HAC Releases Policy Note on Maturing USDA Section 515 Loans

On August 29, the Housing Assistance Council (HAC) published a Rural Policy Note on maturing USDA Rural Rental Housing Loans (Section 515). The policy note analyzed data on USDA’s multifamily loan portfolio as of the end of March 2016. The policy notes that once USDA Section 515 loans are paid in full, owners are under no obligation to maintain the properties as affordable housing. USDA’s Rural Housing program may soon see a significant decline in affordable rental units and properties as numerous existing Section 515 loans reach their maturity in the coming decades.

According to the policy note, “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 22,600 units per year, peaking in 2040.”

According to HAC, as of March 2016, “there were about 13,830 Section 515 properties with over 416,000 rental units … [and n]early two-thirds of the households in these properties receive USDA Rental Assistance. The average tenant household has an income of about $13,600.” The loss of these units will have significant impacts to rural affordable housing.

NAHRO’s position on adequately funding all USDA Rural Development programs can be found here (members only).