Published February 4, 2025
Federal funding freeze confusion another wrench in already challenged housing market
By Ashley Fahey – Editor, The National Observer: Real Estate Edition, The Business Journals
A memo issued by the Trump administration this week to freeze federal funds sent myriad federal and state agencies scrambling Tuesday in advance of the order being blocked by a judge shortly before it went into effect.
The order was subsequently rescinded Wednesday, The Washington Post and others reported.
The order, from the U.S. Office of Management and Budget, issued on Monday called to freeze trillions of dollars in federal grants and loans in order for the Trump administration to assess whether those funds were providing financial assistance "for foreign aid, nongovernmental organizations, [diversity, equity and inclusion], woke gender ideology and the green new deal," according to a memo sent Monday by Matthew Vaeth, acting director of the OMB.
The order was the latest example of Trump's promise to slash federal spending, although the memo's lack of specifics caused widespread confusion. The freeze originally was scheduled to go into effect at 5 p.m. Tuesday. The judge's ruling blocks the order from going into effect until at least Feb. 3.
Among the agencies that were trying to sort out the order's impact were housing groups that administer funds from the U.S. Department of Housing and Urban Development, including Section 8 housing vouchers, Community Development Block Grants and project-based rental assistance. HUD also has tailored programs that provide housing assistance for specific demographics, including senior citizens and people with disabilities.
HUD funds are used by both individuals as well as developers who are building or preserving below-market-rate housing. The Federal Housing Administration, which is part of HUD, insured 766,942 forward mortgages during fiscal 2024, according to the agency. There are more than 2 million Section 8 voucher holders nationally.
Some housing agencies decried the memo. The National Low-Income Housing Coalition in a statement early Tuesday, before the judge's ruling was issued and the withdrawal of the order Wednesday, said the "extreme order" could prevent states and communities, nonprofit organizations, and low-income households "from receiving the critical resources needed" to address affordable housing and homelessness.
"Even a short pause in funding could cause significant harm to low-income families and their communities,” said Renee Willis, interim president and CEO of the coalition. “The longer the freeze continues, the greater the risk that low-income households receiving federal rental assistance could face eviction, and in the worst cases, homelessness, homeless shelters may be forced to close their doors, and nonprofit organizations may have to lay off staff.”
A bulletin sent late Tuesday by HUD said the department confirmed with the Office of Management and Budget that all rental-assistance payments for all multifamily project-based rental-assistance programs remain operational and are not subject to the pause outlined in OMB’s memo.
"HUD’s Office of Multifamily Housing Programs will continue to meet its project-based rental assistance financial obligations to owners and tenants participating in these programs," the department said in a statement.
The National Association of Home Builders in a statement Tuesday said its staff was working to clarify the OMB statement to determine what effect it will have on federal housing programs, and had reached out to several federal agencies and the White House.
"We’ve received assurances from the White House and agencies that housing programs are not the intended target of the pause," the NAHB said, adding HUD confirmed with the OMB that all FHA Single Family Title I and Title II mortgage insurance programs remain operational and are not subject to the pause outlined in the memo.
In a letter to members of the National Multifamily Housing Council, President Sharon Wilson Géno said that as of Tuesday evening, the council "continues to work with agency officials to determine the ultimate impact of these announcements."
The letter, which was obtained by The Business Journals, referenced both HUD's bulletin and the judge's temporary halt of the freeze.
"We anticipate that, in the coming days, the White House will clarify not only what housing programs are affected by the OMB's order but also how long any funding pauses for affected programs will last," Géno wrote. "As indicated in a Jan. 20, 2025, memorandum, the Trump administration has made clear that lowering housing costs and expanding housing supply are top priorities. We would urge the White House and agencies to focus on those goals going forward."
Uncertain outlook could make buyers, builders more cautious
Although the order has been recalled by the Trump administration, the confusion alone could prove to be another challenge in an already tough housing market.
Phil Crescenzo, vice president of the Southeast division at Nation One Mortgage Corp., said in an interview real estate agents he spoke with Tuesday were initially concerned about Section 8 and other assistance programs.
"If a buyer needed a program to be approved [for a loan], they now can’t close," Crescenzo said. "If you’re a builder bringing in these programs on a large scale, now you [potentially] have a pool of buyers that no longer qualify."
Buyers could be more cautious in their decision-making going forward if there's a chance a federal program they were expecting to use to purchase a home will soon be discontinued, he added.
Developers who use federal grants and loans to build housing could have a similarly cautious outlook, as even the threat of those programs no longer existing or being culled could reduce a group's initiative to want to leverage that financing.
"They’re looking at so many factors and so many different directions. If it’s risky, they’re going to move to something that’s more of a sure thing long term," Crescenzo said.
Overall, Crescenzo said, the prospect of a widespread federal freeze and potential for cuts could have far-reaching implications for housing, including for real estate agents. The threat could also affect a little-talked-about aspect of the market: buyer education and housing counseling, for which HUD currently has programs, he said.
"All of that goes away [if you lose] the resources," Crescenzo said.
Despite the hand-wringing around what the order may or may not mean for housing programs, Crescenzo said individual buyers should get the facts about whether a potential scenario will impact them.
"We have to sometimes get homebuyers focused. ... They all have social media and alerts and credit-monitoring services. It’s fatigue sometimes," he said. "With all of the talk going on, see how it affects your individual situation, and then proceed accordingly."
