Weekly update from the National Housing Conference
January 9, 2019
President's Message I By David M. Dworkin

Last night, President Trump warned of a humanitarian crisis on the border as justification for his partial shutdown of the U.S. government, an assertion that has been widely disputed. Should the crisis drag on, a major humanitarian crisis could occur right here in the United States, directly impacting our country’s neediest citizens. As detailed below, over 1,000 federal contracts for the HUD Section 8 housing program have been expiring during the shutdown and some have suggested that thousands of families could be forced onto the street for nonpayment of rent. That’s unlikely, in large part due to the work of a small group of “essential” senior staff at HUD, working without pay to prevent this from happening. Many more people, however could see maintenance on their units curtailed or ended altogether. As The Washington Post reported on Jan. 4, the Trump administration had not anticipated a long-term shutdown (no one does), and “recognized only this week the breadth of the potential impact, several senior administration officials said.”

None of this needed to happen. Government shutdowns are terrible negotiating tactics and ultimately make everyone, especially the taxpayer, the loser. I know this because I have been directly involved in all five of the previous shutdowns in both Republican and Democrat administrations. My first shutdown was as a Republican staff person in the House of Representatives in 1986. This one lasted only a day, but the plight of federal workers was underscored to me by my chief of staff who told us that only essential workers would report to work and anyone who thought they were not essential should see him in his office. Congress has its own work rules and, needless to say, everyone came to work during the one-day closure that cost taxpayers over $60 million.

In 1995, the government was shut down after President Bill Clinton vetoed a spending bill the Republican-controlled Congress passed in a dispute over deficit spending and Medicare reform. President Clinton ended the shutdown five days later in what was seen as a temporary capitulation, emboldening Republicans to force a second shutdown of the government on Dec.16, 1995. That fight risked breaching the federal debt limit – a potentially catastrophic event that neither side wanted to actually see happen. My job was to prepare hundreds of pages of analysis on what federal money could be spent to fund the government before the debt limit was breached, which would turn a high stakes game of chicken into a bloody knife fight.

Ultimately, Treasury Secretary Robert Rubin’s intimate understanding of market psychology forced the Republicans to cave when Wall Street ignored one of the key thresholds we identified and the crisis was set to drag on indefinitely as a result. The shutdown bolstered President Clinton’s stature at a critical time and ironically contributed to both sides agreeing to budget cuts that led to the first balanced budget in a generation. While the White House might look at this experience as an encouraging precedent, negotiators on both sides in 1995/96 were bolstered by extensive experience, volumes of data and no small amount of presidential charm. Frequently during the tense negotiations, President Clinton would break the tension with ribald humor and folksy stories that sent Speaker Newt Gingrich and Majority Leader Dick Armey back to the Capital saying, “damnit, he did it to us again!”

The most frustrating shutdown was in October of 2013. It lasted 16 days and resulting in the furlough of 800,000 federal employees, while 1.3 million others were required to report to work without known payment dates. Like this one, it was driven by ideological extremes and resulted in nothing positive. House Republicans spurred on by Sen. Ted Cruz and House “Tea Party Republicans,” now known as the Freedom Caucus, waged a back-bench war against the Patient Protection and Affordable Care Act (known as "Obamacare"). In the face of President Obama’s refusal to back down, the House eventually capitulated and passed a continuing resolution and debt limit extension on Oct. 16, 2013. At the time, I was part of the White House’s task force on the Detroit bankruptcy and the entire team was deemed “non-essential.” We sat at home for 16 days, unable to make a single phone call under threat of jail for violating the 1884 Anti-Deficiency Act, which states that “an officer or employee of the United States Government… government may not accept voluntary services for either government or employ personal services exceeding that authorized by law except for emergencies involving the safety of human life or the protection of property...”

There’s no way to know how long this shutdown crisis will go on, but I can confidently predict that 1) no one will win, and 2) the taxpayers will pay millions for the drama.

David M. Dworkin
President and CEO
National Housing Conference
News from Washington I By Tristan Bréaux
Thousands of families at risk of eviction due to shutdown

Federal contracts for 1,150 government-funded properties that house low-income renters have expired since the government shutdown began on Dec. 22, 2018. These contracts pay rental subsidies and fund critical repairs, which some have argued place poor families at risk of eviction. Another 500 contracts will expire in February. While HUD has some funds available to get through January, a longer shutdown could have much more dire consequences. In a recent letter, HUD asked landlords of public housing properties to use their reserve funds to prevent evictions and continue needed maintenance during the partial government shutdown. A total of 1.2 million low-income families, many of whom are elderly or disabled, are housed through 23,000 contracts under a variety of programs including the Section 8 Project-Based Rental Assistance program. According to senior HUD staff, a small team of 16 HUD staff who manage these contracts are working without pay to keep people in their homes. Their work is complicated by the fact that nearly all of the work is hampered by HUD's archaic computer systems, making it virtually impossible to anticipate funding shortfalls until they happen. 
Shutdown impacts federal workers mortgage and rent

While the president and Congress attempt to work out a deal to reopen the federal government, unpaid federal employees are starting to feel the financial hardship. Those who are impacted by this partial shutdown contribute about $438 million in housing, according to Zillow. It is still too early to know exactly how much this shutdown will impact on mortgage and rental payments, with employees having to make important household budget decisions right after the holiday season. 
IRS cancels OZ public hearing

The public hearing on Qualified Opportunity Zones scheduled for Jan. 10 has been canceled by the Internal Revenue Service (IRS), due to the partial government shutdown. The Department of Treasury sent out a notification informing the public of the cancellation and that a new date will be scheduled two weeks after the government reopens.  
FHFA issues proposed rule on credit score models

FHFA is requesting comments on a proposed process for GSEs to consider the use of third-party credit score models. The rule does not require the enterprises to use third-party models but provides clear criteria and standards that must be used in order to approve and validate any credit score models that will be used. All comments are due by March 21, 2019.
Disaster relief delayed during shutdown

In 2018, Congress allocated $16 billion in funding to areas impacted by natural disasters. Those states hit by Hurricanes Maria, Irma, and Harvey have desperately needed the federal resources to rebuild and mitigate their damages. However, HUD has yet to issue a rule outlining the process of requesting the funds from the federal government, and the shutdown has extended that process
House Financial Services Committee chair creates new subcommittee

Rep. Maxine Waters (D-Calif.), the new chairwoman of the House Financial Services Committee, will create a new subcommittee on diversity and inclusion. The new panel will analyze the diversity of key roles within corporations and the financial sector. Rep. Joyce Beatty (D-Ohio) has already announced her intentions of leading the subcommittee and has outlined her legislative work to raise the issue within the Federal Reserve. 
The National Housing Conference has been defending the American Home since 1931. We believe everyone in America should have equal opportunity to live in a quality, affordable home in a thriving community. NHC convenes and collaborates with our diverse membership and the broader housing and community development sectors to advance our policy, research and communications initiatives to effect positive change at the federal, state and local levels. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.
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