Sequestration: How Will it Affect Project-Based HUD Housing?

We’ve all heard a lot about “sequestration” or “the sequester”, but what does it mean? What does it mean for our HUD housing programs?  Sequestration is the mandatory, automatic across-the-board spending cuts required under the Budget Control Act of 2011.  These cuts were supposed to happen on January 2, but the American Taxpayer Relief Act postponed the cuts until March 1, 2013. 

The original estimated 8.2% across-the-board cuts for multifamily housing programs were reduced to about 5.1%.  But the timeframe for implementing the cuts was reduced too, which will make their impact more severe.  The cuts affecting HUD and Rural Development are expected to start during the next couple of months and continue through September 30, 2013 (the end of the government’s fiscal year).

These agencies must make the cuts by budget line item – they can’t move funds from one account to another.  For that reason, we can expect widespread furloughs of federal employees (after a 30-day notice).  Public Housing’s Housing Choice Voucher program is expected to cause about 125,000 households to lose housing assistance.  It is possible that many HUD employees will only work (and get paid for) 4-day work weeks, which will likely cause delays in processing FHA multifamily loans, completing preservation deals and answering compliance questions.