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 just half a decade, mortgage payments have almost doubled, currently standing at an average of $2,237 monthly, along with additional expenses like $416 for property taxes and $361 for insurance. Concurrently, home values jumped by $31,300 to reach a median price point of $446,300—the second highest figure ever recorded.
Despite unprecedented levels of unaffordability, the Department of Government Efficiency (D.O.G.E.), which operates under the White House with support from Elon Musk, instructed the Department of Housing and Urban Development (HUD) to reduce millions of dollars in federal housing grants. These budget reductions have halted initiatives across more than 1,000 towns and cities, affecting efforts aimed at tackling homelessness, aiding disaster recovery, and promoting community growth. Advocates for affordable housing are deeming this action as detrimental to low-income households; however, D.O.G.E remains steadfast in their decision.
D.O.G.E. cuts housing funds, scrapping more than $30 million in grants.
In February, D.O.G.E instructed HUD to notify nonprofits that their "activities and achievements related to these specific grants do not align with the Executive Order named 'Terminating Excessive and Inefficient Government Diversity, Equity, and Inclusion Initiatives and Preferences.'" This directive, issued during the Trump administration, served as grounds for terminating funding to at least eight nationwide groups providing support to housing initiatives.
The action led to the defunding of two out of the three groups tasked with managing the Section 4 program, which is a federally funded effort aimed at promoting housing development in underrepresented regions. According to regulations, such subsidies should be channeled via nationwide intermediary bodies; however, D.O.G.E has halted this financial support without obtaining consent from Congress. HUD standards mandate that these funds "promote housing equity" and assist marginalized populations. Contrary to this directive, Musk’s oversight organization has assumed authority, shifting focus away from low-cost housing initiatives.
The organization hit particularly hard includes the Local Initiatives Support Corporation (LISC). All of its Section 4 awards along with technical assistance grants were revoked by HUD, eliminating $30 million worth of federal backing. Previously, LISC was providing funds for removing lead-based paint in Arkansas, assisting first-time homebuyers who are educators in the Mississippi Delta region, and refurbishing an unused mill in Maine. However, these initiatives now face indefinite postponement due to this decision.
A representative from LISC criticized the decision strongly. reportedly informing Bloomberg, "This action breaches the congressional appropriations language, which requires expert intermediaries to handle Section 4 funds." The spokesperson highlighted that HUD does not possess the capability to effectively disburse these grants, suggesting 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 fostering affordable housing initiatives. Over the last year, this organization has been educating smaller groups on how to secure and handle grants, aiding low-income households in obtaining improved living conditions. These resources, usually allocated through grants of around $50,000 each, have vanished suddenly.
Shaun Donovan, the CEO of Enterprise, who once held the position of HUD secretary under President Barack Obama, cautioned that these budget reductions will "increase expenses for households, impede the development of affordable housing, lose out on local employment opportunities, and deprive countless neighborhoods across all 50 states." Even with attempts to locate additional financing options, numerous community initiatives will still have to close down.
The sole organization that managed to survive D.O.G.E.’s cleanup is Habitat for Humanity. This nonprofit, responsible for managing Section 4 resources as well, did not receive termination notifications from HUD. It isn’t clear why this occurred; however, Habitat’s site now contains significantly fewer references to racial equality and social justice than those nonprofits flagged by D.O.G.E.
The housing crisis intensifies as markets respond to economic instability.
As D.O.G.E eliminates housing subsidies, investors are preparing for the Federal Reserve’s upcoming interest rate announcement on Wednesday. They are carefully monitoring crucial economic indicators such as February retail sales, housing starts, and existing home sales. This information will be pivotal in assessing whether the Fed will keep interest rates unchanged or modify them due to inflation worries.
The S&P 500 recently rebounded by 2.1%, momentarily halting a continuous decline of three weeks. Since February 19th, the market has seen a significant dip of around 10%, unsettling many investors as prominent companies such as Nvidia, Meta, and J.P. Morgan have experienced substantial losses. A disappointing financial statement from Walmart heightened worries about declining consumer expenditure. Several experts think this market adjustment might still continue due to persisting economic uncertainties.
The consumer stock trading division at Bank of America circulated a client's message on Friday. saying "We may be well into the process of unwinding our positions, but we're still at the beginning when it comes to discussing the risks of an economic downturn." It’s somewhat reassuring that we typically experience more instances of slowed growth rather than actual recessions, though this provides only limited comfort.
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