In-Depth: Rep. Lacy Clay (D-MO) introduced this bill to maintain affordable housing in order to avoid displacement in rural communities. Original cosponsor Rep. Emanuel Cleaver, II (D-MO) says:
“Too often, I fear, we forget that economic hardships know no race, creed, or geographical location. My rural communities of Ray, Saline, and Lafayette Counties have a poverty rate outpacing the national average. The need for affordable housing is no less important for them than for my constituents in Kansas City, who also face considerable headwinds. I’ve lamented for years now that some of the rural areas in my district have not seen new home construction for decades. With this bill, and some of the other projects we are working on, I’m hopeful we can reverse that trend and provide these communities with the quality, affordable housing they deserve. As someone who spent a few years of my childhood in public housing, I understand the importance of affordable housing and how it enables American families to climb the economic ladder. The lack of affordable housing is not a rural or urban issue, it’s an American issue, and one of the most critical dilemmas our nation faces in the years to come. For as long as I’m here in Congress, anyone that wants to work on the issue will have a partner in me.”
The Council for Affordable and Rural Housing (CARH) supports this bill, but believes it could go further in some respects. In its August 12, 2019 Broadcast Email, CARH writes:
“We recommend the bill go further in certain respects. Specifically, RA (Rental Assistance) contracts should be extended 20 years for all renewing owners and properties, not just those completing a further preservation review. There needs to also be some correlation between this new preservation process and the current ELIHPA preservation process, which could be read to conflict with one another. It should also be clarified that a Section 514/516 owner includes a for-profit entity with a nonprofit general partner or managing member. This bill should also have a stronger direction to USDA to circulate all returned RA for preservation and to fully expend all RA on renewals. The full House has not yet scheduled action on the bill nor is there comparable legislation in the Senate. While CARH does support the concepts envisioned in the legislation, we do believe that there are some changes that need to be made before it is passed by the Congress. CARH is supportive of the concepts contained in H.R. 3620. However, we believe that some provisions need to be amended. Please ask your members of Congress to support the bill and add 20 year RA for all renewals, spending all RA funds appropriated for renewal and preservation. We also need Senators to introduce a companion bill, one that should support these additional provisions.”
The National Low Income Housing Coalition (NLIHC) observes that the Trump administration hasn’t demonstrated support for rural housing in its budget requests. In its FY18 budget, it actually called for the elimination of the Section 515, 514/516, and MPR programs. It’s also replaced the previous USDA Under Secretary for Rural Development with an Assistant to the Secretary — making the USDA employee with authority over rural housing much less authoritative in the department.
This bill unanimously passed the House Financial Services Committee with the support of four Democratic House cosponsors.
Of Note: Under the Section 515 program, USDA RD makes direct loans to developers to finance affordable multifamily rental housing for very low-income, low-income, and moderate-income families, elderly people, and people with disabilities. Section 515 loans have a 1% interest rate, amortized over 50 years, to help finance rentals or cooperatively-owned housing.
Most of the USDA’s properties financed through two specific programs — Section 515 and 514 — are projected to lose their affordability provisions in the coming years. Additionally, no new properties have been financed for several years.
Section 515 direct loans are an important funding source for affordable housing in rural areas, but they often lose their affordability protections once the loans mature or are prepaid. In September 2018, the Housing Assistance Council (HAC) published a report in which it estimated that 892 properties with 21,452 rental homes would leave the program due to maturing mortgages over the next ten years. Then, in 2028, the loss of homes will increase dramatically, as more than 80,000 homes would leave the program in the following five years.
Two other factors make Section 515 loans even more important. For one, rental assistance subsidies that keep homes affordable (e.g., USDA Rural Development Section 521 Rental Assistance and HUD Section 8 vouchers) are tied to Section 515 loans. Second, Section 515 homes are often the only housing option for the lowest-income people in rural areas, so they’re an important source of affordable housing.
The Multifamily Housing Preservation and Revitalization program which this legislation would permanently authorize allows the USDA to restructure Section 515 loans, extend incentives for owners to stay in the program, and provide properties with additional resources to repair and restore homes. This program has been a demonstration for the past 13 years.
Summary by Lorelei Yang
(Photo Credit: iStockphoto.com / ehrlif)