdown. USDA Rural Development’s shutdown plan, last updated in September 2021 and not currently published to the USDA Rural Development site, states that USDA Section 521 rental assistance contracts will continue to be renewed during a shutdown so long as funding is available. Similar to previous years, advanced funding appropriations are not available for rental assistance this year, so funding will be very limited, if available at all. Thus, Rental Assistance Agreements will be impacted as the contracts approach their annual anniversary date. In the past, USDA has discussed the possibility for reserves to be used to fund operations during a prolonged shutdown, which owners may want to explore. USDA will not make new loans or grants during a shutdown. However, USDA should continue to process payments for insurance and taxes from escrow accounts and some other processing activities that are considered essential to preserving the government’s property.
Best practices during a shutdown
As noted above, HUD will operate with a limited “skeleton” staff during a government shutdown and while some services will be available, owners should reasonably expect and plan for delays. For immediate needs that impact the health or safety of residents or threaten the protection of property, owners should contact the Asset Management Division Director in the applicable regional office for assistance.
In the event of a prolonged shutdown, owners should explore options to utilize project reserves and other resources to cover gaps in subsidy payments. HUD’s prior guidance confirmed HUD will process requests for releases of reserves or residual receipts through the Asset Management Division Directors using the form HUD-9250.