Congress Passes Spending Bill for Transportation and Housing

Congress has now passed the final Transportation, Housing and Urban Development (THUD) spending bill for FY26, funding all federal agencies and departments apart from the Department of Homeland Security (DHS). This action ensures stable funding for housing, community development, and transportation programs through the end of September.

In the end, Congress mostly rejected the deep cuts and outright program eliminations proposed by the Trump administration. The administration's budget request called for zero funding for programs such as Community Development Block Grants (CDBG), HOME Investment Partnership, Choice Neighborhoods, and PRO Housing. The final agreement provided funding for each of those programs.

While the most dramatic cuts were avoided, the funding bill does reflect an overall environment of fiscal austerity, with many programs either level-funded or experiencing some reductions. These fiscal and political headwinds are likely to continue as Congress now turns from finally resolving fiscal year 2026 funding to the budget for fiscal year 2027.

Housing Impacts

At the U.S. Department of Housing and Urban Development (HUD), CDBG formula grants remained level at $3.3 billion. Similarly, HOME funds stayed at $1.25 billion. Choice Neighborhoods dropped from $75 million to $25 million, and PRO Housing grants dipped from $100 million to $50 million. Congress rejected a sweeping proposal to convert tenant assistance and voucher programs into a state block grant and put a temporary halt to administration plans to overhaul the Continuum of Care program for homelessness. Homelessness assistance grants increased slightly from $4.051 billion to $4.417 billion.

Congressionally directed project funding, known as "earmarks," increased for both HUD and transportation programs. The bipartisan growth in earmark requests may offer a path for communities looking for federal support in a challenging budget environment. These provisions also likely helped secure support for the final package.

What is earmark funding, and how can it help planners with funding uncertainty?

Transportation Impacts

For transportation, the bill generally maintains funding levels called for under the Bipartisan Infrastructure Law but does shift some of that funding around. The bill also rescinds and repurposes some funding allocated but not fully spent from previous bills. Earmarks for both transit and highway projects are increased from FY 2025 levels.

While the bill maintains funding for projects with funding agreements for Capital Investment Grants (CIG), the program overall will see a cut of $500 million. The bill also uses some repurposed money to support transit service planned for the 2026 FIFA World Cup and the 2028 Olympics. Passenger rail support is largely stable, but within that account, funds are shifting from the Northeast Corridor to Amtrak's National Network.

The bill includes some changes to transportation technology and the National Electric Vehicle Infrastructure (NEVI) program:

• More than $500 million in unobligated State DOT NEVI funds are rescinded
• An additional $300 million is cut from the 10 percent discretionary grant set-aside for localities and states
• SMART grants for transportation technology initiatives, including autonomous and connected vehicles project pilots, were reduced by more than $200 million.

The bill also includes some policy provisions aimed at making funding decisions in federal agencies more predictable and transparent. With many delays, cancellations, or alterations by the Trump administration, the bill requires the U.S. Department of Transportation (DOT) to deliver status reports to Congress on grants that have been awarded but not obligated. DOT will also have to provide notice to Congress before making cancellations and report on grant backlogs and staffing reductions.

Although the spending bill largely avoids major transportation cuts, the road ahead may be challenging. Congress faces a September deadline for reauthorizing transportation programs, and 2026 is the last year that so-called "advance appropriations" from the Infrastructure Investment and Jobs Act (IIJA) will be available.

See why transportation is one of APA's top policy priorities in 2026

What's Next?

Capitol Hill will turn its attention almost immediately to FY 2027 funding after trying to resolve immigration enforcement issues in the one remaining funding bill for DHS. A prolonged dispute over DHS could have implications beyond immigration, with agencies such as the Federal Emergency Management Agency (FEMA) potentially affected.

A budget proposal from the Trump administration is expected soon, and Congressional appropriations hearings and markups will get underway this spring. This work will unfold with midterms looming in November, a prospect that may lead to either a temporary continuing resolution truce until after the election or an intractable fight.

For now, communities have some assurances on federal funding levels, but will also need to continue making the case with lawmakers for critical investment in key programs.

Top image: iStock/Getty Images - benedek