The Department of Housing and Urban Development has terminated its capacity building grants and technical assistance for at least two of the three organizations in its Section 4 program, totaling over $60 million in funds, according to representatives of its affiliate organizations.
Both Columbia, Maryland-based Enterprise Community Partners and New York City-based Local Initiatives Support Corp. received notices from HUD between Feb. 25 and 26 ending all Section 4 funding, planned engagements and previously approved projects, according to news releases and comments from both companies.
The Capacity Building for Affordable Housing and Community Development Program, also known as Section 4, provides grants to support housing and community development for low- to moderate-income households, according to HUD.
“Following direction from the administration, the Department is reviewing and consolidating contracts,” a HUD spokesperson told Multifamily Dive. “HUD will continue to distribute the remaining funding and deliver on statutory responsibilities. Delivery of services will not slow down. Importantly, HUD will continue to support community development and affordable housing activities that benefit low-income individuals.”
Three weeks before HUD sent these notices, a federal judge issued an injunction blocking President Donald Trump’s administration from freezing grants, loans and other payments following the president’s attempt to freeze all federal spending appropriated by Congress in January. The injunction was extended on Feb. 25 and remains in place.
Section 4’s impact
As outlined in Section 4 of the HUD Demonstration Act of 1993, three intermediaries are responsible for distributing this funding to other organizations — Enterprise, LISC and Americus, Georgia-based Habitat for Humanity. The intermediary organizations received a total of $83 million in Section 4 funding in fiscal years 2022-2023, the most recent data available through HUD.
As an intermediary, Enterprise has deployed its Section 4 grants to more than 700 organizations over the last 10 years, creating or preserving more than 45,000 affordable homes, according to a company news release. It has also administered $80 million in technical assistance since 2010.
Enterprise President and CEO Shaun Donovan, former HUD secretary and Office of Management and Budget director, rebuked the cancelation in the release.
“Section 4 and technical assistance programs provide a vital lifeline to communities across the country,” Donovan said. “Both provide support for building and preserving affordable homes, a particularly urgent need as we face an unprecedented housing crisis…Make no mistake: Today’s decision will raise costs for families, hobble the creation of affordable homes, sacrifice local jobs, and sap opportunity from thousands of communities in all 50 states.”
LISC told Multifamily Dive that it appears that HUD plans to move the process of distributing grants to smaller organizations away from intermediaries and into HUD itself.
“This move violates Congressional appropriations language, which mandates expert intermediaries manage Section 4 funds,” the organization said in a statement to Multifamily Dive. “Taking the administration of grant funds out of the hands of those expert intermediaries risks delays, bottlenecks and disruption in real estate financing and economic development at a time when stability is needed most.”
LISC stated that the loss of Section 4 funds would jeopardize thousands of affordable homes, and noted that the cancellation would risk losing hundreds of millions of dollars of private capital that follows its grants.
Habitat for Humanity has not made any public announcement regarding Section 4 grant funding, and neither Enterprise nor Habitat responded to requests for comment. All three organizations have arranged a petition letter to Congress in support of Section 4, and a public call for signatures on the letter is open until March 7.
