The United States Department of Agriculture (USDA) Section 515 Rural Rental Housing Program is an important source of rental housing in many rural communities. Since the program’s inception in 1963, Section 515 loans have financed nearly 28,000 rental properties containing more than 533,000 affordable apartments across rural America. There is at least one USDA Section 515 property in 87% of all US counties.
Although an important resource for many rural communities, the availability of these homes is decreasing. In 2016, the USDA presented estimates of when properties would exit their portfolio and potentially lose affordability and some tenant protections. The Housing Assistance Council (HAC) reviewed changes to the USDA Section 515 portfolio over the past five years.
The number and availability of USDA-backed rental homes is declining
Using USDA data from 2016, an initial HAC analysis in 2018 estimated that 332 properties containing 8,462 units could exit the program due to mortgage expiration by 2021. HAC re-examined question and examined what really happened during this five-year period. Using USDA data in July 2021, HAC identified 921 Section 515 properties, including 21,693 affordable apartments, that exited the portfolio between 2016 and July 2021, nearly three times the original loss projection. properties over the five-year period. As of July 2021, 199 of the projected 332 properties had left the program during this period. However, another 722 properties left the portfolio before the final mortgage payment. These additional properties likely left the portfolio for a variety of reasons, including loan prepayment, foreclosure, or non-compliance. However, there is still incomplete data on why properties leave the USDA portfolio, which hampers the clarity of the analysis. HAC estimates that there were 12,742 properties containing 395,007 units remaining in the USDA Section 515 rural rental housing portfolio.
Rental property exits were concentrated in the Midwest and South
Ten states, including Minnesota, Michigan, Wisconsin, South Dakota, Iowa, Texas, Indiana, Kansas, Missouri and Illinois, account for more than 60% of properties – and nearly 49% of units – that left the USDA portfolio between 2016 and 2021. During the same period, no properties left the program in California, Connecticut, Delaware, Rhode Island and in Vermont.
The impacts of property vacancies on tenants
USDA’s rural rental housing programs particularly serve low-income and vulnerable populations. The average household income of residents of USDA properties is $13,640, and renters who receive rental assistance have an average annual income of $11,380. In addition, approximately two-thirds of Section 515 tenants are elderly or disabled.
Data on residents of USDA properties is somewhat sparse, and understanding of what happens to properties and their residents after release is even more limited. But the potential residual impacts of this trend are concerning. There is a shortage of good quality rental housing in many rural communities and very few new affordable rental properties have been created in rural areas in recent decades. Specific to the USDA rental program, once these properties are released, they are generally no longer subject to government regulations or quality standards, and renters are no longer eligible for USDA rental assistance which helps make their rents affordable. In some cases, homes may no longer be affordable for their tenants.
Read it housing assistance council USDA complete research dossier on the subject Maturity of rural rental housing mortgages.
Michael (Mike) Feinberg is a senior policy analyst at the Housing Assistance Council.
Lance George is director of research and information at the Housing Assistance Council.
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Analysis: Rural America is losing affordable rental housing at an alarming rate
The United States Department of Agriculture (USDA) Section 515 Rural Rental Housing Program is an important source of rental housing in many rural communities. Since the program’s inception in 1963, Section 515 loans have financed nearly 28,000 rental properties containing more than 533,000 affordable apartments across rural America. There is at least one USDA Section 515 property in 87% of all US counties.
Although an important resource for many rural communities, the availability of these houses is in decline. In 2016, the USDA presented estimates of when properties would exit their portfolio and potentially lose affordability and some tenant protections. The Housing Assistance Council (HAC) reviewed changes to the USDA Section 515 portfolio over the last five-year period.
The number and availability of USDA-supported rental units is decreasing
Using USDA data from 2016, an initial HAC analysis in 2018 estimated that 332 properties containing 8,462 units could exit the program due to mortgage expiration by 2021. HAC revisited the issue and examined what really happened during this five-year period. Using USDA data in July 2021, HAC identified 921 Section 515 properties, including 21,693 affordable apartments, that exited the portfolio between 2016 and July 2021, nearly three times the original loss projection. properties over the five-year period. As of July 2021, 199 of the projected 332 properties had left the program during this period. However, another 722 properties left the portfolio before the final mortgage payment. These additional properties likely left the portfolio for a variety of reasons, including loan prepayment, foreclosure, or non-compliance. However, there is still incomplete data on why properties leave the USDA portfolio, which hampers the clarity of the analysis. HAC estimates that there were 12,742 properties containing 395,007 units remaining in the USDA Section 515 rural rental housing portfolio.
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Rental property exits were concentrated in the Midwest and South
Ten states, including Minnesota, Michigan, Wisconsin, South Dakota, Iowa, Texas, Indiana, Kansas, Missouri and Illinois, account for more than 60% of properties – and nearly 49% of units – that left the USDA portfolio between 2016 and 2021. During this same period, no properties left the program in California, Connecticut, Delaware, Rhode Island and in Vermont.
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The impacts of property vacancies on tenants
USDA’s rural rental housing programs particularly serve low-income and vulnerable populations. The average household income of residents of USDA properties is $13,640, and renters who receive rental assistance have an average annual income of $11,380. Additionally, about two-thirds of Section 515 tenants are elderly or disabled.
Data on residents of USDA properties is somewhat sparse, and understanding of what happens to properties and their residents after release is even more limited. But the potential residual impacts of this trend are concerning. There is a shortage of good quality rental housing in many rural communities and very few new affordable rental properties have been created in rural areas in recent decades. Specific to the USDA rental program, once these properties are released, they are generally no longer subject to government regulations or quality standards, and renters are no longer eligible for USDA rental assistance which helps make their rents affordable. In some cases, homes may no longer be affordable for their tenants.
Read it Housing Assistance Council USDA complete research dossier on the subject Maturity of rural rental housing mortgages.
Michael (Mike) Feinberg is a senior policy analyst at the Housing Assistance Council. p>
Lance George is the director of research and information at the Housing Assistance Council.
That article first appeared on The Daily Yonder and is republished here under a Creative Commons license.
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