Administration Proposes Moving Some Rural Housing Programs to HUD

The rural loan guarantees and rental assistance programs of the U.S. Department of Agriculture (USDA) would move to the Department of Housing and Urban Development (HUD) under a proposal released by the Trump Administration on June 21, 2018. The Administration’s document acknowledges that USDA’s Section 502 guarantee program for homebuyers, its Section 538 guarantee program for developers of rental housing, its Section 521 Rental Assistance program, and its Section 542 tenant voucher program are not the same as HUD’s Federal Housing Administration mortgage guarantee programs or HUD’s renter aid programs. It contends, however, that rural America no longer needs separate housing resources.

The Administration proposal suggests modeling this reorganization of agencies after a bill drafted in 2011 but never introduced, the FHA-Rural Regulatory Improvement Act of 2011. That bill would have transferred the entire USDA Rural Housing Service (RHS) to HUD. It is unclear how that would have been feasible, since RHS field staff are also responsible for USDA’s community facilities programs and overlap with staff for other USDA rural development programs. HUD would have been responsible for determining how to effectuate the transfer.

The Administration’s suggestion seems to be based on reports from the Government Accountability Office in 2000, 2012, and 2016, although GAO’s analyses stop short of recommending the change. GAO has repeatedly noted the challenges involved in combining programs and has recommended “that RHS and FHA should evaluate and report on opportunities to consolidate their similar housing programs.” Such an evaluation has never been prepared.

The other housing-related section of the Administration’s government reorganization document proposes to end the conservatorship of Fannie Mae and Freddie Mac and transition the two government-sponsored enterprises to fully private entities. An unspecified federal government entity would continue to regulate them. Fannie, Freddie, and any other competitors that entered the secondary mortgage market would pay a fee that would be transferred to HUD to finance affordable housing.