Implications for Housing Under a Potential Federal Spending Freeze

UPDATE (13:00 EST Wednesday): The White House issued a new memo on Wednesday, rescinding its Monday order. Press Secretary Karoline Leavitt said the latest memo was not a rescission of the government spending freeze, just a rescission of the Monday memo. “The Executive Orders issued by the President on funding reviews remain in full force and effect and will be rigorously implemented by all agencies and departments. This action should effectively end the court case and allow the government to focus on enforcing the President’s orders on controlling federal spending.”

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Background: The White House issued a memo to the heads of government departments and agencies on Monday, directing them to “temporarily pause” disbursement of federal funds and grants that may be implicated by executive orders signed by President Trump. The White House said the freeze, which was due to become effective from Tuesday afternoon, would “provide the Administration time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities.”

Later on Tuesday, a federal judge temporarily blocked the order, preventing the restrictions from taking effect until at least February 3.

Potential implications for housing: A range of housing-related programs rely on federal funds, but it is not yet clear if—or how much—they would be impacted by a potential spending freeze. 

• Government-insured mortgages were unaffected by the freeze: VA and FHA loans, which make up around 20% of home loans combined, are funded by private lenders, but are insured by the federal government. 
  • Despite initial uncertainty from the mortgage industry, the Department of Housing and Urban Development (HUD) later clarified that single family mortgage insurance programs “remain operational” and are not subject to the spending freeze. The HUD memo did not mention multifamily loans.
  • Ginnie Mae, the government corporation which acts as the financing mechanism for government-insured loans, issued a statement saying the spending freeze does not apply to its work. 
• Rental assistance programs are excluded from the directive: The White House said that rental assistance—such as housing vouchers—would not be impacted by the spending freeze, but there were some reports that recipients were unable to access funds.
  • HUD later confirmed that tenant- and project-based rental assistance would be excluded from a spending freeze.
• Other HUD programs: News organizations published a list of the government programs the White House had requested be reviewed as part of the spending freeze—including 100 programs administered by HUD. 
  • Housing organizations expressed concerns about how a funding freeze could affect multiple programs administered by HUD. 
    • The National Low Income Housing Coalition said all HUD programs remain at “significant risk” if funds are frozen.
    • The National Association of Housing and Redevelopment Officials called on HUD to clarify how federal rental assistance and housing development programs could be impacted.
• State-run housing programs: Federal funding helps support a range of state-run housing programs. In response to the White House’s memo, Michigan’s State Housing Development Authority canceled scheduled training for a proposed pilot single-family mortgage program “out of an abundance of caution.”

Conclusion: The housing market relies on a wide range of federally-funded programs. The government has indicated that support to individuals via rental assistance programs or government-insured mortgages will not be impacted. It is still unclear how a potential spending freeze—if it is allowed to proceed—would impact the market overall. The uncertainty surrounding the White House’s plans may impair housing market and rental activity until there is further clarification on the details of the spending pause.

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