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The federal funding freeze has melted. The Trump administration circulated a new memo on Wednesday that rescinds a previous memo released on Monday that put a sweeping funding freeze on federal grants and foreign aid.
The new memo — which is addressed to federal agencies — is two sentences long, one announcing that the previous memo is rescinded and the other directing any questions about Trump’s executive orders to the agency’s general counsel.
The move brings to a close a dramatic sequence of events that began with the Monday memo announcing the funding freeze, which was to go into effect at 5 p.m. ET on Tuesday. But before the start time, a federal judge put a temporary hold on the new directive with a ruling on a lawsuit brought by multiple nonprofits.
But the memo on federal grants and foreign aid is just one piece of the memo puzzle. Tuesday morning the administration circulated a second memo that directed federal agencies to review selected programs and submit their findings to the Office of Management and Budget by Feb. 7, and this memo still stands.
The programs targeted by the memo include 100 administered by the Department of Housing and Urban Development (HUD), including rental assistance, Section 8 housing vouchers, the public housing capital and operating funds, Community Development Block Grants (CDBG), the Choice Neighborhoods program and Project Base Rental Assistance.
HUD’s HOME and CDBG initiatives would comprise the majority of programs affected, as 469 programs rely on HOME funding and 265 programs rely on CDBG funding. It also targeted programs on mortgage insurance and manufactured housing.
Given the scope of the HUD programs listed, it effectively called for a review of HUD in its entirety. Notably missing is the Department of Treasury’s Low Income Housing Tax Credit (LIHTC) program, which real estate developers use to help fund projects in exchange for renting a percentage of units at affordable rates.
The memo set off panic and confusion across multiple industries, which prompted the administration to release a followup memo intended to clarify the previous one.
Formatted as a question and answer, the damage control memo stated that it establishes a process for agencies to “quickly determine whether any program is inconsistent with” Trump’s previous executive orders, and that a pause could be as short as a day. The memo explicitly stated that rental assistance would not be paused.
However, language later in the memo seemed to suggest that the original memo was intended as a funding pause deemed necessary “to act as faithful stewards of taxpayer money.
In the eyes of many stakeholders, the followup memo did little to clear things up. In a contentious press conference Tuesday afternoon, White House Press Secretary Karoline Leavitt reiterated that many assistance programs are not subject to a pause. She added that there’s no uncertainty “in this building” and that the uncertainty is only among members of “the media.”
But many in the housing industry expressed confusion over the memos, with some stating that they oppose a freeze on funding.
“Even a short pause in funding could cause significant harm to low-income families and their communities,” said Low Income Housing Coalition Interim President and CEO Renee Willis in a statement. “The longer the freeze continues, the greater the risk that low-income households receiving federal rental assistance could face eviction, and in the worst cases, homelessness, homeless shelters may be forced to close their doors, and nonprofit organizations may have to lay off staff.”
Down Payment Resource (DPR), which connects eligible homebuyers and hard-to-find down payment programs, estimates that if the Tuesday morning memo were to be enforced, roughly one-third of the nation’s 2,466 U.S. homebuyer assistance programs would be frozen.
“The full impact this will have on the availability of federally-funded homebuyer assistance programs is unclear, and some administrators who accept federal funding have paused associated assistance programs and educational workshops,” a spokesperson from DPR shared in an email.
HUD’s HOME and CDBG initiatives would comprise the majority of programs affected, as 469 programs rely on HOME funding and 265 programs rely on CDBG funding. Major programs with HUD also include the public housing operating and capital funds, Section 8 housing vouchers, the Choice Neighborhoods program and Project Based Rental Assistance.
In response to the Monday memo that was rescinded today, Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit released a statement Tuesday saying the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and the Department of Agriculture (USDA) “must clarify” that the memo does not suspend payments for single-family and multifamily loan insurance or guarantee programs at those agencies.
“Americans are going to the closing table tomorrow and deserve to know that their loan will close on their home purchase,” the statement reads. “Without this clear assurance that the federal government will insure new loans or pay claims under these programs, there will be severe harm to borrowers and disruption to the mortgage market.”
Previous moves by Trump that affect housing include a federal hiring freeze and regulatory freeze.
