The U.S. Department of Agriculture’s (USDA’s) Section 515 Rural Rental Housing Program is an important source of rental housing in many rural communities. Since the program’s inception in 1963, Section 515 loans have financed nearly 28,000 rental properties containing over 533,000 affordable apartment homes across rural America. There is at least one USDA Section 515 property in 87% of all U.S. counties.

While an important resource to many rural communities, the availability of these homes is declining. In 2016, USDA presented estimates of the date when properties would leave their portfolio and potentially lose affordability and some renter protections. The Housing Assistance Council (HAC) examined changes in USDA’s Section 515 portfolio during the past five-year period. 

The Number and Availability of USDA-Supported Rental Homes Are Declining

Using the 2016 USDA data, an initial HAC analysis in 2018 estimated that 332 properties containing 8,462 units could leave the program due to mortgage maturity by 2021. HAC revisited the issue and examined what actually happened during that five-year period. Using USDA data as of July 2021, HAC identified 921 Section 515 properties, including 21,693 affordable apartments, that left the portfolio between 2016 and July 2021 – nearly three times the original projection for a loss of properties during the five-year period. As of July 2021, 199 of the projected 332 properties left the program during this time frame. There were, however, another 722 properties that left the portfolio before the final mortgage payment. These additional properties likely exited the portfolio for a variety of reasons including prepayment of loans, foreclosure, or noncompliance. There are still incomplete data, however, on the reasons for properties leaving USDA’s portfolio, which hinders the clarity of the analysis. HAC estimates there were 12,742 properties containing 395,007 units remaining in USDA’ s Section 515 Rural Rental Housing portfolio.

Rental Property Exits Were Concentrated in the Midwest and South

Ten states including Minnesota, Michigan, Wisconsin, South Dakota, Iowa, Texas, Indiana, Kansas, Missouri, and Illinois represent over 60% of the properties – and nearly 49% of the units – that left USDA’s portfolio between 2016 and 2021. In this same time period, no properties exited the program in California, Connecticut, Delaware, Rhode Island, and Vermont. 

The Impacts of Property Exits on Tenants

USDA’s rural rental housing programs serve particularly low-income and vulnerable populations. The average household income of residents in USDA properties is $13,640, and tenants receiving rental assistance have average annual incomes of $11,380. Additionally, approximately two-thirds of Section 515 tenants are elderly or disabled. 

Data on residents in USDA properties is somewhat sparse, and the understanding of what happens to properties and their residents after exit is even more limited. But the potential residual impacts of this trend are concerning. There is a dearth of good quality rental housing in many rural communities and very little new affordable rental properties have been developed in rural areas over the past few decades. Specific to the USDA rental program, once these properties exit, they are generally no longer subject to government regulations or quality standards, and the tenants are no longer eligible for USDA Rental Assistance which helps make their rents affordable. In some instances, the homes may no longer be affordable for their tenants.

Read the Housing Assistance Council’s full research brief on the topic of USDA’s Maturing rural rental housing mortgages

Michael (Mike) Feinberg is a senior policy analyst at the Housing Assistance Council.

Lance George is the director of research and information at the Housing Assistance Council. 

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