How the Shutdown is Hurting Public Housing

Planned affordable housing projects are experiencing shutdown-related delays, and deals may fall through if the federal government doesn't re-open soon.
October 14, 2013

As the federal government shutdown enters its third week, much of the safety net for national housing assistance remains in place. But interviews with heads of local public housing authorities suggest that the shutdown is already undermining future construction of affordable housing.

READ: Full coverage of the shutdown's impact on states & localities

The good news for the nation's 3,300 public housing authorities is that as of mid-October, most major federal programs for affordable housing remain intact. According to an analysis by the National Low Income Housing Coalition, several key programs were guaranteed funding through October, including tenant-based rental assistance, project-based rental assistance and homeless assistance grants.

With regards to Community Development Block Grants (CDBG) and the HOME Investment Partnership grants, the contingency plan published by the U.S. Department of Housing and Urban Development (HUD) says that it would continue to disburse funds “where failure to address issues result in a threat to safety of life and protection of property.” HUD would also continue to disburse block grants where the money had already been appropriated and competitive funds awarded. Cities and states would not be able to receive any new CDBG funds starting in October.

So far, public housing authorities aren’t reporting problems caused by the shutdown in terms of receiving their normal funding for rental assistance. One exception was the Public Housing Authority of New Orleans, where a glitch in the system HUD uses to send monthly funding resulted in a one-week delay in Section 8 Housing Choice Voucher payments for roughly 8,000 landlords in the city.

Even as the shutdown’s immediate impacts appear to be relatively minimal, it could imperil future housing projects, says Tory Gunsolley, president of the Houston Housing Authority. The problem for public housing authorities is that even though they are not federal entities, they are dependent on federal funds and staff assistance from HUD for much of their work. HUD is operating with a fraction of its staff, from a pre-shutdown level of 8,700 full-time employees to about 300 full-time employees right now. The skeleton crew at HUD doesn't have the capacity to grant approvals for new development (or redevelopment) projects. “Even if (HUD staff) do come back by the debt ceiling (on Oct. 17), it’s not clear to me how big of a backlog there will be and whether or not I’ll be able to get my approvals in time,” he explained.

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The Houston Housing Authority is at the beginning of a $200 million development plan, which includes a number of contracts with private landowners that require HUD approval before contracts can be signed. The timing matters, Gunsolley said, because his contracts have expiration dates within 60 days or 90 days.

If Congress doesn’t reopen the federal government by the time those contracts expire, “I either need to walk away from the property or get an extension,” Gunsolley said. “(Private landowners) are not always willing to grant extensions for free. It’s a competitive real estate market. They might decide they can get a better offer.” Alternatively, the housing authority could try to finance the deal without federal funds and hope that it can receive federal compensation when the shutdown ends.

A diminished HUD may also be delaying time-sensitive projects for the Durham Housing Authority. In one case, the housing authority is trying to rehab a property and tie it to project-based vouchers, but HUD must approve the use of those vouchers. A city loan used to purchase the property is scheduled to mature by the end of the year, which imposes a deadline on the housing authority to close the project and pay back the loan. The project was scheduled to close by the end of October, but now it might not happen until November. “We’re already on a real tight timeline with that,” says Jeffrey Causey, chief financial officer for the Durham Housing Authority. “The shutdown is definitely not helping.”

The other question raised by Gunsolley, Causey and the National Coalition for Low Income Housing was whether HUD funds for rental-assistance programs would still be available in November, assuming the shutdown lasts that long. “We’re getting conflicting reports,” Causey says. “We tried to contact the HUD office that would normally handle it. We just got the auto responder.”

At least part of the explanation behind the "conflicting reports" Causey mentioned is that the HUD contingency plan has changed since it was originally published at the beginning of the shutdown.* "It has changed three times," said HUD spokesman Jerry Brown. The original draft, downloaded by Governing on Oct. 2, was 76 pages. The newest version, published Oct. 11, is 84 pages. The lastest plan clarifies that the Housing Choice Voucher program is funded on a calendar-year basis and "the monthly payments for November and December are scheduled to be made timely."

*This story has been updated to reflect new information from a revised HUD contingency plan and an interview with HUD spokesman Jerry Brown.

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