A shutdown of the U.S. government commenced at 12:01 a.m. EDT on Wednesday, Oct. 1. How long the shutdown will last and what concessions may have to be made for lawmakers to resolve their funding standoff is anyone’s guess. But the clock is ticking.
In the last 50 years, the U.S. government has shut down 10 times, despite funding for federal agencies having lapsed twice as frequently. The last shutdown occurred at the end of 2018 and stretched into 2019, during President Donald Trump’s first term. Lasting 35 days, it was the longest shutdown in U.S. history.
A main sticking point between lawmakers are expiring health care subsidies. Democrats demand that the subsidies be extended in exchange for votes on a stopgap funding bill Republicans passed in the House of Representatives that needs Senate approval. Republican lawmakers say Democrats are leveraging the shutdown to rush through extensions.
On Tuesday, Democratic senators Catherine Cortez Masto and John Fetterman, as well as independent Sen. Angus King, voted in favor of the Republican plan that would have extended funding for seven weeks and prevented the shutdown. That 55-45 vote fell short of the 60 votes needed to pass, with Sen. Rand Paul being the only Republican to vote against it.
The Senate held two additional funding votes Wednesday, but both failed to pass, with no additional Democrats breaking ranks.
The Republican-backed stopgap funding bill would reopen the government until Nov. 21, when another vote would be needed on a longer-term funding bill. Housing vouchers provided to renters through Department of Housing and Urban Development (HUD) programs would run through the end of November during a shutdown.
On a deeper level, the shutdown highlights concerns about the viability of any funding package, given the Trump administration’s success at diverting congressionally approved funding to fulfill campaign promises.
“Now, for the first time in 50 years,” read an Aug. 29 post on the White House website, “the President is using his authority under the Impoundment Control Act to deploy a pocket rescission, cancelling $5 billion in foreign aid and international organization funding that violates the President’s America First priorities.”
‘A concerning trend’
Federal employees are typically furloughed during shutdowns, and they receive back pay after Congress votes to fund the government. Different federal agencies have differing levels of reserves to fund their operations, and some agencies’ operations are more essential to critical government functions.
Historically, those factors have influenced which staff and operations remain funded the longer a shutdown lasts. This time, however, the White House’s Office of Management and Budget issued a memo instructing agencies to make reduction-in-force plans for programs not consistent with Trump administration priorities.
“Threatening additional layoffs during the government shutdown reflects a concerning trend from this White House,” wrote Renee Willis, president and CEO of the National Low Income Housing Coalition, in a statement shared with Scotsman Guide. She noted that approximately 2,300 employees at HUD, or 23% of the agency’s workforce, have already left their jobs this year, straining operations.
“The uncertainty of whether the White House can be trusted to abide by the terms of a negotiated agreement to fund the government greatly complicates the prospect of a timely resolution to this devastating shutdown,” said Willis.
Chen Zhao, chief economist at Redfin, assessed in a report published Monday that up to 40% of the federal civilian workforce — approximately 900,000 people — would be furloughed in a shutdown. Other economists peg furlough projections closer to 750,000.
“It is possible that the current administration would make different decisions than previous administrations regarding which functions are essential,” wrote Zhao.
Federal furloughs tend to impact mortgage markets supported by the Department of Veterans Affairs and the Federal Housing Administration, an insurance program administered by HUD, more directly than conforming markets served by the quasi-private government-sponsored enterprises Fannie Mae and Freddie Mac.
Besides processing delays, federal furloughs also mean some federal housing regulations will go unenforced for as long as the shutdown lasts. Two HUD civil rights attorneys who spoke out against what they viewed as the Trump administration’s efforts to curb enforcement of the Fair Housing Act were fired on Monday.
“The funding gap disrupts critical services provided to the people in America by the federal government, including the U.S. Department of Housing and Urban Development’s (HUD) ability to fulfill its important responsibility of enforcing the Fair Housing Act,” noted the National Fair Housing Alliance in a statement Wednesday, “which the federal government does not permit to continue during a shutdown.”
Immediate shutdown impact
The softness of the U.S. labor market and gloomy attitudes concerning economic growth make the potential for negative impacts stemming from this government shutdown more acute, says Lisa Sturtevant, chief economist of Bright MLS, a large multiple-listing service.
“Although it is difficult to predict the extent of the impact, a prolonged government shutdown, or a shutdown that results in permanent workforce cuts, would lead to a slowdown in housing market activity and likely to year-over-year declines in home prices,” said Sturtevant. “Existing homeowners who do not have to move, or who have a significant amount of equity in their homes, won’t necessarily feel an impact.”
The Washington, D.C., housing market is particularly exposed, she says, given the region’s “deep ties” to federal employment and contracting. Bright MLS covers a market spanning New Jersey to Virginia, including the D.C. metro area.
“The region has been caught up in a series of other federal initiatives, including DOGE layoffs and budget cuts, return-to-the-office mandates and the deployment of the National Guard in the District of Columbia,” Sturtevant adds. “Even the uncertainty created by this shutdown will cause prospective homebuyers to hold back and could cause more existing homeowners to leave the region.”
Rural lending from the U.S. Department of Agriculture (USDA) will be hit hard by the government shutdown, with most rural development programs ceasing, according to a “lapse of funding plan” issued Tuesday.
In messaging similar to that used by HUD this week in a website pop-up alert, a page on the USDA website stated that “due to the Radical Left Democrat shutdown, this government website will not be updated during the funding lapse.”
The shutdown will also delay applications for home purchases in flood-prone housing markets. Funding for the National Flood Insurance Program (NFIP) — a government-backed flood insurance program administered by the Federal Emergency Management Agency and the largest issuer of flood insurance policies nationwide — expired Sept. 30.
Now lapsed, new NFIP policies will not be written and existing policies will not be renewed.
The American Land Title Association and more than a dozen other associations spanning the housing, insurance, mortgage and construction industries, including the Mortgage Bankers Association and National Association of Realtors, wrote a Sept. 29 letter addressed to leadership in the House and Senate urging the immediate passage of a carve-out funding bill called the “NFIP Extension Act of 2026.”
“Since 2017, the NFIP’s authority has been extended 33 times and allowed to briefly lapse on several occasions,” the letter noted. “Another lapse of the NFIP will leave millions of Americans at risk and disrupt the purchase of flood insurance in more than 22,000 communities across the United States.”
