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Federal Rural Housing Programs

The U.S. Department of Agriculture (USDA) provides funding for the development of affordable homes in rural areas through the Rural Housing Service. Roughly one fifth of households in the U.S. live in small towns or rural areas, and some 3 in 10 rural households face housing affordability challenges. In 2013, 41 percent of very low-income homeowners and 48 percent of very low-income renters in rural areas were severely cost burdened. USDA programs supporting rural housing are important because rural communities struggle with access to capital, nonprofit capacity and developer interest. These programs help address some of those challenges. HUD programs can also serve rural areas but are not specifically focused on rural communities. For example, states can deploy HOME and CDBG funds to rural areas.

Rental Programs

These programs support and preserve affordable rental housing in rural communities. The greatest challenge facing rural rental housing is that many properties’ USDA multifamily mortgages (many of them issued in the 1970s and 1980s) are reaching maturity. For example, the Housing Assistance Council calculates that over 3,668 properties funded by the Section 515 program will have matured by 2032. When this happens, the rental assistance ends and tenants face either cost burden from higher rents or displacement. USDA has acknowledged this issue and is working on steps to address it.

  • The Farm Labor Housing Loan and Grant program (Section 514/516) helps to finance the development, improvement, purchase or repair of homes for farm workers through low-cost loans made to farmers and farmers’ associations, nonprofit organizations and public agencies. Funds can also be used to construct day care and other shared facilities or for the purchase of household furnishings. In general, program participants are unable to obtain credit from other lending institutions.
  • The Section 515 program was primarily used to provide direct low-cost mortgages for property owners to develop rental housing that is affordable to low-income rural residents. The program was also used for land acquisition and improvements, including installation of necessary infrastructure, such as waste disposal systems. The program no longer funds new production, and preservation funding is inadequate to address the properties leaving the program through mortgage maturities.
  • Rural Rental Assistance (Section 521) helps to reduce the cost of renting for tenants in properties that receive financing through the Section 515 and 514/516 programs discussed above. This project-based program (the subsidy is tied to the unit, not the family) covers the difference between 30 percent of household income and the monthly rental rate.
  • The Section 538 Guaranteed Rural Rental Housing Program lowers the cost of developing new affordable rental properties with five or more units by providing a guarantee for loans made by private lenders. Tenants in Section 538 properties must have incomes at or below 115 percent of the area median when they move in to the building, and rents may not exceed 30 percent of this income threshold.
  • USDA also offers the multifamily Housing Preservation and Revitalization Loan program, which can restructure loans for existing rural rental housing and farm labor housing to preserve their affordability.

Homeownership programs

  • In conjunction with the Rural Housing Site Loans program, Mutual Self-Help Technical Assistance Grants enable low-income families to affordably buy and own their own home through sweat equity. Nonprofit and local government organizations oversee small groups of families engaged in building their own homes and assisting in the construction of others’. Enrollees move in when all of the homes have been completed. Program grants help to fund technical assistance and other expenses incurred by the agency administering the program.
  • Administered by the U.S. Department of Agriculture’s Rural Development (RD) arm, the Section 502 program provides two types of programs: 30-year loans to help low-income households purchase homes in rural areas and/or build, repair, renovate and relocate a home, as well as loan guarantees for loans made by approved lenders.
  • Very Low-Income Housing Repair Loans and Grants (Section 504) enable homeowners who are unable to obtain credit otherwise to make needed improvements or repairs to their homes to remove health and safety hazards. Homeowners who are age 62-plus and unable to repay a loan may be eligible for grants of up to $7,500; low-interest loans are available in amounts up to $20,000 over a 20-year term.

For more information on these and other programs visit the Housing Assistance Council website.

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