Federal Uncertainty Spells Trouble for Affordable Housing Groups

A month after President Trump was sworn into office, Shaun Donovan received notice from the U.S. Department of Housing and Urban Development that the agency intended to cancel $60 million in affordable housing grants under its Section 4 program, two-thirds of which would have gone to his nonprofit Enterprise Community Partners.

Donovan, a former HUD secretary, was no doubt surprised. Congress had chosen three nonprofit groups to distribute Section 4 grants to hundreds of smaller community organizations for building homes and senior living facilities. 

But the Trump administration blocked funding to two of them, including Enterprise, while also temporarily halting a $1 billion program that Congress approved in 2022 to rehabilitate hundreds of thousands of existing units to protect them from extreme weather.

Without the grants from the contract, Enterprise couldn’t help its partners with technical assistance and financing to build and preserve thousands of homes. Some groups had already made commitments to pay contractors, HVAC technicians and counselors, Donovan said.

After several weeks of discussion, HUD officials abruptly reversed course on April 9 and agreed to reinstate the $60 million.

“As we said from the beginning, this was never about us — it was about the thousands of communities and hardworking Americans who rely on Section 4 every day to create and preserve affordable homes nationally,” Donovan said in a statement. “We’re relieved and grateful that HUD has agreed to partner with us to continue this program that will surely bring down costs and increase the supply of affordable homes across America.”

The White House’s tumultuous overhaul of federal agencies resulting in layoffs and contract cancellations has injected a new level of uncertainty in an affordable housing industry used to making long-term plans.

Before Donald Trump took office, the industry had been under strain across many parts of the country thanks to a sluggish construction rate, burdensome zoning rules, and the rising costs of land, labor and materials. 

Now the potential elimination of federal programs that developers counted on to finance their projects and rehabilitate existing homes has led some to second-guess their business model or ride out the chaos.

“They’re not entirely sure whether they should give up ever getting money or hold out hope,” said Deborah VanAmerongen, strategic policy adviser in law firm Nixon Peabody’s affordable housing practice group and a board officer of nonprofit trade group the New York State Association for Affordable Housing. “I know of some developers who decided they will never get this money, so they are restructuring their financing to see if they can get work done on their properties.”

There are few other ways to unlock the amount of funding that HUD can provide. And the agency’s block grants, rental assistance and mortgage lending programs are deeply intertwined with the economy.

“There’s no alternative to these sources of funds and risk mitigation,” said Christopher J. Tyson, president of the National Community Stabilization Trust, a nonprofit working to increase single-family home ownership. “Banks rely on this funding when they layer debt financing into deals they invest on tax credits. And for nonprofit housing developers these programs are designed to facilitate affordability, and it plays a significant role in how we deliver housing.”

The Trump administration’s January executive order to roll back billions of dollars in environmental initiatives to make homes more energy efficient, remove lead pipes and paint, and clean up polluted properties has had a chilling effect on the nonprofit sector.

Housing and environmental nonprofits set their budgets and hired staff to administer funds from the Environmental Protection Agency’s $27 billion Greenhouse Gas Reduction Fund that Trump froze. Now the group is suing the EPA for “nullifying a congressionally mandated and funded program.”

Other nonprofits still hope to receive money from HUD through its $1 billion Green and Resilient Retrofit Program grant. The program, which would have upgraded heating and cooling systems for 25,000 homes, has remained subject to the president’s order but has not been officially scaled back, and HUD officials have not said whether they are going to distribute the funds.

“The freeze on this program has created uncertainty for this award,” VanAmerongen said. “They were counting on this money to put together the rehabilitation or refinancing of the properties. Either the rehabilitation or refinancing doesn’t happen, or they scale back the scope of what they do.”

The administration is also targeting housing vouchers for low-income families. 

Scott Turner, the new HUD Secretary in the Trump administration, said that the agency’s benefits programs, which include the Section 8 Housing Choice Voucher program, were “never meant to be a permanent solution.”

“We don’t want to grow HUD programs, we don’t want to add more people, more citizens to subsidies,” Turner told Punchbowl News. “We want to work to get people off of government subsidy, to get people to self-sustainability.”

The previous Congress reserved $32.8 billion for the Section 8 voucher program, which marked a $115 million funding increase. But, thanks to cost of living and rent increases, roughly 62,000 households could lose their rental assistance unless Congress agrees to a $4.3 billion increase in its spending plan this year, according to a Center on Budget and Policy Priorities estimate and a Bloomberg Law report.

“A lot of our clients were in the process of getting authorization to collect higher rent, and now they feel like they don’t know what they’re going to do,” VanAmerongen said. “They have properties that are struggling and need that additional assistance.”

Ahmed Tigani, acting commissioner of New York City’s Department of Housing Preservation and Development, said that the status of emergency housing vouchers is a pressing issue. Federal funding for the EHV program — which the Biden administration provided as part of the American Rescue Plan to 7,800 families in New York — will run out by 2030 without congressional renewal.

“There is obviously a question of what the impact will be on budget decisions right now,” Tigani told Commercial Observer. “We’re still talking with HUD about how it would affect us directly.”

A HUD staffing shortage could further complicate the distribution of federal grants, loans and subsidies. In an interview with Fox News, Turner said he wanted to “create a culture of excellence” at the agency and make HUD a place where people want to come to work while serving as stewards of taxpayer dollars.

But the agency has also been preparing to slash its 9,600-person workforce by 50 percent and eliminate regional offices in 34 states. New York’s regional office has only one management employee after its Biden-appointed director Alicka Ampry-Samuel left earlier this year.

Tigani said he was still able to confer with longtime HUD employees on most housing matters related to city programs.

“They are still doing that work, but we want to see as fully staffed an agency as possible,” Tigani said. “We’ve seen initial decisions or announcements that have been revised or reversed, and we’re hoping the secretary and the team there look at priorities.”

But lack of political and civilian employees could affect the timely approval of grants and loans.

“Time is money, and everything that gets delayed or slower will have an impact,” said John Crotty, principal of Workforce Housing Group, an affordable housing developer. “I’ve spent a fair amount of time complaining about [HUD] myself, but there is a functioning marketplace here that is working. It doesn’t need much to not work. It’s more fragile than people think.”

CORRECTION: This article has been updated to reflect the correct share of Section 4 grants that Enterprise Community Partners was due to get, and got.