USDA Rural Housing Programs for Seniors

Fiscal year 2012 funding is seriously threatened for U.S. Department of Agriculture (USDA) housing programs that maintain or create affordable housing options for elders in rural areas. Programs of other agencies – for example, the Section 202 program of the Department of Housing and Urban Development (HUD), weatherization programs, and the Low Income Housing Tax Credit – are also relevant in rural America. Several of them, including HUD’s 202 program and key USDA programs, have already seen steep budget cuts, drastically reducing their effectiveness in serving rural seniors. Congress should continue to fund these important programs at least at their 2011 levels. 

Section 515 rental housing. This program has been the mainstay of USDA’s efforts to serve the poorest of the rural poor, including extremely low-income rural seniors, since 1963. The Section 515 program provides mortgage loans to develop rental housing for low-income households and is often used in conjunction with Low Income Housing Tax Credits. The program has proven extremely successful at providing decent, affordable housing for the lowest income rural seniors. Nearly 60 percent of Section 515 residents are elderly or have disabilities. Their average annual income is about $11,000. They have few other housing options.

Funding for Section 515 has been cut drastically over the past 17 years, sharply reducing production. The USDA appropriations bill passed by the House before the deficit reduction deal, H.R. 2112, would reduce program funding still further, from $69.5 million in FY11 to $58.6 million in FY12. The very low-income tenants served by Section 515 should not bear the burden of reductions in government spending: the program should remain at its FY11 funding level.

Rental housing preservation. The majority of rental units produced using USDA’s Section 515 rental program and Section 514/516 farmworker housing program are more than 20 years old. They need repairs and updates to preserve the taxpayers’ investments. To assist preservation efforts, several years ago Congress created the Multifamily Preservation and Revitalization (MPR) program and the Preservation Revolving Loan Fund (PRLF).

The very popular MPR program uses a range of financing tools to help owners afford to improve their USDA-funded rental properties. Most often, it enables USDA to defer owners’ payments of mortgage principal. The Preservation Revolving Loan Fund, as its name suggests, provides loans to owners or purchasers for preservation of USDA rental properties.

Both the President’s budget for FY12 and H.R. 2112 would eliminate all funding for MPR and the PRLF. The budget – although not H.R. 2112 – would add some Section 515 funding to be used for preservation, but Section 515 funds are not as flexible as MPR’s. For example, under Section 515 USDA cannot defer principal payments. Both preservation programs should be funded at FY11 levels: $15 million for MPR and $1 million for PRLF.

Rental Assistance. USDA’s Section 521 Rental Assistance (RA) program helps tenants whose incomes are so low they cannot afford the rent in a Section 515 or 514/516 property. Rental Assistance is available only to tenants in USDA-financed properties and is an essential part of providing decent, affordable homes for the very lowest income rural Americans.

Both the Administration’s budget and H.R. 2112 would reduce Rental Assistance funding. The budget’s congressional justification assumes that more than 300 properties will leave USDA’s multifamily portfolio in 2012 because of irresponsible owners or prepayments. This would be a very significant increase over past years; in FY10, for example, the mortgages on 86 properties were prepaid, and the highest number prepaid in any year was 152 in 2004.

Given the average 27 units per property in the portfolio, and the fact that 60 percent of USDA’s tenants are elderly or disabled, it is estimated that over 8,100 tenant households – more than 4,800 of them elderly or disabled – would lose their homes and their Rental Assistance if USDA’s calculation is correct. It is hard to believe that these tenants will find other affordable housing. HUD’s recently released Worst Case Needs Report estimated there are already 7.1 million renter households with serious housing needs not receiving assistance. With such a large number already unable to find decent, affordable housing or to obtain assistance, there is no reason to believe that displaced USDA tenants would fare any better.

Section 504 repair grants and loans. With these small loans and grants from USDA, many very poor elderly recipients for the first time in their lives can have an indoor toilet, a sound roof, or a modern furnace. Maximum amounts are $7,500 for grants (for very low-income elderly only) and $20,000 for loans (for very low-income homeowners regardless of age). This is hardly an extravagant program. In 2010 its funding was $32 million for grants and $34 million for loans (which are repaid).

The budget and H.R. 2112 would eliminate Section 504 loans entirely. The budget would cut Section 504 grant funding significantly, although H.R. 2112 would maintain funding at the FY11 level. Like other USDA housing programs, the Section 504 programs should be funded at their FY11 levels, $30 million for grants and $23.4 million for loans.

Published September 2, 2011

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