Federal contracts for more than 1,000 government-funded properties that house low-income renters have already expired as a result of the government shutdown, which could delay critical repairs and place poor families at risk of eviction, advocates and landlords say.
About 1,150 contracts with private landlords have expired since the shutdown began on Dec. 22, according to Jereon Brown, a spokesman for the Department of Housing and Urban Development. That represents about 5 percent of all contracts for a federal Section 8 program known as Project-Based Rental Assistance, which subsidizes rent and utilities for 1.2 million low-income families, including many who are elderly or disabled.
About 500 more contracts will expire in January and 550 in February if the shutdown continues, HUD said in a statement.
HUD has told the landlords participating in the Section 8 program that they “can use their reserves, where available, to cover any shortfalls," said Brown. He said that most of the properties have cash reserves on hand, which are typically required by mortgage lenders.
“Historically, HUD has reimbursed owners following a shutdown and never experienced evictions,” Brown said. While 95 percent of HUD employees have been furloughed, those still on the job are “looking at all accounts for funding to reinstate those contracts that don’t exist now,” he added.
The development, first reported by The Washington Post, came as a surprise to some housing advocates and landlords who were expecting that HUD would renew the contracts and continue the payments despite the shutdown.
“It’s a mess,” said Ellen Lurie Hoffman, federal policy director for the National Housing Trust, an advocacy group for affordable housing that owns Section 8 properties, who said that HUD had previously assured her organization that the contracts for December and those going into January would be renewed. “The pain is coming a lot earlier than we thought.”
If landlords have limited reserves — or if they're squeezed by a continuing shutdown — they could be pushed to delay critical repairs, seek additional financing, raise rents, or ultimately evict tenants, Hoffman said.
Hoffman added that HUD should have anticipated the problem and allocated the funds for the contracts scheduled to expire before the shutdown began. “It’s confusing to me why HUD wouldn’t have prioritized that and assigned staff to make sure this wouldn’t happen," she said. "It’s a huge number of contracts and properties and residents."
HUD did not respond to questions about how many families were affected by the expiring contracts or why the administration did not renew the contracts before they expired.
Brown, the HUD spokesman, said that all landlords with unexpired Section 8 contracts should continue to receive payments during January and February.
But Melissa Steele, who runs an affordable housing real estate company in the Washington area, has already run into problems with a contract that's not scheduled to expire until February. Her company, E&G Group, was supposed to receive a HUD payment on Jan. 2 for a property in Rockville, Maryland, that houses about 120 low-income senior citizens, but it never arrived.
“I checked the account several times today, and it’s not there,” she said. Her colleague tried to contact HUD about the missing payment and got an auto-reply instead, because employees who typically answer questions had been furloughed, Steele said.
Steele said her tenants won’t be at risk of eviction, because her company has reserves and access to financing, but she said that most affordable housing properties only have a thin cushion of funds that are meant to cover an emergency like a collapsed roof or a broken boiler.
“It’s such little cash flow,” she said.
HUD has failed to renew contracts during previous government shutdowns as well. “My recollection is they are never prepared," said Monte Stanford, former chief of staff for the Massachusetts Housing Finance Agency.
But the scale of the problem has startled housing advocates like Michael Kane, executive director of the National Alliance of HUD Tenants, an advocacy group. He said HUD is facing what could be an "imminent catastrophe."
Concerns have been growing as the standoff has gone on with no breakthrough in the negotiations.
Adrianne Todman, CEO of the National Organization of Housing and Redevelopment Officials, which represents housing development agencies, said that most property owners would be able to manage a month of missed HUD payments, but not much more.
“If this goes into Feb. 1, landlords will start to go berserk,” she said. “They, too, have bills to pay.”