What DOGE Means For CRE
And why we may not be able to dodge the DOGE
First, let me say how thankful I am for each and every one of you. I mean it. Every time you tell me that you enjoyed xyz thing or offered another perspective about what I wrote, I feel incredibly honored. It’s the kind of feeling that I suspect will never go away. Thank you for supporting me on this writing journey. Happy Thanksgiving.
Alright, let’s get to the story.
By now, you’ve probably heard of DOGE. If you haven’t, it stands for the Department of Government Efficiency (and is most definitely related to the shiba inu Doge meme and Elon Musk’s dalliance with the cryptocurrency, Dogecoin). President-elect Trump recently appointed Musk and Vivek Ramaswamy to lead the organization.
Their mandate: find ways to cut government spending.
And not just any amount of government spending. Specifically, DOGE plans to cut over $500 billion in annual spending.
Read that statement again, but in Trump’s voice: “we will cut over $500 bill-i-on in annual spending. It’s going to be HUGE.” Sorry, couldn’t resist.
Office
They’ve already started planning their cuts. Similar to Musk’s cost-cutting at X, fka Twitter, they first plan to tackle return-to-office mandates.
“In a Thursday post on X, the social media service owned by Elon Musk, the DOGE wrote, ‘Federal government agencies are using, on average, just 12% of the space in their DC headquarters. The Department of Agriculture, with space for more than 7,400 people, averaged 456 workers each day (6% occupancy).’
It added, ‘Why are American taxpayer dollars being spent to maintain empty buildings?’”
It’s safe to say that 1) DOGE will aim for as many voluntary layoffs as possible and 2) very quickly look to sublease or if possible, terminate many of their DC area office leases.
There’s still speculation about where Musk and Ramaswamy will target their cuts. That said, they will focus on unauthorized Congressional spending. The chart below outlines the largest categories, which add up to just over $500 billion.
Affordable Housing
The fourth largest category in the chart above is housing assistance. The U.S. government provides housing-assistance vouchers for low-income renters through this program. So who are these vouchers going to?
Federal rules ensure that vouchers are targeted to the families who need them most. Seventy-five percent of new households admitted each year must have “extremely low incomes,” defined as incomes up to the poverty line or 30 percent of the local median, whichever is higher. Other new households may have incomes up to 80 percent of the area median.
Housing agencies may set admissions preferences based on housing need or other criteria. Federal rules restrict “Section 8” housing vouchers for people who immigrated to the U.S. Only people with certain immigration statuses are eligible. Families that include members with mixed immigration statuses can receive prorated assistance based on the number of household members who are eligible.
Section 8 probably sounds familiar to you. If not, this is a HUD-managed program that works by ensuring they get as many vouchers filled as possible. I’ve personally met folks who bragged — yes, bragged — about receiving a voucher… even though they came from a priveleged, upper middle-class background. They had taken a low-paying job as a stepping stone to a career change and took advantage of this program. Because HUD incentivizes getting as many vouchers filled as possible, it enables people like this person to take advantage of the system. So at first blush, I can understand wanting to cut it.
But at the same time, these programs do a lot of good in our communities. Not to mention the managers who run these communities! I’ve had the honor of working with various affordable housing managers, such as the Tenderloin Neighborhood Development Corporation, and can attest to how wonderful the people there are. They believe in their missions and are truly making a difference in many people’s lives.
I hope that Musk and Ramaswamy delve into the affordable housing budgeting spend before they immediately axe it. Perhaps we just need to adjust the program incentives. Regardless, it is a focus area of DOGE. If you work in affordable housing, then I’d follow DOGE activities very, very closely.
Student Housing
Other target areas for DOGE include college Pell grants. Now, this might seem scary given what we discussed on affordable housing. But after what student housing owners and managers went through, DOGE “fixing” Pell grants and ultimately, FAFSA, would be a welcome change. If you missed the FAFSA debacle, here’s an excerpt from a post I wrote a while back:
FAFSA stands for Free Application for Student Aid. It’s a government-sponsored program that makes attending college more affordable and accessible for low-income students. The Office of Federal Student Aid decided to overhaul the application for the 2024-2025 school year… and failed miserably. Applications weren’t available until 3 months late. Not only that, when the FAFSA finally opened up, the new system was riddled with bugs. Students who relied on FAFSA and couldn’t get their application to work had to make a decision: do they take a gap year and work? Or find an occupation that doesn’t require a degree?
The FAFSA debacle did not impact student housing equally across property classes and universities. Student housing near smaller schools and Class B or C properties were hit the hardest. They provide housing for students who needed financial aid, and they’re seeing the biggest impact on pre-leasing. But again, you’re not seeing this in the averages. On average across all locations and classes, we’re seeing maybe a 3% decrease in pre-leasing. But if you look at housing near small schools or that’s Class B/C, we’re seeing as much as 30%+ declines in pre-leasing.
And unfortunately, the Department of Education hasn’t fixed the issue yet.
A one-year aberration would be bad enough, but the department has yet to fix its FAFSA failure. This year, it delayed the planned Oct. 1 release date until the beginning of December. This creates problems for colleges, which will now (yet again) have to process aid offers on a very short timeline, and for students, who will have to decide where to enroll without knowing whether they can afford to attend the schools of their choosing.
Correcting software issues should be a walk in the park for Musk. Let’s hope that before he tears down a fence because he doesn’t understand why it exists, he tries to fix the problems with it first. At least to salvage this year’s impending FAFSA-induced student housing crisis…
…Are We Ready For It?
It may not be easy to immediately pull out of certain expenses, nor does DOGE necessarily have the power to do so. We have checks and balances in our government for a reason. Just because Trump authorized DOGE, doesn’t mean that it will survive “overrulings” by the legislative or judicial branches.
Regardless, if you’re in office, affordable housing, or student housing, I recommend following DOGE closely.
P.s. What does Musk have to do with Dogecoin anyway? Check out this fun section of the Dogecoin wiki.
Jen’s Reading Corner
In preparation for Thanksgiving, I’ve been reviewing my favorite dessert cookbook, Bravetart. I made crunch bars last night and a carrot cake today. Yum!
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