America is on the verge of a housing catastrophe as Elon Musk’s Department of Government Efficiency (DOGE) moves to halt federal housing projects, including a vital $1 billion program aimed at preserving affordable housing. This decision is already reshaping the landscape of housing assistance across the country, with far-reaching consequences for millions of low-income families and underserved communities.
In February, DOGE ordered the Department of Housing and Urban Development (HUD) to cut millions from federal housing contracts, leading to the abrupt cancellation of 78 Fair Housing Initiatives Program (FHIP) grants. These grants supported organizations in 33 states that focused on homelessness prevention, disaster recovery, and affordable housing development. As a result, over 1,000 community projects have been forced into limbo, leaving vulnerable populations without critical support.
One of the most devastating losses is the Green and Resilient Retrofit Program, a $1 billion initiative passed by Congress in 2022. This program was designed to fund energy-efficient upgrades for older affordable housing units, ensuring they remained livable for low-income Americans while promoting environmental sustainability. Without this funding, many of these aging properties face deterioration, potentially displacing thousands of residents.
Reports indicate that monthly housing costs in the US hit a record $3,104 in January 2025. Mortgage payments have nearly doubled in the past five years, averaging $2,237 per month, with an additional $416 for property taxes and $361 for insurance. Home prices have surged by $31,300 in the last year alone, reaching a median of $446,300 — the second-highest in US history.
In response to these devastating cuts, four fair housing organizations filed a class action lawsuit against HUD and DOGE on March 13, 2025. Representing 66 housing groups that lost their FHIP grants, the lawsuit accuses the agencies of "arbitrarily terminating" the funding without notice, justification, or a clear explanation. The suit argues that $30 million in congressionally approved funds — intended to combat housing discrimination and enforce fair housing laws — are now at risk.
The funding cuts were triggered by an Executive Order titled "Ending Radical and Wasteful Government DEI Programs and Preferencing." This directive not only slashed grants but also dismantled eight national organizations that provided technical assistance to local housing programs. Additionally, DOGE has pushed for a 50% reduction in HUD staff, severely hampering the agency’s ability to manage remaining programs and enforce housing laws.
The effects of DOGE’s cuts are reverberating through non-profits and local communities. Two major organizations, Local Initiatives Support Corporation (LISC) and Enterprise Community Partners, were hit particularly hard, losing $30 million in grants combined. These organizations played pivotal roles in housing initiatives nationwide, funding critical projects such as lead paint removal in Arkansas, homeownership assistance for teachers in the Mississippi Delta, and revitalization of an abandoned textile mill in Maine. With their funding eliminated, these projects are now indefinitely stalled, leaving communities stranded.
Enterprise Community Partners, led by former HUD Secretary Shaun Donovan, had been training smaller local organizations to apply for grants and improve housing access for low-income families. The sudden loss of this funding is expected to create ripple effects, leaving those families without essential support services. Donovan warned that the cuts will "raise costs for families, hobble the creation of affordable homes, forfeit local jobs, and sap opportunity from thousands of communities in all 50 states." He emphasized that while efforts to secure alternative funding are ongoing, many local projects will inevitably shut down due to the sudden budget shortfall.
The timing of this crisis couldn’t be worse. In 2023, 24 million Americans lived in low-income households that spent over half their income on rent, putting them at severe risk of eviction. By January 2024, the US recorded an all-time high of 770,000 people experiencing homelessness, many living in cars, tents, or other unsafe environments.
Housing market conditions continue to deteriorate. The National Association of REALTORS reported a 4.6% decline in pending home sales in January, with steep drops across the Midwest, South, and West. The Pending Home Sales Index (PHSI) — a measure of contract signings — fell to a historic low of 70.6, reflecting a 5.2% year-over-year decline. For comparison, a healthy market is typically benchmarked at 100, based on activity levels from 2001.
Mortgage rates, ranging from 6.91% to 7.04%, are compounding the problem. A $300,000 mortgage now costs $1,590 per month — $50 more than the previous year — pushing homeownership further out of reach for middle- and low-income families.
With DOGE’s sweeping cuts and skyrocketing housing costs, millions of Americans face an increasingly grim future. The legal battle against HUD and DOGE may offer a glimmer of hope, but even if successful, reversing the damage will take years. Local non-profits, once the backbone of housing support in underserved areas, are now scrambling for alternative funding to prevent mass closures.
As more communities lose vital services, the gap between housing supply and demand continues to grow. Realtor.com reports the US needs 3.8 million additional homes to meet demand in 2024 — a gap that’s expected to widen as federal funding dries up. Experts fear that if the cuts remain in place, the US could see an unprecedented surge in homelessness and housing instability, particularly among low-income families, seniors, and people with disabilities.
The road ahead is uncertain, but what’s clear is that DOGE’s cuts are reshaping the American housing landscape — and for millions of struggling families, the consequences could be catastrophic.
