CARH’S BROADCAST E-MAIL – Regulatory Alert
June 4, 2025
Late on Friday, May 30, the Trump Administration issued its full justification for its proposed Fiscal Year (FY) 2026 budget requests for the federal government. This justification provides details on the skinny budget for FY 2026 that was released on May 2, 2025. As was reported in CARH’s Broadcast email on May 5, 2025, most of the Department of Housing and Urban Development (HUD) programs would be substantially reduced, transferred to states, or eliminated. While the United States Department of Agriculture (USDA) Rural Development’s (RD) programs would also experience reductions, many of the multifamily programs would continue to be funded, some at the same, or at slightly higher levels than provided in the Continuing Resolution (CR) for FY 2025. This is just the beginning of the budget process for FY 2026. It is important to keep in mind that the mammoth budget and reconciliation bill that passed the House at the end of May is now being considered in the Senate and is separate from the FY 2026 budget. The appropriations proceedings will soon begin in the House later this week.
USDA–Rural Development Programs
The budget provides funding to renew Section 521 Rental Assistance (RA) contracts at $1.715 billion, which is an increase from the $1.642 billion allocated in the FY 2025 CR. According to the budget, “this level of funding will prevent the default of the $9 billion in USDA underwritten multifamily housing direct loans, which depend on the rental assistance grants for the debt service.” The Section 542 voucher program would be eliminated, presenting serious problems for residents in properties where prepayment occurs, or where a mortgage has matured, and the owner decides not to participate in the Stand-Alone Rental Assistance (SARA) program. Currently, residents who live in properties where a mortgage matures can receive vouchers if the owner decides to no longer keep the property affordable. Vouchers are resident-based and can then be used by a resident in another property.
The Section 515 program would be funded at $50 million versus $60 million under the FY 2025 CR level; the Multifamily Preservation and Revitalization (MPR) program would be funded at $15 million versus $34 million under the FY 2025 CR level; the Section 538 program would have a budget authority of $400 million, which is the same as FY 2025. The single-family direct loan program would be eliminated, with the Section 502 guaranteed single family loan program authorized at a $25 billion loan level. Language remains for the continuation of the decoupling pilot program, also known as SARA. Finally, further staff reductions would be anticipated under the budget, and $75 million would be directed to technological improvements for RD.
Department of Housing and Urban Development
Under the proposal, HUD’s Housing Choice Voucher program, Public Housing, Project-Based Rental Assistance (PBRA), Section 202 Housing for the Elderly (Section 202), and Section 811 Housing for Persons with Disabilities (Section 811) programs would be combined into one “State Rental Assistance Block Grant program,” funded at $31.79 billion. The budget assumes a $26.8 billion cut in Rental Assistance for HUD. According to the proposed budget, “States would be empowered by transforming the current federal rental assistance programs into a state-based formula grant which would allow states to design their own rental assistance programs based on their unique needs and preferences. The budget would also newly institute a two-year cap on rental assistance for able-bodied adults and would ensure a majority of rental assistance funding through states would go to the elderly and disabled. A state-based formula program would also lead to significant terminations of federal regulations. In combination with efforts related to opening up federal lands, this model would, according to the budget, incentivize states and the private sector to provide affordable housing. This proposal would encourage states to provide funding to share in the responsibility to ensure that similar levels of recipients can benefit from the block grant.” Both the Community Development Block Grant and the HOME Investment Partnership programs would be eliminated.
It’s important to note that this is a budget proposal and has not been enacted into law. Congress holds the authority to approve, modify, or reject the proposed budget. In the past, similar proposals have faced significant opposition and have not been implemented.
You will not want to miss CARH’s upcoming Annual Meeting and Legislative Conference which will be held on June 23-25 at The Ritz-Carlton, Pentagon City, where the FY 2026 proposed budgets for both HUD and RD will be discussed in detail. In addition, the reconciliation and tax bill now in the Senate will also be analyzed. Click here to register if you have not already done so.
CARH members are encouraged to email your members of Congress and emphasize the importance of all of the tools that make housing affordable throughout rural communities. Click here to contact your Senators, and click here to contact your Representatives.
For other news and information affecting the affordable rural housing industry, please visit the Newsroom on CARH’s website, www.carh.org.