Trump administration throws hundreds of affordable housing projects into limbo after contract cuts

The Trump administration has stalled at least $60 million in funding intended largely for affordable housing developments nationwide, throwing hundreds of projects into a precarious limbo, according to information and documents obtained by The Associated Press

The move is part of a flurry of funding freezes, staffing cuts and contract cancellations by the Trump administration at the U.S. Department of Housing and Urban Development, changes that have instilled widespread uncertainty in the affordable housing industry.

The some $60 million is intended to go to small community development nonprofits in small grants. The money is often used as seed funding for affordable housing projects, turning a concept into a viable development and consequently drawing in more public and private investment.

Congress chose three nonprofits to distribute the grants, but HUD said in letters that it was cancelling contracts with two of the organizations, which together were to distribute the $60 million. That's pushed millions in funding already promised to small nonprofits, or yet to be awarded, into the twilight zone.

“Many of those organizations have already committed funds to pay workers, such as HVAC technicians, local contractors, homeownership counselors,” said Shaun Donovan, CEO of Enterprise Community Partners and former HUD secretary under President Barack Obama. Enterprise is one of the two groups whose contracts were cancelled.

“They will have to stop that work immediately. That will cost local jobs, hobble the creation of affordable homes, and stall opportunity in hundreds of communities.”

A spokesperson for HUD said the program, called Section 4, will continue and is not being cut, but that “the department is consolidating some grants, while others remain."

It remains unclear how or when the funding will arrive to the small nonprofits, which has thrown their work into disarray.

“Not knowing for me means we assume that the money is not coming, and that means that I have to pivot," said Jonathan Green, executive director of a nonprofit in Mississippi that's building a 36-unit affordable housing development in Biloxi.

Green said about $20,000 in grant dollars are now in limbo, money that was meant to pay for an environmental review that could cost upwards of $10,000, and licenses and permits. That threatens discussions Green is having with potential partners and investors who want to see all the up-front work done first.

“My fear is that, if the project stops altogether, we may never get it started again,” he said.

The development is supposed to be in East Biloxi, where lots still remain empty after Hurricane Katrina in 2005. Before an ounce of dirt has been moved on the project, Green's organization has received enough calls from people eager to become tenants that they’ve started a waiting list.

That's the position hundreds of other small nonprofits have found themselves in, with not just their grant funds in question but investments on the line. For every dollar in grants disbursed by Enterprise Community Partners, the local nonprofits leverage another $95 in other capital, CEO Donovan said.

Congress gave the national nonprofits the job of administering the grants, fielding and assessing hundreds of applications, so that the government doesn’t have to, Donovan said.

In one of the contract termination letters obtained by the AP, HUD said the contracts were cancelled at the direction of the Department of Government Efficiency. It said the group's operations “were not in compliance" with Trump's executive order targeting diversity, equity and inclusion initiatives. The letter also allows the organizations to appeal the termination.

The Local Initiatives Support Corporation is the other group whose contract was cancelled.

“Without access to this seed capital, housing projects for hardworking, families will stall, worsening shortages and pushing distressed neighbors into overcrowded conditions or homelessness," it said in a statement.

Habitat for Humanity International is the third nonprofit disbursing the grants, but the organization has not responded to repeated requests for comment or said if their contract was cancelled.