Posts

An Update on Maturing Mortgages in USDA’s Section 515 Rural Rental Housing Program

Rural America is Losing Affordable Rental Housing at an Alarming Rate

USDA’s Section 515 Rural Rental Housing properties are an important resource for many rural households and communities. But 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. HAC examined changes in USDA’s Section 515 portfolio during the past five-year period. The analysis identified 921 Section 515 properties that left the portfolio between 2016 and July 2021 – nearly three times the original USDA projection for maturing mortgages during the five-year period. The ramifications of this accelerated loss of affordable rural rental housing are important as the number of properties expected to leave USDA’s portfolio will grow exponentially in the coming decades.

Download Research Brief (PDF)

Appendix 1: List of properties that have left the program.

 

USDA Releases Maturing Mortgage Dates for Multifamily Loans

In an update to the issue of maturing rural multifamily mortgages, USDA released a loan level database of all rural multifamily loans and their projected “exit” or maturity date. These data can be accessed on USDA’s data site.

USDA’s Section 515 rental properties were financed with USDA loans that could be amortized over terms as long as 50 years. Once the USDA loan is paid in full, owners are under no obligation to maintain the properties as affordable housing. After the loan matures, tenants living in these properties are also no longer eligible for USDA’s Rental Assistance.

The Housing Assistance Council (HAC) analyzed data on USDA’s multifamily loan portfolio as of the end of March 2016. At that time, there were about 13,830 Section 515 properties with over 416,000 rental units. Nearly two-thirds of the households in these properties receive USDA Rental Assistance. The average tenant household has an income of about $13,600.

USDA calculated a “exit date’ which includes a loan maturity, or estimated payoff date. According to HAC analyses, these projections indicate that an average of 74 properties (1,788 units) per year will leave the program over the next 12 years (2016 – 2027). In 2028, the number properties exiting the program is expected to increase significantly with an average loss of 556 properties (16,364 units) per year through 2032. For the following eight years after 2032, the numbers of properties exiting the program increases for an average loss of roughly 22,500 units per year until peaking in 2040.

For a summary analysis of the updated maturing mortgage estimates see HAC’s Rural Policy Note.

To view an interactive map of properties and estimated exit dates for each property visit HAC’s Mapping Rural America page at https://arcg.is/29638UI.

The data and corresponding data dictionary are available on USDA’s Rural Development Datasets page.

HAC Recommends Notifying Tenants about Maturing Mortgages

On August 7, 2014, HAC wrote a letter to Tony Hernandez, USDA’s rural housing programs administrator, to express concern about tenants in properties that will lose USDA Section 521 Rental Assistance when their USDA mortgages mature. Over 8,000 properties with Section 515 or Section 514 mortgages are expected to make their last payments to USDA by the year 2020. Because many of the tenants rely on USDA Section 521 Rental Assistance, which is available only when a USDA mortgage is in place, thousands of tenants in those 8,000 properties risk losing their aid when these mortgages mature.

HAC’s letter to Hernandez encourages USDA to follow HUD’s practice and ask property owners to notify tenants at least nine months before their Rental Assistance ends. The letter also asks for a dialogue between HAC, USDA, and other interested parties to identify approaches to keeping the housing affordable.