The recent 43-day federal government shutdown, caused by political deadlock over budget approvals, inflicted significant damage on the commercial real estate sector and the broader economy. The recent closure depressed GDP by approximately $11bn (€9.5bn), aggravating challenges across housing and hospitality markets according to the Congressional Budget Office (CBO).
Affordable housing developers were particularly affected, thanks to stalled US Department of Housing and Urban Development loan processing and delayed voucher approvals. Such delays can hinder financing and construction of affordable units just as demand rises.
Sarah Brundage, president and CEO of the National Association of Affordable Housing Lenders, observed: “The federal government is an essential partner in housing and community development across the country. When agencies are shuttered, it can turn families’ lives upside down, disrupt development and preservation of critical affordable housing, and make it even harder for mission-focused organisations.”
She added that opening up again will “get the creation of desperately needed housing supply back on track”.
Meanwhile, the Federal Aviation Authority cancelled thousands of flights.
Rosanna Maietta, president and CEO of the American Hotel & Lodging Association, stated that “the economic uncertainty caused by the shutdown, coupled with widespread travel disruptions, has shaken consumer confidence, leading to trip cancellations and a slowdown in future bookings”.
The association estimated hotel operators experienced over $1.2bn in lost revenue.
Permanent damage from delays and uncertainty could linger according to the CBO, which forecasts a permanent economic loss of $7bn to $14bn.
“Even if there is a reopening of the government in the next couple of weeks, you’re going to see a visible and permanent loss of economic activity as a result of the government shutdown,” Greg Daco, chief economist at consulting firm EY-Parthenon, told CBS News.
With the prospect of another shutdown early next year, commercial real estate executives are racing to close deals and stabilise operations before new government deadlines trigger more disruptions.
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