NALHFA: HUD cuts would worsen housing affordability challenges

Affordable housing advocates are warning that proposed reductions to several key U.S. Department of Housing and Urban Development (HUD) programs could make it harder for communities to address persistent affordability challenges and expand housing supply.

The National Association of Local Housing Finance Agencies (NALHFA), which represents state and local agencies that finance affordable housing developments, says the House of Representatives‘ spending proposal would reduce resources that communities depend on to build, preserve and operate affordable housing.

Jonathan Paine, executive director of NALHFA, told HousingWire that proposed cuts will only exacerbate existing housing affordability and cost-of-living shortfalls for many Americans.

“The [funding proposal would limit] the ability of communities to finance affordable housing production and preservation at a time when housing costs remain historically high,” Paine said. “NALHFA is particularly concerned about proposed reductions to rental assistance, affordable housing investment and homelessness assistance programs.

“These resources serve as critical gap financing that helps make affordable housing developments financially feasible and leverage substantial public and private investment.”

The House Transportation, Housing and Urban Development appropriations bill would provide approximately $71.4 billion for HUD and the Department of Transportation — representing a nearly $6 billion reduction from fiscal year 2026 levels.

While some housing programs would receive funding increases, several major development and community investment programs would face cuts.

Affordable housing production concerns

Among the programs drawing concern from housing finance agencies is the HOME Investment Partnerships Program, which would receive $500 million under the proposal — a reduction of $750 million from fiscal 2026 funding levels.

The bill would also eliminate funding for the Pathways to Removing Obstacles to Housing program, which received $50 million in the current fiscal year.

Paine said reductions to development-focused programs could create financing challenges for affordable housing projects already facing difficult economic conditions.

“The proposed funding levels would directly reduce affordable housing production and preservation by weakening key sources of capital that local housing finance agencies use alongside Low-Income Housing Tax Credits, tax-exempt bonds and other financing tools,” he said.

The Community Development Block Grant (CDBG) program would remain funded at $3.3 billion — matching fiscal 2026 levels.

“While CDBG is proposed at level funding, the program has effectively lost purchasing power over time as housing costs have increased and community needs have grown,” Paine added.

The funding debate also comes as affordable housing developers continue grappling with elevated construction costs, higher borrowing expenses, regulatory needs and rising insurance premiums.

“Additional reductions in HUD funding would create larger financing gaps, forcing projects to be delayed, scaled back or canceled altogether,” Paine said. “These impacts would be particularly significant in rural and underserved communities where alternative funding sources are often limited.”

Potential market-wide effects

NALHFA illustrated how reductions in federal housing investments extend beyond affordable housing providers to influence broader housing market conditions.

Paine said slowing affordable housing production and preservation efforts could intensify existing shortages in many communities.

“When fewer homes are built or rehabilitated, pressure on rents and home prices increases across the broader housing market,” he said. “Communities would have fewer tools to address housing needs, resulting in greater competition for limited housing inventory and making it more difficult for working families, seniors, veterans and individuals with disabilities to find affordable housing.”

The House proposal includes mixed funding outcomes for rental assistance programs.

Tenant-based rental assistance would receive $38.083 billion, a decrease of $356 million from fiscal 2026 levels, although funding specifically designated for Housing Choice Vouchers would increase by $496 million.

Project-based rental assistance would receive nearly $19 billion, representing a $432 million increase above fiscal 2026 levels.

Congressional priorities ahead

As lawmakers continue the appropriations process, NALHFA is urging Congress to prioritize investments that increase housing supply and preserve existing affordable units.

The organization supports continued funding for vouchers, project-based rental assistance, homelessness assistance programs and community development initiatives.

“Federal housing programs support the entire housing ecosystem by helping create stable rental markets, preserving existing housing stock and increasing overall housing supply,” Paine said. “Reductions in these programs can contribute to tighter housing markets, higher cost and reduced affordability for households at all income levels.”

Looking ahead, NALHFA believes sustained federal investment will remain essential as communities work to address growing housing needs nationwide.

“Congress should prioritize policies and investments that increase housing production, preserve existing affordable housing and provide local communities with flexible tools to address their unique housing challenges,” Paine said. “At a time when affordability remains a top concern nationwide, sustained federal investment is essential to expanding housing opportunities and strengthening local economies.”