TRAVERSE CITY — The ongoing shutdown in Washington, D.C., is putting some government services on hold and could cause major headaches for the housing industry.
Officials working in offices like the Internal Revenue Service, U.S. Department of Agriculture, Housing and Urban Development, and the Federal Emergency Management Agency are not able to perform key parts of their job, which include verifying tax information for mortgages, providing loans, issuing new insurance policies and regulating new home construction.
The situation is concerning to Northern Michigan Realtors like Tommy Corbett, executive director of Brick and Corbett Realty in Traverse City.
“Instability is never good for our business,” Corbett said. “We always want to have people feel things are going normally and they’re secure in their investments.”
The suspension of services like these could particularly impact the sale of homes located on lakes and rivers with a risk of flooding. In Michigan, about 200,000 buildings fall into this category (or 6% of the state), according to the Michigan Department of Environment, Great Lakes, and Energy.
Buyers in cases like this need to show proof of flood insurance in order to get a mortgage from most major banks, and delays in the process could lead to canceled contracts. In the meantime, private options are available, but they are often more expensive and unattainable for people living in high-risk areas.
Realtors tell 9&10 News this has been a growing issue for homebuyers in the Traverse City area over the last few years, especially after FEMA flood maps were redrawn on the coastline along Old Mission Peninsula and East Bay.
“This could cause a lot of issues for people going to lenders that require you to have flood insurance, or for someone who’s renewing,” Corbett said. “There are some real expensive lakefront properties for sale right now that do.”
Some government programs are expected to continue, like certain Federal Housing Administration loans, Section 8 contracts, and rental subsidies managed by Housing and Urban Development. However, these programs are operating with a limited staff and beneficiaries are being advised to prepare for delays that could lead to missed payments.
The shutdown has left local realtors scrambling to find more information about which programs have been cut.
“Honestly, I’ve never dealt with this before, so I don’t know exactly what it means,” Corbett said. “I’m going to be talking to my lenders because any federally backed loans could be affected by this, and right now, a lot of my agents and clients have properties on water that may require flood insurance. ‘How is this going to affect them?’ ‘Are we going to get a delay?’ ‘What does a delay mean?’ A lot of these questions we are going to be asking and hearing from our clients.”
The impacts on the housing market will get worse the longer the shutdown continues, according to the National Association of Home Builders. The last government shutdown happened during Donald Trump’s first presidency.
It was also the longest, lasting a little more than a month. Builders say if the current shutdown drags on for a couple of weeks, it’s going to delay loan programs that help fund new housing projects and developments. In the mid-to-long term, that could mean lower housing supply and higher prices across the country.
“We don’t want any more delays in the building process than there already are because it’s not easy to build homes up here and it’s definitely not inexpensive,” Corbett said. “There are not that many new builds (in northern Michigan) compared to the rest of the country, and it’s a product that people really want.”