Summary

The 2024 Federal Fiscal Year (FFY2024) begins on October 1, 2023, and as of the writing of this Alert, Congress has not passed and the President has not signed a bill to provide funding for FFY2024. As a result, federal agencies, including the U.S. Department of Housing and Urban Development (HUD), are preparing for a lapse in appropriations that would result in a partial but substantial government shutdown starting October 1, 2023.

The Upshot

• This shutdown has the potential to significantly impact all aspects of HUD’s work, as they are only permitted to retain essential functions during a shutdown.
• Congress has not passed funding bills to keep the government open past September 30, 2023.
• HUD has a contingency plan for a lapse of appropriations that leads to a government shutdown.

The Bottom Line

Congress continues to work on a funding solution that would avert a government shutdown on October 1, 2023, but neither a funding solution nor a government shutdown are a certainty at this time. The situation is changing day-to-day, at times hour-to-hour, and preparation is essential for smooth business operations during this uncertain time. Please reach out to the Ballard Spahr team if you have questions.

The 2024 Federal Fiscal Year (FFY2024) begins on October 1, 2023, and, as of the writing of this Alert, Congress has not passed and the President has not signed a bill to provide funding for FFY2024. As a result, federal agencies, including the U.S. Department of Housing and Urban Development (HUD), are preparing for a lapse in appropriations that would result in a partial but substantial government shutdown beginning on October 1, 2023.

HUD has released in Contingency Plan for Possible Lapse in Appropriations 2023 that describes the activities that HUD may conduct during a lapse of appropriations and identifies the employees at HUD that may conduct these approved activities. Generally, during a government shutdown caused by a lapse of appropriations, most federal employees must stop work as there will be no funds to pay staff and the federal government cannot accept volunteer services. However, a limited number of employees may be excepted from this rule because of the specific activities they perform. The “excepted” category most relevant to the operation of HUD’s programs are employees that address emergency situations where failure to perform their employment function would result in an imminent threat to the safety or human life or the protection of property. HUD has identified only 4 percent of its total workforce that meet the excepted category. Accordingly, HUD’s Office of Housing currently has 2,615 employees and only 104 would be excepted. Similarly, of the total 1,396 employees in HUD’s Office of Public and Indian Housing (PIH), only 19 would excepted. Overall, only 339 of the 8,828 total number of HUD employees would be excepted.

Relevant to many of our clients, the HUD Contingency Plan provides that the following activities are considered excepted:

PIH

• Keep open the line of credit control system so that previously obligated funds for Public Housing can be accessed by Public Housing Authorities (PHAs) (funds for October and November 2023 have been obligated);
• Keep open the HUD Central Accounting Program System (HUDCAPS) so that previously obligated Housing Choice Voucher (HCV) Housing Assistance Payments (HAP) and Administrative Fees can be accessed;
• Continue existing Technical Assistance and Capacity Building awards that have been previously obligated and have an approved work plan;
• Conduct closings of Mixed Finance and Choice neighborhood transactions if the failure to close by a set date would threaten the property and demands an immediate response such as the loss of Low-Income Housing Tax Credits and/or other critical financing commitments;
• Issue tenant protection vouchers in the event of an emergency that would require families to move from a project. Examples would include a HAP contract termination due to health and safety violations or an emergency or disaster Section 18 application;
• Keep open the Real Estate Assessment Center (REAC) Technical Assistance Center (TAC) to receive and answer questions; however, HUD reviews or approvals of questions may be delayed, if needed;
• Continue inspections that have previously been awarded and funded; other inspections for which HUD is responsible will only occur if there is a threat to life or property at a specific location; and
• Respond to any other issues that are directly related to an imminent threat to the safety of residents or the protection of property.

Office of Community Planning and Development (CPD)

• Continue to make previously obligated Community Development Block Grant Programs, HOME, Housing Opportunities for Persons With AIDS, Homeless Assistance Grant funds and other grant funds available for drawdown;
• Review and conduct further actions in cases to avoid imminent threat to the safety of human life or property so grantees may draw down previously obligated funds;
• Where there is no valid objection, review and approve environmental requests for release of funds (RROFs) to avoid the imminent threat to the safety of life or property, including where a previously scheduled closing would be impacted;
• Continue to maintain and ensure access to CPD system so grantees may draw down previously obligated funds;
• Continue existing Technical Assistance and Capacity Building awards that have been previously obligated and have an approved work plan; and
• Keep open the Ask A Question (AAQ) Help Desk to receive and answer questions, however, HUD’s review or approval of questions may be delayed.

Office of Multifamily (MF) Housing

• FHA MF Production will conduct closings and endorsements of projects with Firm Commitments/Firm Approval Letters issued prior to the shutdown and related activities (e.g., review and approve lender requests for amendments to the Firm Commitment, including mortgage increases (subject to handbook processing guidelines) so long as Commitment Authority is available.
• Rental Assistance Demonstration (RAD) program will conduct closings on RAD scheduled where a Rental Assistance Demonstration Conversion Commitment (RCC) was issued, and the closing was scheduled prior to the shutdown or RAD conversions where the failure to close or prepare to close would threaten the property and demands an immediate response (e.g., loss of tax credits).

Congress continues to work on a funding solution that would avert a government shutdown on October 1, 2023, but neither a funding solution nor a government shutdown are a certainty at this time. The situation is changing day-to-day, and at times hour-to-hour, and preparation is essential to smooth business operations during this uncertain time.