The Republican-led funding and staffing cuts to federal housing programs will affect not only low-income tenants, but also legions of New York City real estate developers who rely on federal funding to make their projects work.
The climate of uncertainty is already spooking owners and lenders and delaying deals on pending projects, said Rachel Fee, executive director of the New York Housing Conference — an affordable housing trade group.
The Trump administration reportedly plans to cut nearly half the workers at the Department of Housing and Urban Development, or some 4,000 positions, as part of the aggressive downsizing led by Elon Musk’s Department of Government Efficiency. Separately, the budget bills working their way through the GOP-led Congress will entail billions of dollars in spending reductions to pay for tax cuts, which, while not yet specified, are likely to affect HUD as well.
The staffing cuts, which were reported in mid-February but have not yet been officially ordered, are expected to include a 40% reduction to the Federal Housing Administration, an agency that insures mortgages for homebuyers and protects lenders against possible losses.
“Projects that have construction loans right now and need to convert to permanent financing with FHA will be a big risk if their staff are gone,” Fee said. “That uncertainty is really shaking the industry.”
Other deals are being held up because they rely on the Green and Resilient Retrofit Program, a major grant and loan program from the 2022 Inflation Reduction Act that the Trump administration has targeted for cancellation. HUD appears to be withholding funding for projects that had been awarded money under GRRP, including renovations geared toward energy efficiency and climate resilience, Fee said.
A dozen developers expecting awards under GRRP, including New York-based Related Cos. and Essence Development, signed onto a letter to HUD Secretary Scott Turner last week, saying their projects could be halted or badly delayed if the federal government goes back on its commitment.
Related said it has at least nine residential projects at risk around the country, including a $140 million, 179-unit project in Poughkeepsie reliant on a $647,700 award from the GRRP program.
One real estate executive, who requested anonymity to discuss the new administration, said his firm is “in a listening and waiting mode” when it comes to HUD cuts. Uncertainty, he noted, is rarely good for business.
“I would defy anyone who holds a lot of these HUD-dependent properties to tell me that they’ve got a plan,” the executive said. “Everybody’s pausing — how could it not cause a pause? How can you plan your return on investment when you don’t know what the rent that HUD’s going to be paying is?”
The affordable housing industry is closely watching the upcoming budget process for potential cuts to the Section 8 program. Some 482,000 New Yorkers live in HUD-assisted buildings, including public housing and the subsidy known as project-based Section 8; and more than 100,000 households rely on Section 8 Housing Choice Vouchers to stay in their homes.
The city’s Housing Preservation and Development department relies more on federal funds than any other city agency — with 58% of its $1.2 billion budget coming from Washington to fund vouchers, housing inspections and affordable housing construction, the Independent Budget Office wrote in an analysis this week.
Mayor Eric Adams, who has refrained from criticizing President Donald Trump, has not publicly addressed the expected housing cuts. But some Democrats are trying to make political hay out of the issue: U.S. Rep. Dan Goldman of Manhattan and Brooklyn criticized the reductions to HUD in a press conference on Friday alongside state Sen. and mayoral candidate Zellnor Myrie.
“You are going to put people out on the streets. You are going to deprive people of health care,” Goldman said.
