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Rural Housing Overview
Rural Housing

Many people are aware of HUD subsidized housing, but few also know about its rural counterpart, the Section 515 program.  Section 515 rental properties, funded and regulated by Rural Development, a division of the U.S. Department of Agriculture, often constitute the only decent affordable rental housing in America’s small towns.  Like HUD housing, however, this critical supply of affordable housing is threatened by owner conversion of these properties to market rate housing.  Minnesota has a large supply of Section 515 properties, along with a high rate of owners seeking to prepay their mortgages and escape the program.  By monitoring these prepayment attempts, and pursuing preservation strategies where appropriate, HJC has had success in retaining a number of these properties in the program.  In addition, HJC has been active in leading a coalition of interested groups to advocate on a national level for more effective preservation policies for the Section 515 program.

In Minnesota HJC works with HOMELine to monitor and take action where appropriate with respect to all owner applications to prepay Section 515 mortgages and exit the program.  This monitoring helps to ensure rigorous application of preservation protections by Rural Development (RD) and in some cases this leads to HJC connecting potential nonprofit buyers with owners for purposes of exploring preservation transfers of the building.  Where federal law has not been followed, HJC stands ready to file suit to protect the residents—see article elsewhere on this page.  Despite these efforts, though, Minnesota continues to lose Sec. 515 properties from its inventory at a slow but steady rate.  Compounding the preservation challenge is the fact that a large share of these projects are owned by “mom and pop” owners who are now aging and eager to divest themselves of these properties—something that is not always easy to do.

Change at the federal level has been under discussion for several years now.  RD has instituted two demonstration programs which it hopes to authorize as permanent programs under pending preservation legislation (as of August 2010).  One program would authorize a Rural Voucher program, providing vouchers to tenants in buildings where the owners had prepaid their mortgage, or where the project had been foreclosed upon.  These vouchers are modeled on the Section 8 program, though they are simpler in program design and in some cases inferior to Section 8 vouchers.  The other program the agency seeks to make permanent is the Multifamily Housing Revitalization Program (MPR).  This program is structured to address a widely acknowledged problem:  the Section 515 inventory nationwide has never provided for sufficient reserves to address rehabilitation needs, which is now looming as a huge need in coming years.  The MPR program allows RD to offer owners a variety of financial options to renovate their properties in exchange for long term use restrictions ensuring ongoing program participation.  Both demonstration programs would be made permanent under HR 4868, a bill pending in the House in 2010 but still lacking a companion bill in the Senate.