Tenants, landlords, lenders, and Government Sponsored Enterprises (GSEs) would all suffer greatly if the President’s FY2026 budget request were to become law, according to a recent brief published in the Wall Street Journal by the New York Housing Conference.
Millions of Americans with low incomes could lose their rental assistance if President Trump’s FY2026 budget proposal cuts funding for the U.S. Department of Housing and Urban Development (HUD) by 44%. In addition, it proposed a two-year time restriction on help for non-elderly, non-disabled households and attempted to turn important housing programs, such as Public Housing and Section 8, into state-controlled block grants. This drastic change would make housing support erratic and short-lived.
According to the recently released research, Housing Market Impact of Proposed HUD Budget Cuts & Term Limits, millions of renters would no longer be eligible for federal support that helps them maintain stable housing. Additionally, landlords would face building-level financial hardship in the absence of a significant revenue stream, which would result in defaults by investors and lenders, including large banks. In the end, the federal housing finance system would have to take on billions of dollars in bad debt, reiterating dangers not seen since the financial crisis of 2008.
In addition to helping low-income people and families with their rent payments, HUD’s rental assistance programs provide the funding for a large portion of the country’s low-income housing stock. To finance and run buildings, landlords, developers, and lenders—including government-sponsored organizations like Freddie Mac and Fannie Mae—rely on the stability of long-term HUD contracts. Fannie Mae and Freddie Mac backed roughly $50 billion in loans associated with HUD-assisted properties between 2018 and 2023 alone, encompassing over 238,000 units nationwide.
Under the idea, New York would be one of the most severely affected states. According to NYHC, HUD funding would shrink by 46%, from $8.7 billion to $4.8 billion, endangering the homes of over a million New Yorkers. The New York Housing Conference looked at which neighborhoods had the most Section 8 vouchers in order to better understand the risk in New York City, including the effects on building owners and lenders. They discovered that only 3% of census tracts use nearly 30% of the vouchers. Due to federal budget limitations and timing constraints, these Census Tracts represent the highest risk areas for owners, their lenders, and investors.
In New York City:
- In some neighborhoods — such as Harlem, Brownsville, and Mott Haven — nearly 40% of households rely on Section 8 assistance.
- The City and its partners have more than $10 billion invested in affordable housing deals tied to long-term HUD contracts, including:
- $6.2 billion in loans from HPD, HDC, and NYCHA;
- $3 billion in GSE-backed financing; and
- More than $1 billion each from JP Morgan Chase, Flagstar/NYCB, and CPC.
Since UNHP’s BIP data, the data source we used, only records one lender per home, although the majority of affordable housing properties will have both private financing and government loans or agreements, this analysis represents the least amount of exposure. In addition to evictions and vacant buildings, a loss of this magnitude of subsidies would increase borrowing prices, put City finances in jeopardy, and halt the construction of affordable housing in the five boroughs in the future.
As the FY2026 budget is being negotiated by Congress, it is critical to recognize that the overall health of the housing market is critically dependent on federal housing aid. Despite rejecting the President’s proposal, the House Appropriations Committee’s draft measure nonetheless cuts money for important HUD programs like HOME, public housing, and housing choice vouchers. This week, their bill is anticipated to be reviewed by the Senate Appropriations Committee. In the next several days, NYHC will publish its examination of the proposed budget bills.
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