As the 2025 government shutdown begins with no end in sight, the fallout from Elon Musk’s DOGE project is already hitting real estate markets across the country.
DOGE was the brainchild of Elon during his brief stint in Congress, and it continues to influence the real estate industry even after he leaves Washington.
As reported by Cryptopolitan, the program has canceled 384 government leases so far, and while DOGE’s website claims that these cancellations have saved about $140 million, those so-called “savings” have fallen headlong into financial chaos.
Once upon a time, the federal government was the safest tenant. Cameron Lapointe, who teaches finance at Yale University, said government leases always have polite little cancellation clauses, but no one actually takes advantage of them. Homeowners saw it as symbolic and not a real threat.
DOGE changed that. “If you and I are renting an apartment and you cancel that tenancy, there will be a penalty of several months’ rent,” Cameron said. “But when the government cancels leases, landlords are left alone.” It’s happening now in cities, towns, blue states, red counties, everywhere. DOGE calculations assume that all leases are renewed, which is not always true. Some of these offices may close anyway due to agency downsizing or relocation. But the amount and speed of closures is making the situation even worse. The government has retreated from real estate large and small, from an 845,000-square-foot building in Washington, D.C., to a 250-square-foot Secret Service office in New York City.
Landlords lose tenants, lenders lose trust.
Commercial loans across the country are now at risk. Mr Cameron said the knock-on effect would be “thousands of loans” because the commercial lending system relies on big tenants like the federal government. Banks package those loans and sell them as securities. If the anchor tenant disappears, the entire deal can fall apart. When a government falls out of office, these loans become less valuable and become more risky across the country. A GSA spokesperson said DOGE saved taxpayers $113 million, but no one at GSA is talking about what will happen to the buildings, which are currently vacant and worthless to lenders.
In Florida, real estate broker Alexi Morgado, who runs LexaWise, says she’s already seeing a knock-on effect. “Just because supply is available doesn’t mean demand will be created right away,” Alexi said. Buildings whose leases have been terminated become vacant, causing losses and making refinancing difficult. In some cases, owners may be considering converting them into apartments or mixed-use space. But it takes planning and resources, and not all landlords have both.
In California, Mark Besharati, senior vice president at Arbor Financial Group, says landlords will need to subdivide large government offices into smaller spaces to stay afloat. “To alleviate what is happening in most cases, owners of these properties will need to reconfigure their properties to suit a different type of tenant base,” Mark said. If banks are unable to consolidate loans and reduce risk, they will be forced to raise interest rates, hurting even more transactions across the country. “This is a national problem,” he said. “This isn’t just happening in Washington, D.C., it’s happening across the country.”
Local cities brace for more federal strikes
Small towns are being hit even harder. Unlike large cities, rural areas are not included in most bundled securities. There is no safety net if the lease is cancelled. Cameron pointed out that 57% of leases eligible for early termination are outside the 10 most populous states, and 63% are outside the 100 largest counties. DOGE has already sent termination letters to 61% of these local offices.
Michelle Hanley, mayor of Marquette, Michigan, said the closure of the IRS office is less significant because no one has actually worked there since the pandemic. But she is angry that DOGE is targeting the Bureau of Indian Affairs office in Baraga and the tribal health center in Sault Ste. Marie. Native communities in northern Michigan have five times the population of the state’s lower peninsula. “The layoffs will be a huge blow,” Michelle said.
Tom Whalen, dean of the business school in the University of Massachusetts College of Liberal Arts, said the federal government’s withdrawal reflects Keynes’ theory. Government spending stimulates the economy. But things slow down once Washington starts withdrawing funds. “The economic stimulus effect will also be reduced due to reduced rental income and job losses,” Tom said. “This has a ripple effect throughout the local economy.”
Meanwhile, President Trump’s administration has signaled layoffs across government agencies. Office of Management and Budget Director Russell Vought told House Republicans that layoffs could begin within 48 hours. President Trump’s press secretary, Caroline Leavitt, confirmed in a press conference that federal employees will be laid off “in the near future.” Betting platforms believe this closure will last at least two weeks.