How the Government Shutdown Could Affect Housing

Filed in Capitol Hill by on January 20, 2018 1 Comment

capitolUpdated as of 9 a.m. ET Jan. 22: The situation still remains fluid and the Senate has scheduled a noon vote to reopen the government. The outcome of this vote is uncertain.

The White House and Republican and Democratic congressional leaders failed to reach an agreement to extend government funding on Friday, resulting in a shutdown of certain federal government functions at 12:01 a.m. on Saturday, Jan. 20 that will affect housing and home builders.

It is unclear how long the shutdown will remain in effect. In most cases, the short-run impacts will be minor. A long-run shutdown, lasting several weeks or a month or more, could have significant impacts on mortgage accessibility and reduce housing demand.

In general, NAHB members should expect delays for any housing-related federal government programs that are still operating and plan accordingly. NAHB continues to monitor the situation closely and is calling on federal lawmakers to act quickly to reach an agreement to fund the government.

National Flood Insurance Program

Of immediate concern is the effect on the National Flood Insurance Program (NFIP). The authority to provide new flood insurance contracts is expired for the duration of the government shutdown. This will delay all new home sales or insurance renewals for property owners with federally-backed mortgages who lie in a Special Flood Hazard Area.

This disruption could lead to significant uncertainty in the housing market and may result in the cancellation of sales. However, flood insurance contracts entered into before Jan. 20 will continue until the end of their policy term of one year.

Moreover, as a result of the government closure, the Federal Emergency Management Agency will only have a fraction of its borrowing authority to pay off claims. This could have significant ramifications in Houston, Florida and other areas still recovering from the massive hurricanes last fall.

While Congress has reauthorized the NFIP retroactively following most prior lapses in authorization that have occurred, there is no guarantee that it will do so in this instance. A failure to retroactively renew the flood insurance program will impact the effective date of policies that can be issued once the NFIP has been reauthorized and once again begins issuing new policies.

Compiled by NAHB, the following is a list of government programs that could affect home builders and housing stakeholders under the current shutdown:

Department of Housing and Urban Development

  • FHA-insured single-family loans will continue to be endorsed in the near term, although some delays in processing and closing should be expected.
  • FHA multifamily insured projects with firm commitments and scheduled closings may go forward, although no new firm commitments will be issued.
  • Section 8 Project Based Rental Assistance Contracts, rent supplement, Section 236, and PRACs with permanent or indefinite authority or multi-year funding will have payments made from budget authority available from prior appropriations or recaptures.
  • No Real Estate Assessment Center (REAC) inspections.
  • CDBG, HOME and other block grant funds will be dispersed in cases where failure to address issues result in a threat to life safety and protection of property.
  • Authorized drawdowns for approved CPD program activities (homeless assistance programs, CDBG, HOME, HOPWA) using pre-FY2018 program funds will continue uninterrupted unless it is necessary for a HUD employee to approve a voucher or lift a system edit prior to a drawdown.

Department of Agriculture

  • Most rural development programs will not continue without appropriation.
  • A shutdown of more than two weeks is likely to have a significant impact on rural development programs.

Department of Homeland Security

  • E-Verify, the Internet-based system that allows businesses to determine the eligibility of their employees to work in the U.S., is unavailable due to the government shutdown. While E-Verify is unavailable, employers may not be able to access their E-Verify accounts.

Small Business Administration

  • The SBA will not initiate new loan guarantees during the shutdown.

Occupational Safety and Health Administration

  • OSHA’s investigation and enforcement activities will be substantially reduced during the shutdown, with the agency focusing on “imminent danger” situations involving the safety of life or property and other emergencies, such as catastrophic and fatal workplace accidents.

Department of Labor

  • The agency will likely stop processing employers’ foreign labor certifications to access temporary workers under the H-2B program.

Department of the Interior

  • Businesses that seek permits from the Fish and Wildlife Service could be affected. New permits or applications under review will not be processed during the government shutdown, which will increase costs and delays.

Environmental Protection Agency

  • Businesses in states where EPA is the primary permitting authority may notice a delay in issuance of their stormwater permits. These states are Idaho, Massachusetts, New Hampshire and New Mexico, along with the District of Columbia.
  • The Energy Star program is shut down until further notice and the processing of all partner applications and partner inquiries is on hold. Updates to Energy Star qualified product lists and release of draft Energy Star specifications will also be delayed.

Internal Revenue Service

  • Some lenders require home borrowers to file IRS form 4506-T to verify the mortgage applicant’s income and Social Security number. With the IRS shut down, this could result in major delays in some mortgage application approvals.
  • Taxpayer services will be suspended, meaning no refunds will be issued and taxpayers will not be able to phone the IRS for advice.
  • A lengthy shutdown will affect implementation of the new tax law, which took effect on Jan. 1. This could include delaying the many new regulations needed for taxpayers to comply with the changes.

Economic Data

  • Future reports on items like the monthly jobs report, housing starts and new home sales could be postponed.
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  1. Willie Martin says:

    Great summary. Let hope Congress will understand why they were sent to Washington and get down to business.

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