Washington Recap: January 2026
NAAHL, in partnership with the Center for Affordable Housing Lending, is pleased to provide this monthly recap of the top federal policy developments in affordable housing and community development. NAAHL Members receive breaking policy updates and additional policy resources directly; however, any partner can sign up for NAAHL alerts and the monthly Washington Recap here.
January was the start of the second session of the 119th Congress and marks the first full year of President Trump’s new term in office. In a message to members and partners, NAAHL President & CEO Sarah Brundage reflected on the first year of the second Trump Administration and opportunities that lie ahead in 2026.
CONGRESS
Government Likely Headed Toward Partial Shutdown as Funding Bills Stall
Following months of bipartisan work to fund the federal government, the federal government is once again poised for a partial shutdown at midnight on January 30.
In November, a funding deal was reached that reopened the federal government after the longest full government shutdown in history. This deal included full-year appropriations for three of the 12 funding bills – Agriculture, Military Construction-Veterans Affairs, and Legislative Branch. Through a continuing resolution, agencies funded through the remaining 9 bills – including the Department of Housing and Urban Development (HUD) and Treasury, which includes the CDFI Fund – received funding based on Fiscal Year (FY) 2025 levels until January 30. That agreement also reversed terminations of employees that occurred during the shutdown, including the entire staff of the CDFI Fund, and prohibited terminations of employees through January 30, 2026.
In mid-January, Congress passed three more full-year funding bills, leaving six bills that Congress needed to pass to avoid funding lapses on January 30. These six bills include the Financial Services and General Government (FSGG) bill, which funds the CDFI Fund, and the Transportation, Housing and Urban Development, and Related Agencies (THUD) bill, which funds HUD.
FSGG Funding Passes the House
On January 14, the House passed FSGG and National Security-State funding bills that had bipartisan support from House and Senate Appropriators. This included $324 million for the CDFI Fund for FY 2026, the same amount as was provided in FY 2025. It also directed the Government Accountability Office (GAO) to study the possibility of a government-sponsored secondary market for acquisition, development, and construction (AD&C) loans to support housing development, including opportunities to access the secondary market through Fannie Mae and Freddie Mac. While the bill passed the House, the Senate did not act on the bill before they left on a one-week recess.
Four-Bill Package Funding HUD Passes the House
On January 20, the House and Senate Appropriations Committees released the final four-bill package, which had been agreed to on a bipartisan basis and included funding for the Department of Defense, the Department of Homeland Security, Labor-Health and Human Services, and THUD. It provided $77.3 billion in funding for HUD, an overall increase from FY 2025 funding levels, including:
$1.25 billion for the HOME Investment Partnerships program (equal to FY 2025).
$3.3 billion (before earmarks) for the Community Development Block Grant program (equal to FY 2025).
Includes $50 million for PRO Housing grants to help communities reduce zoning barriers.
$38.439 billion in Tenant-Based Rental Assistance (increase from FY 2025).
$18.543 billion in Project-Based Rental Assistance (increase from FY 2025).
$46 million for Section 4 Capacity Building, including $5 million for rural capacity building (increase from FY 2025).
$158 million for NeighborWorks (equal to FY 2025).
In addition to program funding, the bill also addresses FY 2025 grant awards for HUD’s Continuum of Care (CoC) program. For more on this topic see “HUD Reissues Continuum of Care (CoC) NOFO Amid Continued Litigation,” below.
During consideration of the four-bill package, many House Democrats raised concerns about supporting Department of Homeland Security (DHS) funding, due to the Trump Administration’s immigration policies. Despite these concerns, the House was able to pass the final four bills, in two packages, on January 22. Those four bills were packaged with the two bills the House previously passed and sent to the Senate for a vote.
Funding Bills Stall in the Senate
Since these bills were previously negotiated on a bipartisan and bicameral basis, the Senate was largely expected to return from recess on January 26 and pass a six-bill package before January 30.
However, after the fatal shooting of Alex Pretti on January 24 in Minneapolis, key Democratic Senators stated they would not vote for a package that included the current DHS funding language. On January 29, it was reported that Senate Democrats and President Trump had reached a deal to pass full-year funding for all bills except for the DHS funding bill, and to provide a two-week continuation of funding for DHS while additional negotiations take place. However, these changes need agreement for an expedited vote and must go back to the House for approval. With funding expiring on January 30 and the House in recess until February 2, a lapse in funding is almost certain. The lapse could be brief if both chambers are able to agree to move quickly on the funding deal.
The funding lapse would affect both HUD and the CDFI Fund, as both were funded through the stalled six-bill package. Each agency determines what activities must continue on an essential basis during a shutdown.
The agencies funded by the Agriculture, Military Construction-Veterans Affairs, Legislative Branch, Energy and Water Development, Interior-Environment, and Commerce-Justice-Science bills have received full year funding and will continue to operate normally.
NAAHL’s budget chart, which provides a more detailed breakdown of the funding levels for key programs, is available here.
HUD Secretary Turner Appears before House Financial Services Committee
On January 21, HUD Secretary Scott Turner testified before the House Financial Services Committee at a hearing entitled, “Oversight of the Department of Housing and Urban Development and the Federal Housing Administration.” Members raised a number of issues during the hearing, including:
Support for the Housing for the 21st Century Act: During their questioning, multiple members highlighted the bipartisan Housing for the 21st Century Act, which passed the House Financial Services Committee in December, and its updates and reforms aimed at increasing housing supply. Representative Mike Flood (R-NE), the Chair of the Subcommittee on Housing and Insurance, and Representative Troy Downing (R-MT) raised concerns about Build America, Buy America (BABA) requirements increasing housing cost and slowing down projects.
Rising the Public Welfare Investment Cap: Representative Andy Barr (R-KY) called for raising the public welfare investment (PWI) cap to unlock more private investment in affordable housing production. The Housing for the 21st Century Act, the Community Investment and Prosperity Act, and the ROAD to Housing Act would all increase banks’ PWI cap.
Fair Housing Enforcement: Representatives Rashida Tlaib (D-MI), Al Green (D-TX), and other Democrats on the Committee raised concerns about HUD’s current fair housing enforcement and the reduction of staff in the Office of Fair Housing and Equal Opportunity.
CoC Funding: Secretary Turner also received questions about HUD’s CoC NOFO and potential disruptions to private sector housing providers and community partners.
In February, the House Financial Services Committee will continue its focus on housing with three hearings: one full committee hearing on homeownership, one Oversight and Investigations Subcommittee Hearing on Public Housing Agencies (PHAs), and one Housing and Insurance Subcommittee Hearing on the secondary mortgage market.
House Committee on Oversight Housing Affordability Hearing
On January 22, the House Committee on Oversight and Government Reform Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs held a hearing titled, “Housing Affordability: Saving the American Dream.”
The hearing focused on high housing costs and the effect on homeownership opportunities. Members were all concerned about the lack of affordable housing opportunities but divided on the role that the federal government should play. During the hearing, members raised issues including the growing property insurance crisis, building code and energy regulations as contributors to rising housing costs, the need for regulations to ensure housing quality and safety, and corporate ownership of single-family homes.
Speaker Johnson Plans for Second Reconciliation Bill
House Speaker Mike Johnson (R-LA) told reporters this month that he is starting discussions and is “bullish” on a second budget reconciliation bill. A reconciliation bill allows the Senate to pass the bill with a simple majority but limits the scope of the bill to revenue and spending-related matters. The first reconciliation bill of the Congress, the One Big Beautiful Bill Act, included a number of tax, healthcare, and border security changes, including a permanent increase and improvements to the Low-Income Housing Tax Credit, permanent extension and enhancements to the Opportunity Zones tax incentive, and a permanent extension of the New Markets Tax Credit.
In anticipation of a second reconciliation bill, the Republican Study Committee (RSC) released a framework titled, “Making the American Dream Affordable Again.” This framework includes policy provisions related to various areas of affordability including housing, healthcare, and energy costs.
The housing policy recommendations include a zero-to-low down payment option through the Federal Housing Administration (FHA), mortgage portability and assumability for GSE-backed loans, eliminating the capital gains tax on home sales to first-time home buyers or to tenants that are purchasing the home they rented, the sale or leasing of federal land, and the ability to draw from tax-advantaged savings accounts for downpayments.
While there are early discussions of a second reconciliation bill, there is no guarantee it will happen. The razor thin majority held by Republicans in the House adds to the challenges Republican leadership must overcome to move a party-line bill. House Ways & Means Committee Chair Jason Smith (R-MO) told reporters in December that he did not see a path for a second reconciliation bill passing this Congress. NAAHL is closely monitoring reconciliation discussions for opportunities to advance affordable housing legislation.
ADMINISTRATION
President Trump Focuses on Housing Affordability
In early January, there was renewed reporting about a possible executive order on housing affordability. Reporting suggested that President Trump was considering a variety of policies, including 50-year mortgages, allowing penalty free withdrawals from retirement and college savings accounts for downpayments, and portable mortgages, in addition to actions on institutional investors buying single-family homes.
Throughout January, President Trump began to distance himself from policies related to 50 year mortgages and 401(K) withdrawal plans, but took two significant housing actions, which he highlighted in a speech at the World Economic Forum in Davos.
Executive Order Limits Institutional Investor Purchases of Single-Family Homes
On January 20, President Trump signed the "Stopping Wall Street From Competing With Main Street Homebuyers" executive order to restrict federal agency or GSE sales of single-family homes to large institutional investors. The order directs the Treasury Department to define "large institutional investors" and mandates that HUD, USDA, VA, and the Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae and Freddie Mac, prioritize individual owner-occupants in sales of single-family homes while preventing the transfer of federal assets to corporate entities. Additionally, the DOJ and FTC will review large investors’ acquisitions of single-family homes for anti-competitive practices, and HUD will require ownership disclosures to track institutional investors participating in HUD assistance programs. Notably, "build-to-rent" projects are explicitly excluded from this order.
While the order focuses on restricting federal financing and asset sales rather than a total ban on institutional investors, its full impact will depend on agency definitions and interpretations. The executive order also called on Congress to codify these actions, and several Republicans have said they are working on legislation, including Representative Anna Paulina Luna (R-FL), who introduced legislation to ban investors with more than $500 million in assets under management from acquiring additional single-family homes and requiring them to fully divest their portfolio within a decade.
Trump Administration Directs Fannie Mae, Freddie Mac to Purchase Mortgage-Backed Securities
This month, President Trump directed Fannie Mae and Freddie Mac to purchase $200 billion in their mortgage-backed securities (MBS) in an effort to bring down mortgage rates for homebuyers. Since the 2008 financial crisis, the Treasury Department and FHFA have limited the size of Fannie Mae and Freddie Mac’s portfolios, which are currently capped at $225 billion per Enterprise. These caps have kept them making large investments or purchasing significant amounts of MBS. While the Federal Reserve was purchasing MBS as one of its tools to help manage interest rates, it has now stopped these purchases.
HUD Proposes to Rescind Disparate Impact Rule
On January 14, HUD published a proposed rule that would rescind the agency’s Fair Housing Act disparate impact regulation. In its proposal, HUD states that the courts are the best interpreters of disparate impact liability under the Fair Housing Act. In a 2015 ruling, Texas Department of Housing and Consumer Affairs v. Inclusive Communities Project, Inc., the Supreme Court upheld disparate impact liability under the Fair Housing Act. A 30-day period was given for public comment.
This proposed regulatory change is part of the Trump Administration’s April executive order titled “Restoring Equality of Opportunity and Meritocracy,” which states it is “the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.” The executive order directs federal agencies to review and amend or repeal, as appropriate, rules or policies imposing disparate impact liability.
HUD Reissues Continuum of Care (CoC) NOFO Amid Continued Litigation
On January 9, HUD reopened its NOFO for the CoC program, the coordinated funding provided to communities for housing and homelessness services. The revised NOFO comes amid ongoing litigation over HUD’s original NOFO that would have changed the way HUD allocated CoC funds away from permanent housing to temporary housing assistance with work or treatment requirements. The reissued NOFO applies for renewals of existing projects and not to any new developments. Based on this release, HUD anticipates making awards in May, which means that CoCs with funds expiring before May could see funding lapse, which some advocates and operators have said could put people at risk of homelessness.
In response to ongoing concerns about the change in funding priority from HUD’s original CoC NOFO, the FY 2026 THUD funding bill, which is included in the most recent minibus but has not passed the Senate yet, requires HUD to non-competitively renew CoC grants that are expiring during the first quarter of the calendar year 2026, for a period of 12 months. If an FY 2025 Notice of Funding Opportunity (NOFO) has not been issued and awards made by April 1, 2026, then HUD must continue to renew awards based on a schedule and conditions provided in the bill text. The THUD appropriations bill also requires HUD to renew at least 60% of the amount of previous years’ grants (up from 30% in the now-rescinded NOFO from the fall).
BANKING REGULATORS
Trump Announces Kevin Warsh as Pick to Lead the Federal Reserve
On January 30, President Trump announced that he would nominate Kevin Warsh to serve as the next Chair of the Federal Reserve. Warsh previously served as a member of the Federal Reserve Board from 2006 through 2011, and as Special Assistant to the President for Economic Policy and Executive Secretary to the National Economic Council under President George W. Bush. He is currently the Shepard Family Distinguished Visiting Fellow at the Hoover Institution and a lecturer at the Stanford Graduate School of Business.
The announcement came after months of speculation on who Trump would pick to fill the Chair position when current Federal Reserve Chair Jerome Powell’s term as Chair expires in May. President Trump has repeatedly expressed his displeasure with Chair Powell over the Federal Reserve’s decisions on interest rates, which the President has said remain too high. Once Warsh is formally nominated, his nomination must be confirmed by the Senate. That process could face a roadblock in the Senate, where at least one Republican Senator on the Banking Committee, which will consider Warsh’s nomination, has said he will not vote to confirm a new Chair of the Federal Reserve until a probe into current Chair Powell related to the costs of renovations of the Federal Reserve building is resolved.
Powell’s term as Chair expires in May, his term as a member of the Federal Reserve Board of Governors lasts through 2028. While Chairs have typically resigned from the Board at the end of their term as Chair, they may elect to stay through the end of their term as a member of the Board.
CONFIRMATIONS AND APPOINTMENTS
Prior unconfirmed nominations expired at the end of the first session of the 119th Congress on January 3, 2026 unless the Senate agreed to hold them over into this year. No banking or housing-related nominees were held over. The President has since re-nominated the following nominees:
Department of Agriculture (USDA)
NOMINATED: Glen Smith to be Under Secretary for Rural Development.
Department of Housing and Urban Development (HUD)
NOMINATED: Irving Dennis to be Chief Financial Officer of the Department of Housing and Urban Development [Privileged Nomination]