Federal Government Set for Partial Shutdown Despite Senate Passing Bipartisan Funding Bill

A partial government shutdown is set to begin Saturday morning after the Senate delayed a vote on a massive spending bill amid an ongoing tug-of-war over funding for Immigration and Customs Enforcement (ICE).

Late on Friday, the Senate voted 71 to 29 to pass a bipartisan bill that will fund the majority of the government and keep the Department of Homeland Security (DHS) running for the next two weeks while the Democrats negotiate with President Donald Trump over future ICE restrictions.

However, while the funding bill has passed through the Senate, it now needs to clear the House, which it likely will not do until Monday morning when lawmakers return to their offices in Washington, DC, leaving the Federal Government in partial shutdown over the weekend.

In a rare bipartisan move, Democrats reached a deal with President Trump on Thursday to strip funding for the DHS, which oversees ICE, from a $1.2 trillion package that will fund a large number of government agencies, including the Department of Housing and Urban Development (HUD).

The Departments of Health and Human Services, Labor, and Transportation are also impacted.

As part of the agreement, announced by Senate Minority Leader Chuck Schumer, a Democrat from New York, DHS will be funded separately for two weeks in a stopgap measure while Congress considers imposing restrictions on ICE agents following the deaths of two protesters in Minnesota that caused widespread condemnation. 

In response to the killings of Renee Good and Alex Pretti, Democrats threatened to block the entire spending package before reaching the compromise over DHS, The Associated Press reported.

On Thursday night, however, the passage of the modified spending package—stripped of ICE funding— hit a roadblock when several lawmakers, led by Sen. Lindsey Graham, a Republican from South Carolina, voiced their objections, derailing efforts to fast-track the vote. 

Graham criticized the agreement between Trump and the Democrats as "a bad deal," according to MS Now, arguing that ICE agents were being unfairly targeted.

He also took issue with legislative language being removed from a new law that would have allowed senators to sue the federal government for up to $500,000 if their personal or office phone records were secretly obtained. 

Without a signed funding package, nine federal agencies will temporarily cease operations at 12:01 a.m. ET on Saturday. 

How would a shutdown affect housing?

If the shutdown goes into effect overnight, its primary impact on the housing market will come through HUD.

The agency, which is due for a major funding increase of $7.2 billion as part of the contested funding package, administers federally backed FHA loans, often for first-time homebuyers.

A pause in HUD's work would stop FHA loan issuance, likely dampening demand for starter homes.

A HUD shutdown would also halt or delay the issuing of Section 8 vouchers, making it tougher for low-income renters to afford housing.

Created as part of President Lyndon B. Johnson’s War on Poverty in 1965, HUD was tasked with addressing America's housing shortages, enhancing communities, and enforcing fair housing laws, according to its website.

More than 4.3 million low-income families rely on HUD to provide them with affordable housing through public housing, rental subsidies, and voucher programs like Section 8.

Beyond the role of HUD, another government shutdown, coming on the heels of last year's historic 43-day hiatus, would add uncertainty to a housing market already struggling to regain momentum after a slowdown.