Policy

House Bill Proposes Rural Housing Cuts, Though Not for Purchase Mortgages or Rental Vouchers

The House Appropriations Subcommittee released its fiscal year 2025 funding proposal for USDA on June 10, 2024, and will hold a markup at 6:00 pm Eastern time on June 11. As expected, the bill would fund most USDA housing programs at levels lower than those enacted for FY24 or proposed in the administration’s FY25 budget.

The House measure would increase Section 502 direct loans to $950 million, higher than the $880 million level for FY24 but not at the $1.25 billion provided in FY23 or requested in the FY25 budget. It would keep the Section 502 guaranteed loan program at $25 billion and Section 538 guaranteed multifamily loans at $400 million.

The bill appears to provide no funding at all for Section 516 farmworker housing grants, which are used by nonprofit developers alongside Section 514 loans.

— HAC’s analysis of FY25 appropriations for HUD programs is available here.  —

  —  The House’s HUD bill is expected to be released in late June, shortly before a markup scheduled for June 27.  —

Homeownership Housing

Despite its support for home purchase programs, the House bill would reduce funding for self-help housing, Section 504 home repair loans and grants, and Section 533 Housing Preservation Grants.

Rental Housing

The bill proposes cuts in rental preservation programs, reducing Section 515 loans from $60 million in FY24 to $48 million and the Multifamily Preservation and Revitalization (MPR) program from its current $34 million to $28 million. It shows some support for tenants, however, with Section 521 Rental Assistance funding almost at the level requested by the administration’s budget, an increase in Section 542 vouchers, and continuation of the 1,000-unit demonstration program that decouples Rental Assistance from USDA mortgages reaching the end of their terms.

Energy Efficiency

The House bill would prohibit use of any USDA housing funds to implement a recent determination made jointly by HUD and USDA that would require some federally supported new housing construction, including single-family homes supported by USDA’s Section 502 direct, Section 502 guaranteed, or Section 523 self-help programs, to meet updated energy efficiency standards. The ban, tucked into Section 743 in the bill’s “general provisions,” is reminiscent of an amendment defeated in the Senate in October 2023. That proposed amendment would have prevented HUD implementation of the same energy efficiency standards.

Community Facilities

The bill would cut funding for Community Facilities direct loans by two-thirds, from $2.8 billion in FY24 to $1 billion in FY25.

 

Program
($ in millions)
FY23 Final FY24 Final FY25 Budget FY25 House FY25 Senate(a) FY25 Final(a)
502 SF Direct Loans $1,250 $880 $1,250 $950
     Nat. Amer. SF Demo 7.5 5 7.5 5
502 SF Guar. Loans 30,000 25,000 30,000 25,000
504 VLI Repair Loans 28 25 28 18
504 VLI Repair Grants 32 25 30 (c)
515 MF Direct Loans 70 60 70 48
514 Farm Labor Hsg. Loans 20 15 25 (d)
516 Farm Labor Hsg. Grants 10 7.5 10 0
521 Rental Asst. 1,488 1,608 1,690 1,684
523 Self-Help TA 32 25 32 20
533 Hsg. Prsrv. Grants 16 10 16 (c)
538 MF Guar. Loans 400 400 400 400
542 Vouchers 48 48 38(b) 54
Rental Prsrv. Demo (MPR) 36 34 90 28
Rental Prsrv. TA 2 1 0 0
Rural Cmty. Dev’t Init. 6 5 6 4
Cmty. Facil. Direct Loans 2,800 2,800 1,250 1,000
Cmty. Facil. Grants 25 5 22 (e)
   Tribal Colleges CF Grants 10 8 10 6
   Energy Cmties. Grants 10
Cmty. Facil. Guar. 650 650 650 650

Abbreviations key

  • MF: Multfamily (Rental)
  • SF: Single-Family (Homeownership)
  • TA: Technical Assistance
  • VLI: Very Low-Income

(a) These columns will be filled in as the FY25 funding process progresses.

(b) This $38 million is to renew vouchers already issued. Most tenants in USDA-financed rental properties where mortgages end or are paid off would receive Section 521 Rental Assistance under the Administration’s decoupling proposal. An additional $20 million is included in the HUD tenant protection vouchers account to provide new vouchers for tenants “in USDA properties that are unable to refinance, participate in the multi-family preservation and rehabilitation options, or decouple.”

(c) The House bill provides a total of $20 million for Section 504 repair grants and Section 533 Housing Preservation Grants. It is not clear how the total would be divided between the two programs.

(d) The House bill provides $4.8 million in budget authority for Section 514 loans, but does not indicate the dollar amount of loans expected to be generated.

(e) The amount proposed for Community Facilities grants in the House bill is not clear.

Administration Proposes Small Increases in Many Rural Housing Programs

The Biden Administration’s budget for fiscal year 2025, released on March 11, 2024, would hold funding at FY23 levels for most of USDA’s rural housing programs. In effect, it would restore the cuts made in the final FY24 appropriations bill, which was passed after the budget was prepared. Details are provided in the table below.

The recording and slides from HAC’s March 13 webinar on Rural Housing in the Fiscal Year 2025 White House Budget are posted here.

Homeownership Housing

Like last year’s budget proposal, this year’s would eliminate subsidy “recapture” for the Section 502 direct program. Recapture requires that, when a low- or very low-income homeowner with a Section 502 direct loan sells the house or moves, they must repay the subsidy amounts they have received over the life of the loan. The administration estimates that eliminating this penalty for current borrowers would cost USDA $1.12 billion. It also proposes that Section 502 direct loans made in 2025 will not to be subject to recapture.

The budget would require that funding for housing construction or rehabilitation be targeted to projects that improve energy or water efficiency, implement green features, including clean energy generation or building electrification, electric car charging station installations, or address climate resilience of properties.

The budget also proposes three changes that were just adopted in the final FY24 funding bill, which had not been passed yet when the budget was prepared. These include extending the length of self-help and site-development loans from two years to five, and standardizing foreclosure procedures consistent with HUD’s.

Rental Housing

The administration again asks for legislative language to “decouple” Section 521 Rental Assistance from Section 515 and 514 mortgages, so that when a USDA rental housing mortgage ends for any reason, the tenants can continue to receive Rental Assistance. The final FY24 bill authorized a limited pilot to decouple up to 1,000 units of RA, but the budget does not propose any limits.

The budget requests Section 542 voucher funding be used only to renew “legacy vouchers,” $11.79 million in unobligated voucher funds be rescinded, and $20 million be added to provide HUD tenant protection vouchers for tenants “in USDA properties that are unable to refinance, participate in the multi-family preservation and rehabilitation options, or decouple.”