Student Corner: The Changing Dynamics of USDA’s Section 515 Program

The United States Department of Agriculture (USDA) is the federal department primarily responsible for setting national food, farm, and nutrition policies across the country. In addition to management of national food systems, the USDA has played an important role in rural economic development. Managed by the the Office of Rural Development, the USDA administers grants, loans and loans guarantees for rural communities with a loan portfolio of over $222 billion. In 1963, the USDA began the Section 515 Rural Rental Housing Loan Program to provide housing for very low, low, and moderate-income, elderly and disabled households in rural communities. The loans can apply to the purchase of land or buildings, costs associated with construction or renovation, and infrastructure to support rental housing development. According to a study released by the Housing Assistance Council (HAC) in September 2018, the program has provided financing for nearly 28,000 properties comprising 533,000 affordable units. Sec. 515 housing pairs with the USDA’s Section 521 Rural Rental Assistance program that provides a subsidy to low income households to allow them to afford rents in projects financed through the loan program. Among tenants of the Sec. 515 developments, two thirds of residents take advantage of the Sec. 521 Rental Assistance program. Financing for Sec. 515 developments have been provided by the USDA with 1% effective rate loans and 50-year amortization periods with 30-year terms. During the loan period, property owners must retain affordable rents (the greater of basic rent or 30% of the tenant’s adjusted income), but once mortgages are paid off, [...]