As the federal government shutdown drags into week three, the Environmental Protection Agency (EPA) and the Department of Housing and Urban Development (HUD) are two of many agencies struggling to maintain their mission with only a skeleton staff in place. Once pre-appropriated funds run out, funding for permitting and programs like public housing go into limbo, leaving recipients out in the cold.
Nearly 90% of EPA workers and more than 75% of HUD staff are currently furloughed – not including the staff laid off amid the shutdown – stalling their mission to protect the American environment and housing sector to a near-halt. The EPA and HUD work in tandem to oversee restrictions over transactions regarding contaminated properties and property development.
Contingency plans in place
The EPA’s contingency shutdown plan outlines about 1,700 employees of its 17,000 permanent workers as essential, either required to work without pay or funded outside federal appropriations. Its shutdown plan requires the agency to stop conducting non-criminal pollution inspections to enforce air and water rules, issuing new permits for demolition, construction, or pollution-related purposes and conducting most of its scientific research endeavors.
The HUD’s contingency plan has revealed that the Department’s workforce has been reduced more than 30% since the beginning of the Trump Administration. The Federal Housing Administration (FHA), a major subagency of the HUD providing loans to low-income and first-time homebuyers, will continue to insure single-family loans in the near future, but no new firm multifamily insured project commitments will be issued.
Federal shutdown, environmental slowdown
The Superfund program, one of the EPA’s major initiatives to clean contaminated land and protect public health, has been paused with exception for the most urgent matters. The EPA includes Superfund site progress under activities necessary to protect human life and property.
States that rely on the EPA as the authority to issue permits for businesses will experience delays, especially permits relating to stormwater, urban runoff, and sewer systems. These states are Idaho, Massachusetts, New Hampshire and New Mexico, as well as the District of Columbia.
Property development and compliance issues
All commercial real estate transactions involve some level of environmental due diligence before a property can be bought or sold, yet not all transactions require the same level of disclosure before a purchase can take place.
Beyond environmental concerns, the EPA has robust compliance laws for construction and property development that have been impacted by the shutdown. Real estate construction activity that occurs over one or more acres of land may be subject to obtaining a Clean Water Act permit. In addition, if a site or project involves hazardous waste such as lead-based paint, lamps containing mercury, or construction and demolition wastes, the developer may have to check the allowed concentrations of such materials outlined in the Resource Conservation and Recovery Act.
Broader implications
The end of the shutdown won’t mean an immediate return to normal operations. Developers, lenders, and housing officials will face a cascade of continued delays as the EPA and HUD address the backlogs built up during the shutdown. Environmental reviews, loan and permit applications and grant disbursements could take weeks – if not months – to process, pushing project timelines further back and adding additional strain to state and local-level entities working with the agencies.
Longer-term effects could be more structural, as repeated shutdowns have made private companies and municipalities wary of relying on federal agencies for permits and funding. Private environmental consultants or alternative lending channels may rise as a result of a distrust of the federal government, potentially pointing to a trend of increased fragmentation that could disproportionately affect equity in housing accessibility and environmental oversight.
For now, the real estate industry is watching Washington closely as the shutdown continues and the potential aftershocks begin to expose themselves.
