Policy News from the Administration

HAC’s Comments on Rental Assistance Decoupling – August 2023

The Fiscal Year 2023 President’s Budget included a request to decouple USDA Section 521 Rental Assistance from Section 515 Multifamily Loans to facilitate the rehabilitation and preservation of the multifamily portfolio. To explore the potential impacts, Congress directed USDA to conduct a series of stakeholder meetings and provide a report on how decoupling would be implemented. HAC submitted comments in support of decoupling, with a focus on the topics below.

  • Making Long Term Affordability Parameters the Top Priority
  • Considering A Pilot Concept When Implementing Decoupling
  • Clarifying the Annual Rent Increase Process for Decoupled RA Units
  • Establishing A Plan for Units Without Rental Assistance in Decoupled Properties
  • Maintaining Support for the Entire Suite of Preservation Programs, Even If Decoupling Becomes an Option
  • Establishing A Plan for Prepayments, Since the Bulk of Units Are Lost to Prepayments
  • Improving Data Transparency At RHS

Read HAC’s full comments.

HAC Decoupling Comments 2023

Old Historic Carnation, LP: A HAC Success Story

HAC’s patience and flexibility help convert a vacant Carnation milk plant into homes for seniors in Tupelo, MS

Rendering of carnation plant developmentThe Carnation Milk plant in Tupelo, Mississippi, has sat vacant since 1972. In about a year, that will change when 33 low-income senior households move into new affordable homes in this old factory. This May, Old Historic Carnation, LP broke ground on Carnation Village, a $16.8 million adaptive reuse project to convert the abandoned factory into 33 units of affordable senior housing. These units are sorely needed in Tupelo, a high-poverty community which needs over 1,500 additional senior affordable housing units. With a $325,000 loan from The Housing Assistance Council (HAC)—and two sixth-month extensions to that loan—the developer successfully navigated a predevelopment process mired in construction cost increases and unexpected funding gaps. Here’s how:

Photo of vacant Carnation plantThe original project scope called for 50 units: 25 from an adaptive re-use of the plant itself and another 25 in a second building to be constructed next door. When our loan closed in July 2021, the project budget totaled about $12.7 million, to be funded by Low Income Housing Tax Credits, Historic Tax Credits, and a $1.6 million equity investment. Our financing covered the predevelopment costs of the work required to get to construction financing closing including environmental testing, historic preservation approvals, tax credit application and reservation fees, a market study, and an appraisal.

In the fall of 2021, increases in construction costs left Old Historic Carnation with a $3.8 million funding gap. By the time they applied for and received more tax credits from the Mississippi Housing Corporation (MHC), added a $1 million mortgage, received approval from the National Park Service, and updated the construction bids, costs had increased by a further $4.5 million. In the space of less than a year, the construction cost for the project nearly doubled.

Because HAC can be a patient lender, we extended our loan by six months to give the developer time to solve the problem. Old Historic Carnation applied for and received another tax credit increase from the state, reduced costs with value engineering measures, and increased the deferred developer fee by almost $2 million.

Construction costs increased again in the summer of 2022, causing the equity investor to back out of the project. The developer went back to the drawing board once again and reduced the project’s scope to 33 units, all affordable to households making less than 80% of the area median income (AMI). Plus, 26 would also be affordable to households under 60% AMI. With an additional loan extension from HAC, Old Historic Carnation secured approval of the new scope by MHC, obtained the necessary building permits, and have now begun demolition.

HAC Loan Office Alison Duncan (center) breaks ground for Carnation Village.

HAC Loan Office Alison Duncan (center) breaks ground for Carnation Village. Photo by Adam Robison, the Daily Journal.

On March 21st, Old Historic Carnation, LP closed on construction financing and repaid our predevelopment loan in full. And on May 31st, the project broke ground. Old Historic Carnation’s persistence and creativity made this project a success. But it was HAC’s flexibility that supported them as they went through the process of raising additional funds three times to make the project work. The Carnation Village project showcases how the ingenuity of a local housing developer, solid working relationships with private, state and federal funders, and flexible and patient HAC financing all add up to bring difficult and important projects to fruition. Fifty-one years ago, Carnation Milk closed its factory in Tupelo, Mississippi. Soon, thirty-three low-income, senior households will be able to call it home.

HAC is proud to be a critical part of this project and we look forward to watching it develop.

HAC President & CEO, David Lipsetz, testifies in front of the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Housing, Transportation, and Community Development

HAC’s CEO Testifies to Senate Banking Subcommittee on Rural Housing Reforms

HAC was honored to be invited to testify on May 2, 2023 before the Housing, Transportation, and Community Development Subcommittee of the U.S. Senate Committee on Banking, Housing, and Urban Affairs to discuss commonsense, bipartisan reforms to the U.S. Department of Agriculture’s Rural Housing Service (RHS) programs. HAC’s President & CEO, David Lipsetz, was one of five witnesses on the hearing panel.

The hearing was held to discuss the bipartisan Rural Housing Service Reform Act of 2023, which has been introduced by Subcommittee Chairwoman Tina Smith (D-MN) and Senator Mike Rounds (R-SD). The RHS Reform Act includes a slate of provisions to improve the multifamily, single-family, and capacity building programs at RHS. Senators Smith and Rounds engaged deeply with stakeholders on the creation of the bill, including offering a call for policy recommendations in the summer of 2022. HAC’s response to that comment opportunity can be seen here. We were thrilled to see many of our recommendations included in the bill, and applaud Senators Smith and Rounds on their thoughtful engagement with stakeholders and their commitment to improving the RHS programs.

Highlights from the RHS Reform Act include:

  • Multifamily

    • Authorizing the Multifamily Preservation and Revitalization (MPR) program and Multifamily Preservation Technical Assistance Program
    • Allowing for the decoupling of a Section 515 mortgage and Section 521 Rental Assistance
    • Allowing Section 542 rural vouchers to be adjusted based on changes in tenant income
    • Streamlining the process for Section 515 nonprofit transfers and increasing the Section 515 nonprofit set aside
  • Single Family

    • Establishing the Native CDFI Section 502 relending program
    • Increasing the threshold for the mortgage requirement on a Section 504 home rehab loan from $7,500 to $15,000
    • Extending the loan term for a Section 502 loan up to 40 years
  • Capacity Building

    • Authorizing the Rural Community Development Initiative (RCDI) and waiving the matching funds requirement for groups working in areas of persistent poverty
    • Requiring RHS to publish more data on their housing programs
    • Authorizing funding for much needed technology upgrades at RHS
Watch the Recording Read David’s Testimony HAC’s 2023 Policy Priorities
Policy News from Congress

HAC’s Research Director Testifies to Senate Banking Committee on the State of Housing 2023

HAC was deeply honored by an invitation to testify at the first hearing held in the new 118th Congress by the Senate Banking, Housing, and Urban Affairs Committee. Titled The State of Housing 2023, the session featured Lance George, HAC’s Director of Research and Information, as one of  three witnesses.

A wide range of topics was covered by the witnesses’ testimony and the Senators’ questions. Among the key areas of concern were the gap between housing supply and need, the high cost of both homeownership and rental housing, and what congressional actions could address these challenges. Committee Chair Sherrod Brown (D-Ohio) asked specifically about the loss of rentals financed by USDA’s Section 515 program, a serious concern addressed by HAC research in 2016 and 2022.

Key Takeaways

Lance’s statement made five key points about the state of rural housing in 2023:

  • The pandemic left its mark on rural America and housing markets remain uncertain.
  • Rural mortgage markets are being impacted by interest rates and prices too.
  • Affordability is the greatest housing challenge in rural America, by far.
  • Manufactured housing is an often overlooked but important source of housing – especially in rural America.
  • Race matters across the rural spectrum – especially in housing.

Key policy recommendations, based on HAC’s full set of policy priorities for 2023, included:

  • Increase rural communities’ access to credit and capital and strengthen USDA and HUD homeownership supports.
  • Improve opportunities and financing for preserving aging rental properties and protecting tenants.
  • Authorize the powerful Rural Community Development Initiative and a significant cross-sectoral, flexible capacity building rural investment initiative.

Lance George

Lance George

HAC’s Director of Research & Information

Watch the Hearing


USDA Rural Development Obligations Cover

USDA Rural Development Obligations FY 22- September

HAC presents the FY 22 September USDA Rural Housing Service (RHS) monthly obligations report.*

Download the Spreadsheet.

* The Rural Housing Service (RHS) monthly obligation reports are produced by the Housing Assistance Council (HAC) 1025 Vermont Ave., NW, Suite 606, Washington, DC 20005. The monthly figures derive from HAC tabulations of USDA –RHS 205c, d, and f report data. For questions or comments about the obligation reports, please contact Lance George at 202-842-8600 or lance@ruralhome.org.

Policy News from Congress

HAC’s Stakeholder Comments on Rural Housing Service Programs

HAC submitted comments to Senators Tina Smith (D-MN) and Mike Rounds (R-SD), the Chair and Ranking Member of the Housing, Transportation, and Community Development Subcommittee of the Senate Banking Committee, in response to their call for recommendations on how to improve the U.S. Department of Agriculture’s (USDA) Rural Housing Service (RHS) programs. RHS programs are a critical source of housing for our nation’s small towns and rural places. HAC hopes that Senators Smith and Rounds will use these stakeholder comments to help improve the efficiency and impact of RHS programs, especially as more multifamily properties leave the USDA portfolio.

Topline Takeaways  

  • Multifamily

    HAC strongly recommends that the Senators authorize important multifamily preservation programs and simplify the process for transferring properties to non-profit owners in order to help more properties remain in RHS programs and maintain their affordability. HAC also recommends that the Senators investigate the rental assistance programs available in rural areas and extend these to more rural renters.  

  • Single family

    HAC recommends that the Senators improve the Section 504 program which provides grants for single family home repair. Simplifying and making this program’s funds more accessible would help more families stay in their homes and preserve single family homeownership. 

  • Capacity building

    Many communities have the willingness and desire to help improve their housing opportunities but lack the technical skill or capacity to accomplish their goals. HAC recommends authorizing capacity building programs that would help communities develop the tools they need to thrive. 

  • RHS staffing and operations

    HAC recommends improving the workflow within RHS and updating the technology the RHS staff uses to increase efficiency and help RHS better serve rural communities.  

Read HAC’s Comments

HAC Comments on RHS Reforms
Policy News from the Administration

HAC CEO Statement on Biden-Harris Housing Supply Action Plan

by David Lipsetz

The Biden-Harris Administration released a Housing Supply Action Plan on May 16 that can bring the cost of housing back in line with families’ incomes. This is particularly important in small towns where incomes remain stubbornly low, while the cost of buying or renting a place to live is soaring. The Housing Assistance Council (HAC) applauds the Administration for designing and including several provisions specifically with rural markets in mind.

The Plan includes administrative and legislative proposals to improve existing housing finance mechanisms. It establishes new housing production programs. It calls for changes to the Low-Income Housing Tax Credit that will attract private investment in affordable rental housing. It provides grants—such as the HOME Investment Partnerships Program—to states, cities and towns to do what locals know will be best for their local housing market.  It calls on Congress to establish a Housing Supply Fund and incentivize zoning reform to accelerate the building of more housing across the Nation.

Critically, the Administration proposes reforms that prioritize homeowners living in the homes that they own. This is a welcome change for rural Americans who need high-quality affordable homes in which to live far more than they need high-priced vacation homes. For rental housing, the Administration focuses investment on small-scale 2–4-unit buildings instead of high-rise apartment complexes. It calls for new rentals where few are being built and recognizes the urgency of preserving affordable rentals that already exist. And for the first time in decades, an Administration released a housing plan that calls for improved financing for manufactured housing, an important resource in rural places.

The shortage of affordable housing in rural America is a serious issue. Rental units are being lost at an alarming rate. Single-family homes are significantly older than elsewhere in the Nation. The Administration’s framework recognizes the unique need for affordable housing and proposes solutions built to work in small town and rural America.

Many of the Administration’s actions just announced reflect HAC’s policy priorities. But it remains critical that these actions be complemented by initiatives to address another essential factor in improving housing for rural Americans—building the capacity of local organizations to improve their own communities. Because rural places often have small and part-time local governments, they often find it particularly difficult to navigate the complexities of federal programs and modern housing finance, and to compete for government resources. Philanthropy has not stepped in to address this inequity built into our systems, instead concentrating its resources in already-prosperous high-cost regions. Targeted capacity building through federal investments in training and technical assistance is how most local organizations build skills, tap information, and gain the wherewithal to do what they know needs to be done.

Rural communities hold vast potential to drive economic growth and improve the quality of life for all Americans. Access to quality, affordable housing is key to jumpstarting that potential. Building and preserving homes creates jobs, improves education and health outcomes, and provides much-needed financial and physical stability to families in need. We look forward to working with the Biden-Harris Administration and Congress to ensure that these initiatives move us closer to the day when every American has access to a safe, decent, and affordable place to call home.

USDA Rural Development Obligations Cover

USDA Rural Development Obligations FY 22- February

USDA Rural Development Obligations Report Cover - FY 2021

As of the end of February, USDA obligated 39,285 loans, loan guarantees, and grants totaling about $7.0 billion. This is $3.3 billion less than obligation levels from this time last year. At that time, there were 60,232 loans, loan guarantees, and grants obligated totaling $10.3 billion.

The agency has been operating under a series of continuing resolutions since the beginning of the fiscal year.

Single Family Housing Program Highlights

The Section 502 Guaranteed loan program, the largest of the Single Family Housing programs, obligated $6.6 billion (35,862 loan guarantees) compared to $9.9 billion (56,221 loan guarantees) last year.

For the Section 502 Direct program, loan obligations totaled $324.5 million (1,678 loans), compared to last year’s obligation level of $356.8 million (1,965 loans.) About 27 percent of the loan dollars went to Very Low-income (VLI) applicants. VLI loans represented nearly 32 percent of the total number of Section 502 Direct loans.

The Section 504 Repair and Rehabilitation programs obligated 638 loans representing $4.1 million. Loan volume was up from this time last year (750 loans representing $4.3 million.) There were also about $7.0 million (1,052 grants) obligated in the Section 504 grant program compared to $7.9 million (1,245 grants) last year.

USDA’s Section 523 Self Help Housing Grant program funded 8 grants totaling $10.8 million compared to last year’s 6 grants totaling $3.7 million.

Multi-Family Housing Program Highlights

USDA’s Section 538 Multifamily Housing obligated 29 loan guarantees totaling $76.7 million compared to last year’s 35 loan guarantees ($68.4 million.) The Farm Labor Housing programs funded 4 loans and 1 grant totaling $5,120,000 and $4,000,000 respectively. There were no Farm Labor Housing loans or grants at this time last year. There have been no other loan or grant obligations so far this year

USDA obligated funds for 40,063 rental assistance units under the Section 521 Rental Assistance program totaling $238.7 million. This compares to about 38,592 units ($219.6 million) obligated same time last year. There were also 2,898 Rural Housing Vouchers totaling $14.1 million compared to 1,939 vouchers representing $9.6 million this time last year.

Download the combined document.

* The Rural Housing Service (RHS) monthly obligation reports are produced by the Housing Assistance Council (HAC) 1025 Vermont Ave., NW, Suite 606, Washington, DC 20005. The monthly figures derive from HAC tabulations of USDA –RHS 205c, d, and f report data. For questions or comments about the obligation reports, please contact Michael Feinberg at 202-842-8600 or michael@ruralhome.org.

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 Rural Development Obligations Cover

USDA Rural Development Obligations FY 22- January

USDA Rural Development Obligations Report Cover - FY 2021

As of the end of January, USDA obligated 33,374 loans, loan guarantees, and grants totaling about $5.9 billion. This is $2.2 billion more than obligation levels from this time last year. At that time, there were 47,476 loans, loan guarantees, and grants obligated totaling $8.1 billion.

The agency has been operating under a series of continuing resolutions since the beginning of the fiscal year.

Single Family Housing Program Highlights

The Section 502 Guaranteed loan program, the largest of the Single Family Housing programs, obligated $5.6 billion (30,597 loan guarantees) up from $7.8 billion (44,318 loan guarantees) last year.

For the Section 502 Direct program, loan obligations totaled $264.5 million (1,374 loans), a bit less than last year’s obligation level of $292.3 million (1,623 loans.) About 29 percent of the loan dollars went to Very Low-income (VLI) applicants. VLI loans represented nearly 34 percent of the total number of Section 502 Direct loans.

The Section 504 Repair and Rehabilitation programs obligated 516 loans representing $3.4 million. This compares to 587 loans representing $3.4 million this time last year. There were also about $5.5 million (848 grants) obligated in the Section 504 grant program compared to $5.7 million (916 grants) last year.

USDA’s Section 523 Self Help Housing Grant program funded 7 grants totaling $3.9 million up from last year’s 5 grants totaling nearly $3.5 million.

Multi-Family Housing Program Highlights

USDA’s Section 538 Multifamily Housing obligated 19 loan guarantees totaling about $47.0 million, higher than last year’s 20 loan guarantees ($64.7 million.) The Farm Labor Housing programs funded 3 loans and 1 grant totaling $4.8 million and $4.0 million respectively. There have been no other loan or grant obligations so far this year.

USDA obligated funds for 40,064 rental assistance units under the Section 521 Rental Assistance program totaling $238.2 million compared to 38,592 units ($219.5 million) obligated same time last year. There were also 2,064 Rural Housing Vouchers totaling $9,.9 million compared to 1,675 vouchers representing nearly $8.4 million this time last year.

Download the combined document.

* The Rural Housing Service (RHS) monthly obligation reports are produced by the Housing Assistance Council (HAC) 1025 Vermont Ave., NW, Suite 606, Washington, DC 20005. The monthly figures derive from HAC tabulations of USDA –RHS 205c, d, and f report data. For questions or comments about the obligation reports, please contact Michael Feinberg at 202-842-8600 or michael@ruralhome.org.