Operating in Today's HUD Environment
AHIC Spring Meeting | Scottsdale, AZ | April 21-23, 2026
The session was moderated by Deborah VanAmerongen, Strategic Policy Advisor at Nixon Peabody. Speakers were Jeff Little, Deputy Director of the National Leased Housing Association and former General Deputy Assistant Secretary at HUD; David Pearson, Executive Vice President at Related Affordable; and Ismael Guerrero, President and CEO of Mercy Housing and former CEO of the Denver Housing Authority.
The session examined federal budget developments, HUD staffing impacts, proposed administrative and regulatory changes, and preservation trends.
Federal Budget and Rental Assistance Funding
The panel opened with a review of the FY26 budget, which was not adopted until February following an extended federal government shutdown.
Despite an administration proposal that would have eliminated all HUD rental assistance programs in their current form and rolled funding into a state block grant with significant cuts attached, Congress rejected that approach entirely and produced a budget that fully or near-fully funds core rental assistance programs, including Section 8 vouchers and Project-Based Rental Assistance (PBRA).
Panelists framed this as consistent with a decade-long pattern: the administration proposes major structural changes, Congress ignores them and passes stable funding.
The FY27 budget proposal followed a different approach. Rather than repeating the block grant proposal, the administration included funding lines for core programs but proposed to cancel all rent increases for a year and freeze new voucher issuances at all public housing authorities.
Panelists categorized these provisions as noise, noting that Congress is expected to reject them as it has done with similar proposals in prior years. Programs including HOME, HOPWA, and the Family Self-Sufficiency program were zeroed out in the FY27 proposal but are expected to be restored through the legislative process.
Voucher Shortfalls: Real-World Impacts
While rental assistance programs have received stable or increased funding, rising rents have outpaced budget assumptions, creating shortfalls in the Housing Choice Voucher program at many housing authorities.
The shortfall does not represent a cut to the program but rather a gap between what was funded and what is needed to renew all contracts at current market rents.
Housing authorities are responding in two main ways: absorbing vouchers back into the program rather than reissuing them when households leave, and reducing payment standards.
The panel noted that responses vary significantly by jurisdiction, creating an uneven landscape for developers and operators with multi-state portfolios. San Francisco Housing Authority has reduced payment standards; Sacramento chose not to reissue certain Shelter Plus Care vouchers as they turned over.
The more significant near-term concern for LIHTC investors is the freeze on new project-based voucher contracts at many housing authorities. Permanent supportive housing development that depends on future Project-base voucher (PBV) commitments is increasingly difficult to underwrite, with some authorities declining to issue any new PBV contracts until their shortfall situation stabilizes.
PBRA contracts, funded and administered separately through the Office of Multifamily Housing, are not subject to the same pressures and panelists noted that distinction is important for investors reviewing Section 8 properties.
The question of which type of project-based Section 8 a deal carries, PBRA or PBV, matters significantly in the current environment.
HUD Staffing Reductions and Operational Impacts
HUD has lost approximately 38% of its workforce compared to recent peak staffing levels, through a combination of the deferred resignation program, voluntary departures, retirements, and attrition. No formal reductions in force took place, which means the departures were not strategically targeted.
The result is an uneven distribution of losses across offices, with some program areas far more affected than others. Offices with particularly significant departures include Fair Housing, Community Planning and Development (which oversees HOME and CDBG), and the office responsible for property inspections.
The Policy Development and Research office, which produces Fair Market Rents and Area Median Incomes, also saw heavy losses, contributing to a roughly three-month delay in publishing income limits this year. HUD currently has approximately 13 open positions posted publicly, against an estimated need to hire around 500 people annually just to maintain current staffing levels through normal turnover. No active hiring surge is underway.
Operationally, panelists reported a mixed picture. Last fall, during and immediately following the government shutdown, closings were delayed and backlogs built up significantly. Related Affordable reported five closings that were pushed from late 2025 into 2026 as a result.
Since then, conditions have improved. Multifamily asset management has adapted by shifting more review responsibility to contract administrators and streamlining certain processes. Panelists noted that Housing Assistance Payment (HAP) assignment approvals and markup-to-market requests are now moving more efficiently in many field offices, and that HUD staff have generally been responsive and cooperative when given clear communication about deal timelines and priorities.
The main remaining bottleneck is environmental review. HUD's HEROS environmental review process requires significant staff capacity to administer, and with reduced staff, approvals are running behind.
Physical condition assessments have also been a source of delay, though HUD recently issued guidance allowing owners to submit alternative physical condition reports rather than requiring use of the HUD CNA e-tool, which panelists welcomed as a practical improvement.
Administrative and Regulatory Changes: Signal vs. Noise
The panel walked through a series of proposed HUD administrative changes, consistently returning to the framework of distinguishing meaningful policy shifts from proposals unlikely to result in near-term change.
The mixed-status family rule, which would end the longstanding practice of prorating rental assistance for families with some members lacking eligible immigration status and instead require all household members to demonstrate eligibility, drew significant attention.
Panelists noted the rule affects approximately 15,000 households and 60,000 individuals nationally, concentrated in states like California and Texas. The comment period closed the day before the session with over 6,000 comments submitted.
Panelists categorized the rule as noise for now, given the time required to review comments and issue a final rule, the likelihood of legal challenges, and the administrative complexity of implementation for owners and property managers.
Other proposed changes include voluntary work requirements and time limits for residency, which PHAs and owners could choose to adopt but would not be mandated; a proposed rollback of the 30-day eviction notice requirement for non-payment of rent; and revisions to the disparate impact rule for fair housing alongside the withdrawal of significant fair housing guidance.
Panelists noted that each of these proposals, even in proposed form, generates uncertainty and anxiety among residents and staff, even when actual implementation remains unlikely or distant.
The panel also addressed the Green and Resilient Retrofit Program, which the Trump administration attempted to cancel. Following litigation, the program was revived with modifications: funding for solar panels and whole-building electrification was removed, additional due diligence requirements were added, and some support contracts that had been in place were cancelled and could not simply be restored.
The program is now moving forward for most participants, though some deals that could not wait out the legal process returned their grant funding and found alternative gap financing.
RAD, Restore Rebuild, and Preservation
The administration has proposed eliminating the statutory cap on the number of units that can convert through the Rental Assistance Demonstration program. Panelists noted this has some resistance on Capitol Hill but that the cap is not currently limiting RAD activity, making the proposal largely academic in the near term. Overall support for RAD within the administration is strong.
By contrast, the Restore Rebuild program, previously known as Faircloth to RAD, which allows housing authorities to create new units from their historical development authority, has been effectively halted by the administration and is targeted for elimination.
The administration's objection is that the program creates new public housing units, which runs counter to its broader policy stance. Congress is unlikely to formally eliminate the program, but the practical effect of the administrative freeze is that few if any new Restore Rebuild deals are moving forward.
On preservation more broadly, panelists noted a meaningful shift underway in state housing finance agency priorities following the reduction of the 50% private activity bond test to 25%. States that had previously reserved bond allocations almost exclusively for new construction are increasingly open to preservation deals.
The existing Section 8 portfolio is now largely 50 or more years old, with renovation costs running from $70,000 to $200,000 per unit depending on the scope of work. Panelists noted preservation is typically more cost-effective than new construction and can often be executed with less subsidy, particularly where project-based Section 8 contracts are in place to help leverage financing.
Colorado, Virginia, and Massachusetts were cited as states showing meaningful movement toward preservation allocations. New York remains an exception.