Real estate is one of the most closely connected sectors of the economy to the federal government. So when government operations pause, the impact reaches every corner of the market—buyers, sellers, lenders, and REALTORS® alike, including Tennessee REALTORS®.
When Washington Stops, Housing Feels It
A government shutdown might sound like political theater in D.C., but its effects ripple through neighborhoods across the country. From delayed home loans to stalled flood insurance renewals, even a short-term lapse in federal funding can throw real estate transactions into limbo.
On a recent episode of the National Association of REALTORS® Advocacy Scoop Podcast, NAR Executive Vice President and Chief Advocacy Officer Shannon McGahn and host Patrick Newton discussed how critical housing programs grind to a halt when the government shuts down.
FHA Loans: Slowed to a Crawl
While the percentage can fluctuate with the market, roughly 15% of U.S. mortgages are backed by the Federal Housing Administration (FHA). During a shutdown, the agency operates with limited staff. That means slower loan processing and endorsement times, particularly for first-time or lower-income buyers who rely on FHA-backed financing.
Even if lenders continue to issue loans, the backlog can delay closings for borrowers already under contract.
“These aren’t just numbers; every delay represents a family trying to close on a home or a community waiting on housing support,” McGahn said. “That’s why we push so hard for continuity.”
VA Loans: Essential but Not Immune
The Department of Veterans Affairs (VA) considers its home loan program “essential,” which means it continues through a shutdown. However, even essential programs can experience ripple effects, particularly in underwriting and document verification.
If key support staff are furloughed or systems run at reduced capacity, veterans may face frustrating slowdowns at the final stages of closing.
Photo Credit: RDNE Stock project | Pexels
USDA Rural Housing Loans: Complete Halt
For rural communities, the impact is even sharper. The U.S. Department of Agriculture (USDA) stops processing and guaranteeing rural housing loans during a shutdown.
These loans are often the only affordable path to homeownership in small towns and agricultural regions. Without them, buyers can’t move forward and sellers can’t close.
For Tennessee, where USDA loans are common in counties outside major metro areas, the freeze can disrupt entire local markets.
IRS Verification: A Hidden Bottleneck
Lenders depend on the IRS to verify borrowers’ income and tax documents through official transcripts. When IRS staff are furloughed, these verifications can’t be processed, causing unexpected loan delays.
Even if taxes are considered “essential,” the verification service typically isn’t. The result? More waiting, more rescheduling, and sometimes, expired rate locks.
National Flood Insurance Program: Another Casualty
Homes in flood-prone areas require coverage under the National Flood Insurance Program (NFIP). But if Congress doesn’t reauthorize the program during a shutdown, new policies and renewals stop immediately. That means homeowners who need flood insurance will have to purchase a more expensive policy from a private insurer.
That pause can affect as many as 1,400 property transactions per day, according to NAR data. Home sales in flood zones simply can’t close without proof of active flood insurance.
For REALTORS®, that means calling clients with difficult news: “We have to wait.”
Beyond the Buyer and Seller
The ripple doesn’t stop at the closing table. Builders face delays in permits and environmental reviews. Housing providers may see HUD rental assistance contracts postponed, leaving property owners waiting for payments.
“Most people wouldn’t immediately think a government shutdown would impact the real estate market,” said Will Sliger, 2025 President for Tennessee REALTORS®. “But the industry works in tandem with the federal government in many ways. It doesn’t just affect the real estate industry; other industries that are interconnected with real estate are impacted, too.”
Why REALTORS® Advocate for Stability
Shutdowns create uncertainty in an already complex market. REALTORS®—through NAR and state associations—consistently advocate for continuity in housing programs and stable government funding to keep transactions moving and communities strong.
These advocacy efforts include urging Congress to:
- Fund FHA, VA, and USDA operations even during temporary shutdowns.
- Extend NFIP reauthorization before lapses occur.
- Protect HUD and housing assistance programs from disruption.
When REALTORS® speak up, they do it not just for their industry—but for the families and neighborhoods counting on reliable access to housing.
The Bottom Line
When the government shuts down, housing doesn’t stop—but it slows, stumbles, and strains. Each delayed loan or paused policy represents a family waiting for a home, a veteran trying to settle in, or a builder trying to keep crews working.
Real estate depends on steady government operations. And REALTORS®, on the front lines of every transaction, are working to keep America’s housing market moving, no matter what happens in Washington.