By: Tushar Gurjal, Senior Policy Manager

June 30, 2026 — On May 29, the Office of Management and Budget (OMB) published a proposed rule on Federal Financial Assistance. The rule, which NAHRO opposes, would have government-wide impacts, including at the U.S. Department of Housing and Urban Development, on “. . . policies and requirements related to the management of grants, cooperative agreements, and other forms of assistance.” This article provides talking points that housing agencies may use in their comment letters regarding this rule, which threatens funding to housing agencies across the country. NAHRO recommends that housing agencies not copy the bullet points word for word but instead rewrite and incorporate them into their own comment letters (having comment letters that are too similar will cause the federal government’s artificial intelligence [AI] programs to screen out those comment letters). All comment letters are due on or by July 13, 2026.

While it is NAHRO’s position that this rule would not impact the Public Housing or Housing Choice Voucher program (as they are governed by an Annual Contributions Contract), NAHRO is concerned that HUD will try to enforce the application of these rules onto those programs nonetheless. Additionally, many other HUD programs, that housing agencies or other NAHRO members may use (e.g., Community and Planning Development programs) will likely be subject to these rules.

NAHRO recommends that housing agencies make the following points on the OMB proposed rule:

• The OMB Proposed Rule Will Cause Funding and Housing Service Disruptions — The OMB proposed rule will allow federal agencies to potentially stop funding housing programs for a variety of reasons, including excessively vague reasons like if a particular action by a grantee is not in “the national interest.” The rule would also allow HUD to add terms and conditions to grants while they are being executed, meaning that the government could fundamentally and unilaterally change grants erratically and then deny funding to grantees that do not meet the new terms and conditions. Collectively, these changes will end predictability in the appropriations and funding process as funding streams are arbitrarily disrupted. The unpredictability of federal funding streams will impair development of new affordable housing as developers will not be able to rely on federal funding in new developments. It will also impair housing agencies from properly running their Public Housing and Housing Choice Voucher programs.

• Housing Agencies Are Not Subject to these Rules — Housing agencies with Public Housing or Housing Choice Voucher programs are not subject to the requirements of this rule. While the rule applies to federal financial assistance from grants, HUD and housing agencies are in a contractual relationship governed by a housing agency’s Annual Contributions Contract. Neither OMB nor HUD should attempt to apply these rules to the housing agencies that run Public Housing or the Housing Choice Voucher programs. As the relationship is contractual and not governed by grants, these rules should not apply to housing agencies.

• Alignment with Administration Priorities (§ 200.202) — The proposed rule would require federal agencies to design federal programs with goals that “align with administration policies and priorities.” Congress determines the programmatic requirements of federal programs, not the executive branch. This provision would allow any administration to redesign programs to align with the executive branch’s priorities instead of those set by Congress using its authority under the spending clause.

• Grantee / Proposal Selection (§ 200.205) — The proposed rule would create a political process for pre-issuance review of federal award proposals. The rule states that “[d]iscretionary awards must, where applicable, demonstrably advance the President’s policy priorities.” The proposed rule would allow the executive branch to deny funding awards because of policy criteria that it chooses. This risks creating an environment where grants shift substantially between administrations as new administrations rewrite grants.

• Ability to Terminate or Suspend Funds (§ 200.211and §§ 200.340–343) — The proposed rule would allow federal awards to be terminated by a federal agency or a pass-through entity if the termination is in the interest of the federal agency, or the pass-through entity,  or “the national interest.” This would be applicable to discretionary grants but not block grants, formula grants based on a statutory formula, or disaster recovery grants. Housing agencies are concerned that national interest and interest of the federal agency is not clearly defined. While this would not impact the Housing Choice Voucher program (where the administrative fee and Housing Assistance Payment [HAP] grants are determined by formula) or the Operating Fund (which is also determined by a formula), it may impact the Public Housing Capital Fund. The rule also does not build in a process for objections, hearings, or appeals in case the federal agency made a mistake. The proposed rule states that “[t]he Federal agency is not required to allow for objections, hearings, and appeals related to any reasons for termination except termination for noncompliance.” Housing agencies have previously encountered instances where HUD staff have made mistakes, so not requiring a process to report and correct mistakes will lead to improper terminations of funds. This provision will result in funding and service disruptions as grants across the country are terminated for vague, ill-defined reasons such as not being in the national interest.

• Termination for Reputational Damage (§ 200.332) — The proposed rule would require pass-through entities (potentially housing agencies) to “not take actions that could significantly damage the reputation of the pass-through entity, the Federal agency making the award, or the Federal Government.” A federal agency may determine that reputational harm has occurred and either directly terminate the grant or instruct the pass-through entity to terminate the award. This is troubling as it is not clear what activities might be determined to damage the reputation of the Federal Government. Again, this has the potential to create uncertainty in federal grant administration if grants are canceled on an ad-hoc basis or because the Federal Government believes that some action of a grantee created a perceived reputational harm. This would also harm development of new affordable housing as investors will not be able to rely on federal funding streams for new developments.

• New Terms and Conditions (§ 200.208) — The proposed rule would allow federal agencies to add specific conditions for a grant. Conditions federal agencies could add include the following:
  • requiring payments as reimbursements rather than advance payments;
  • withholding authority to process to the next phase until receipt of evidence of acceptable performance;
  • requiring additional or more detailed financial reports, which may include requiring information on payments to subrecipients, contractors, and vendors;
  • requiring additional project monitoring, which may include financial integrity-related site visits with the goal of improving the financial integrity of the program or recipient organization;
  • requiring the recipient or subrecipient to obtain technical or management assistance; or
  • establishing additional prior approvals.

Allowing federal agencies to add additional terms and financial conditions to grants would create uncertainty as agencies will overwhelm grantees with additional terms and reporting that would make operation of federal programs impractical. It would be infeasible for grantees to run programs where the requirements are subject to change at any point after the grant has been awarded. This also has the potential to allow the administration to arbitrarily increase reporting requirements for programs disfavored by the administration (e.g., Public Housing).

• Limits on Diversity, Equity, and Inclusion, Gender Ideology, and Discrimination (§ 200.300) — The proposed rule would require federal agencies and pass-through entities to ensure that awards and subawards are not used to fund diversity, equity, and inclusion (DEI) or diversity, equity, inclusion, and accessibility (DEIA) policies; gender ideology “that deny the biological reality of sex or the sex binary in humans”; or the transition of children under the age of 19. This language is overly broad and could prevent a wide range of activities. Absent definition, it is not clear what might fall into the DEI category. For example, would activities that a housing agency might undertake to increase voucher success rates or house families experiencing homelessness fall into a DEI categorization? Could accessibility policies that might help people with disabilities access homelessness assistance fall into these prohibited categories?

• Disparate Impact (§ 200.218) — The proposed rule would require that “[t]o the maximum extent permitted by law, Federal agencies [would have to] eliminate the use of disparate-impact liability in all contexts relevant to Federal awards.” This could prove very confusing for grantees as, at this time, courts still allow for disparate impact liability. The rule does not allow for federal awards to be used to support disparate-impact litigation, but a grantee or housing agency could potentially be sued based on a disparate-impact theory and would not be able to use its funding to defend itself in a suit.

• English Language (§ 200.111) — The proposed rule requires that all “[f]ederal financial assistance announcements, applications, and Federal award information must be in the English language” and must be written in U.S. dollars. It is not clear if this “English only” requirement would apply to Public Housing and Housing Choice Voucher applicants. If it did, this could have a large impact on people trying to access these programs.

• Build America, Buy America Expanded (§ 200.322) — The proposed rule would direct federal agencies to “include terms and conditions in Federal awards to maximize the use of goods, products, and materials produced in the United States.” While a worthy goal, at this time, there is no system to determine which products were made in the United States and this will hamper construction of any new affordable housing. HUD is already trying to offer waivers to alleviate this situation, but this requirement would push against these efforts. Potentially, this language may prevent agencies from offering waivers related to Build America, Buy America requirements.

• Pre-approval for Conferences (§ 200.432) — The costs for attending conferences in the proposed rule would only be allowable only “if participation in the conference is expressly approved by the Federal agency and included in the terms and conditions of the Federal award.” As the rule is written, a conference has to be expressly pre-approved in the term and conditions of the award. First, it is not clear that there are enough HUD staff to know which conferences to approve in advance. Second, this might create a chilling effect where the associations who host conferences are incentivized not to criticize agencies for fear that their conference will be blacklisted. This may hinder agency staff from receiving real and appropriate feedback about aspects of programs that are not working (e.g., association staff may not want to criticize certain regulations knowing that their conference may be blacklisted).

• Pre-approval for Membership in Organizations (§ 200.454) — The proposed rule would require that grant “recipient’s or subrecipient’s membership in professional civic, business, and technical organizations” would be allowable only to “fulfill the award requirements” and they “must receive prior written approval of the Federal agency.” This could prevent housing agencies from receiving the benefits of membership in a trade association. Housing agencies would not have access to the benefits of membership including technical assistance; exchange of best practices; information regarding new statutes, regulations, and guidance; networking opportunities; professional development opportunities, and certification opportunities. This would lead to a decline in how well grantees would be able to operate programs. Additionally, forcing membership organizations to receive prior written approval would chill legitimate feedback that those organizations may provide to HUD and other federal agencies.

Housing agencies can read the full rule here.

The National Council of Nonprofits has put together a helpful chart here. While the chart is assembled for use by nonprofits, NAHRO believes that many of the provisions would still impact housing agencies.

To submit a comment on this OMB proposed rule, housing agencies should click here and follow the instructions on screen.

[mo-optin-form id="NIrLFwofHp"]