'Fallout Would Be Devastating': Trump’s Budget Alarms Affordable Housing Sector

President Donald Trump doesn’t want the federal government to spend less money in 2026, but he does want to spend the cash a certain way. 

The White House’s discretionary budget request released May 2 offered a glimpse into the president’s priorities. Spending for defense, veterans and homeland security would be increased under Trump’s proposal, while nearly every other federal sector would shrink. 

The Department of Housing and Urban Development is facing some of the steepest cuts, a 44% budget reduction from $75B to $42B. If approved, the adjustments at HUD would threaten to collapse the country’s affordable housing model, putting owners at risk of foreclosure and forcing people from their homes. 

“We've never seen cuts to the programs that have come close to what's being proposed,” said Eric Oberdorfer, director of policy and legislative affairs at National Association of Housing and Redevelopment Officials.

The White House budget framework targets nearly a dozen HUD programs for funding cuts or elimination. If passed in its current form, the proposal would effectively end housing voucher programs like Section 8 and cut off government funding for projects under the Community Development Block Grant program. 

The framework unveiled on May 2 is often called a skinny budget because it serves as a jumping-off point for negotiations rather than a binding piece of legislation. Still, it’s the only insight available into Trump’s priorities, and its release is closely watched across the corporate world as an indicator of policy direction. 

“The 44% cut to HUD's budget would have huge and devastating repercussions to housing providers across the country, not only in their ability to continue serving the numbers of families that they're serving, but also just in terms of making sure that they're able to provide on-time payments to landlords,” Oberdorfer said.

Funding for rental assistance programs would be cut nearly in half under the president’s proposal, trimming $27B from a $59B collection of programs that the budget’s authors describe as dysfunctional, promising to create a “state-based formula grant which would allow States to design their own rental assistance programs.” 

The cuts to those programs would account for just over 80% of the total savings proposed for HUD. The plan has the backing of Secretary Scott Turner, who was confirmed by the Senate to lead the housing agency in February.

“President Trump’s bold budget proposes a reimagining of how the federal government addresses affordable housing and community development,” Turner said in a statement. “It rightfully provides states and localities greater flexibility while thoughtfully consolidating, streamlining, and simplifying existing programs to serve the American people at the highest standard.”

HUD didn’t respond to a request for comment.

The Ways and Means Committee in the House of Representatives put forward its first version of an amended budget bill Wednesday. That piece of legislation will face fierce debate before it comes up for a vote,  and it will eventually have to be aligned with whatever bill comes out of the Senate in the coming weeks.

In addition to the outright elimination of some programs, the skinny budget also finds cost savings by consolidating programs, which it says will reduce the regulatory burden on developers. 

Those changes could unlock more development opportunities by diverting funding from compliance to construction. Margaret Stagmeier, managing partner at Atlanta-based Mission Partners, which operates roughly 4,000 units predominantly around Atlanta, said that as much as 30% of the revenue she gets from government sources goes towards compliance with those programs. 

But there’s little expectation that state entities will backfill funding gaps left by the federal government at a time when state tax revenue is falling and major cities are already grappling with an affordability crisis. 

“How are they going to make up the cuts to 35% of rental assistance and 44% overall of the HUD housing programs? It's like voodoo economics, it just doesn't work,” said Dan Cruz Jr., senior vice president at Cruz Development Corp., a subsidiary of a third-generation Black-owned affordable housing developer based in Boston.

The skinny budget is likened to a presidential wish list, and the proposals are frequently watered down or disappear entirely by the time Congress puts forward the final budget for a vote.

Cruz estimates that roughly 95% of his company’s 1,200-unit portfolio relies on some type of rental assistance whether through housing vouchers or project-based funding. The size of the proposed budget cuts would devastate his business, Cruz said, and would likely reverberate across the affordable housing landscape. 

“In the president's first term, he did the same thing. He came out with a down budget, and Congress level funded the budget,” he said. “I don't think that they'll implement changes to this degree, because the fallout would be devastating. You'd have developments in foreclosure. You'd have people forced out of their homes.”

Eliminating the block grant program, launched in 1974 as a formula-based system that provides federal dollars to urban communities to promote development, would save $3.3B in 2025. The federal government is looking for an additional $1.3B in savings by ending the HOME Investments Partnership program, a low-interest loan offering that is meant to facilitate affordable housing development. 

The loan program is frequently used by developers to supplement their capital stack, with the other lenders on a project expecting committed federal funds to be available when the project is completed. 

The long time horizons on new developments mean the framework budget alone could stifle new construction, Cruz said. Two of his projects that are near the end of underwriting with all the capital committed are now at risk because lenders can no longer rely on federal sources of funding to be there when the project breaks ground. 

“The lenders, they're not ready to shut it down, but they're hedging their bets, putting a little bit more spread in the deal, just looking at ways to give themselves a bit more cushion in case things start to go a bit sideways,” Cruz said. 

Plans to cut funding come as the U.S. grapples with a longstanding housing affordability crisis exacerbated by the pandemic. The country is short some 7.1 million homes that are both affordable and available for the lowest-earning Americans, according to the National Low Income Housing Coalition. 

Even without accounting for hurdles related to income, the country needed an additional 3.7 million homes to meet long-run housing demand in 2024, according to Freddie Mac. 

While inflation was a key battle line in the 2024 race for the White House, the cost of housing specifically was less of a focus. 

Both Trump and Kamala Harris, the then-vice president and his opponent in the campaign, called for efforts to increase the supply of housing. While Harris pledged to help build 3 million housing units in her first term, Trump promised to open up federal land for affordable housing development and cut regulations around construction. 

In March, the Trump administration said it would work to identify underutilized federal land overseen by the Department of the Interior that was ideal for housing development. 

But affordable housing developers, owners and their supporters are already reeling from early White House cost-cutting measures. 

Trump issued an executive order in March that sought to eliminate the Community Development Financial Institutions Fund, which provides financing at attractive terms for affordable housing construction and preservation. HUD is also reportedly planning to cut up to half of its workforce of more than 9,000 full-time staff.

While each dollar lost in funding doesn’t directly translate to a shelved project or lost job, Oberdorfer said the steep cuts would inevitably lead to a decrease in the quality and availability of the services provided by housing agencies across the country.   

“With a cut that significant, they would not be able to provide the same level of subsidy and would have to make difficult choices about how they work to move forward,” he said.