The U.S. housing market is facing collapse, with Elon Musk’s D.O.G.E ceasing funding for affordable housing initiatives nationwide. In January, monthly housing expenses in the U.S. hit an all-time high of $3,104.
In the last half-decade, mortgage payments have almost doubled, currently standing at approximately $2,237 monthly, along with an additional $416 for property taxes and $361 for insurance expenses. Concurrently, home values jumped by $31,300 to reach a median price of $446,300, marking the second highest point historically.
Despite unprecedented levels of unaffordability, the Department of Government Efficiency (D.O.G.E.), which is supported by Musk as part of the White House initiatives, instructed the Department of Housing and Urban Development (HUD) to reduce millions from federal housing budgets. These budget reductions have halted projects across more than 1,000 neighborhoods, affecting efforts aimed at tackling homelessness, aiding disaster recovery, and promoting community development. Advocates for affordable housing describe this move as detrimental to low-income households; however, D.O.G.E remains steadfast in their decision.
D.O.G.E. cuts housing funds, eliminating more than $30 million in grants.
D.O.G.E ordered HUD in February to inform non-profits that their “operations and performance in connection with the subject awards are not in compliance with the Executive Order titled ‘Ending Radical and Wasteful Government DEI Programs and Preferencing.’” The order, signed under Trump’s administration, was cited as the basis for shutting down at least eight national organizations that provided technical assistance to housing programs.
The action led to the defunding of two out of the three groups tasked with overseeing the Section 4 program, which is a federally backed scheme aimed at fostering housing growth in underrepresented regions. According to regulations, such subsidies should be channeled via nationwide middlemen; however, D.O.G.E has ceased financial support without obtaining consent from Congress. The rules set forth by HUD stipulate that these funds ought to "promote housing equity" and "aid marginalized populations." Nonetheless, Musk’s oversight organization has assumed authority, shifting focus away from developing more cost-effective homes.
One of the hardest-hit organizations is the Local Initiatives Support Corporation (LISC). HUD canceled all of its Section 4 awards and technical assistance grants, erasing $30 million in federal support. LISC had been funding lead-based paint removal in Arkansas, first-time homebuyer support for teachers in the Mississippi Delta, and renovations for an abandoned mill in Maine. Now, all of those projects have stalled indefinitely.
A representative from LISC strongly criticized the decision. reportedly Telling Bloomberg, "This action breaches the congressional appropriations language, which requires expert intermediaries to oversee Section 4 funds." The spokesperson highlighted that HUD does not possess the capability to effectively disburse these grants, implying that the reduction in funding might lead to significant long-term impacts on community housing programs.
The Enterprise and Habitat for Humanity respond to unexpected layoffs.
A significant nonprofit impacted is Enterprise Community Partners, managing a $32 million Section 4 grant aimed at promoting affordable housing initiatives. Over the last year, this organization has been educating smaller groups on securing and handling grants, assisting underprivileged households in obtaining improved living conditions. These resources, usually provided through $50,000 awards, have vanished suddenly.
Shaun Donovan, the CEO of Enterprise, who once held the position of HUD secretary during Barack Obama’s administration, cautioned that these budget reductions will "increase expenses for households, impede the development of affordable housing, lose out on local employment opportunities, and diminish prospects for countless neighborhoods across all 50 states." Regardless of attempts to locate additional financial resources, numerous community initiatives will unfortunately have to cease operations.
One of the few organizations that survived D.O.G.E’s purge is Habitat for Humanity. The non-profit, which also administers Section 4 funds, was not included in the termination notices sent out by HUD. The reason for this remains unclear, though Habitat’s website has noticeably less language related to racial equity and social justice compared to other non-profits targeted by D.O.G.E.
Housing crisis worsens as markets react to economic uncertainty
As D.O.G.E eliminates housing subsidies, the financial sector is preparing for the Federal Reserve’s upcoming interest rate announcement on Wednesday. Market participants are keeping an eye on crucial economic indicators such as February's retail sales figures, housing starts, and existing home sales. This data will be instrumental in assessing whether the Fed might keep interest rates unchanged or modify them due to inflation worries.
The S&P 500 recently surged by 2.1%, briefly interrupting a continuous three-week decline. Since February 19th, the market has seen a dip of around 10%, unsettling many investors as prominent companies such as Nvidia, Meta, and J.P. Morgan have experienced significant losses. Walmart's disappointing financial statement added fuel to worries about diminishing consumer expenditure. Several experts think this market adjustment might still continue due to persisting economic instability.
The consumer stock trading division at Bank of America circulated a client's message on Friday. saying "We could be nearing the end of the unwinding positions phase, yet we're still at the beginning of the economic downturn discussion." It’s somewhat reassuring that we experience more instances of slowing growth without actually entering a recession.
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