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Impact of federal government shutdown on Vermont housing programs

By: Mia Watson on 1/8/2019

As the federal government shutdown continues into its third week, many in the affordable housing community have expressed concern about what it might mean for their programs. Vermont Housing Finance Agency will remain open throughout the shutdown. However, some of the federal program funding that VHFA and its partners administer may be affected if the shutdown persists. 

U.S. Department of Housing and Urban Development (HUD)

The U.S. Department of Housing and Urban Development (HUD), has released a contingency plan outlining the status of its programs during the shutdown.  Much of HUD funding for multifamily affordable housing is disbursed through local public housing agencies (PHAs), which are not part of the federal government and therefore continue to operate. However, these organizations receive significant federal funding, and may not be able to carry out normal activities in the event that the shutdown lasts for an extended period of time.

Under HUD’s plan, HUD staff who process funding for the Office of Housing will work on a limited basis to process payments and contract renewals. However, any new funding actions that require HUD staff involvement cannot be processed during the shutdown. Payments for Tenant-Based Rental Assistance will continue to be disbursed, and Homeless Assistance Grants will continue to be fully funded. HUD will continue to disburse block grant funds (CDBG, HOME) that have already been allocated in prior year budgets. HUD will continue payments for Project-Based Rental Assistance (Section 8, rent supplement, Section 236, and project rental assistance contracts), contingent on the availability of existing funds. According to the National Low Income Housing Coalition, funding for project-based assistance is currently in place for January, but may become uncertain if the shutdown continues into next month.

USDA Rural Development

The U.S. Department of Agriculture (USDA) Rural Development (RD) 502 homeownership program is the primary source of government guarantee loans for home purchases in the state of Vermont. During the shutdown, RD will not process new loan requests under the 502 Direct or Guarantee programs. Under USDA’s contingency plan, RD offices at the state level are shut down completely.

Vermont also receives funding for multifamily affordable housing through USDA Rural Development programs. The Section 521 Rental Assistance, Section 542 Rural Housing Vouchers will continue until funding is exhausted, however, USDA suggests that a shutdown of more than two weeks is likely to have a “significant impact” on its programs.

VHFA Home Loans

Despite the substantial wide-reaching challenges the shutdown creates, most VHFA mortgage programs are not affected at this point, and VHFA continues to accept loan reservations. Fannie Mae, Freddie Mac and the Veterans Administration (VA) continue to process home loans. Federal Housing Administration (FHA) loans will continue to be processed, though due to HUD’s reduced staffing, processing of FHA loans may occur more slowly than usual.  Although RD will not process new loan requests during the shutdown, VHFA is still receiving reservations for RD guaranteed loans. Vermonters preparing to buy a home with VHFA financing should continue to work with their participating lender, who can best advise them on navigating the approval process during the shutdown.




Hi Mia, Thanks for citing the NLIHC Memo article about the shutdown. I wanted to update you. Despite a high HUD official assuring us and others that PBRA would be available through January, a colleague organization of ours (National Alliance of HUD Tenants) obtained a HUD press email yesterday. I am pasting it in below. Feel free to contact me ed@nlihc.org or Elayne Weiss, eweiss@nlihc.org.

HUD’s Rental Assistance Payments to Multifamily Property Owners During the Lapse
January 7, 2019

• HUD’s Project-Based Rental Assistance (PBRA) program represents approximately 23,000 contracts serving 1.2 million units.

• The vast majority of these contracts (approximately 21,150) had fully executed agreements before the lapse occurred on December 21st, and their January and February payments have been obligated and will be disbursed without interruption.

• As of January 3rd, roughly 1,150 contracts are up for renewal but currently under suspension (i.e., not executed) in our system because funds were not obligated prior to December 22nd. Contracts are continually being renewed on a rolling basis. The process requires executed agreements signed by both the property owner and HUD.

• HUD is determining whether we have any available funds that could be obligated to renew these contracts and working through the processing of these contracts to determine what could be signed if funding is available.

• The number of expiring contracts will increase as time goes on, as we anticipate approximately 500 additional contracts will expire and be up for renewal in January and 550 in February. Without additional funding, HUD cannot renew these contracts or obligate funds – doing so would be in violation of The Antideficiency Act.

• As in previous shutdowns, HUD sent a notice to property owners on January 4th notifying them that they can use their reserves, where available, to cover any shortfalls.

• All of HUD’s multifamily properties are privately owned and financed. As such, owners have reserve funds at their disposal to cover costs in the event of a shutdown.

• Historically, HUD has reimbursed owners following a shutdown and never experienced evictions.

• HUD has called in additional field office employees to go through these suspended contracts to determine what we might be able to complete or renew based on available funding.

• HUD is focused on the health and safety of tenants, and continues working to ensure the funding it has available will go to contracts that can be renewed.

Thanks for updating us, Ed, and for everything you are doing to help those affected.  

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