October 26, 2016 – USDA has announced a new effort to increase nonprofit participation in preservation of Section 515 rural rental housing. Changes will take effect on March 1, 2017. USDA’s Rural Housing Service hopes its staff and interested nonprofits will use the intervening time to identify preservation deals. Nonprofits can reach out to USDA Rural Development state offices for additional information and assistance.
The changes include:
- Return on Investment (ROI):
- Eligible nonprofits will earn a return based on the investment of their own resources following the ROI methodology.
- Grant funds used for hard costs of construction will be included in the ROI methodology.
- Loans made by nonprofits (aka Developer Loans) to a nonprofit purchasing entity will be included in the ROI methodology subject to certain conditions being met.
- Security Value: USDA will include the value of state or local loans provided at favorable rates in the determination of Security Value (loan to value ratio).
- Hard Cost Contingency: Hard cost contingency will be an eligible Section 515 loan purpose, allowing it to be included in the ROI methodology subject to certain conditions being met.