The U.S. Department of Agriculture (USDA) announced new decoupling authority, as provided in the fiscal year (FY) 2024 appropriations bill, to decouple Rural Housing Service Rental Assistance (RA) from direct loans for maturing properties. Currently, when a USDA Section 514- or Section 515-financed mortgage matures, the property is no longer eligible to receive RA. With the new decoupling authority, property owners can apply to continue receiving long-term RA if they agree to keep operating their property as affordable housing. Rural housing advocates are encouraged to attend a stakeholder engagement call on April 25 at 2 pm ET. Register here.
Funding for USDA’s Section 515 program – once the principal source of financing for affordable rental homes in rural America – has been cut by more than 95% over the past few decades, limiting rural communities’ ability to attract private-sector capital and other federal resources. Rental homes financed by the USDA are located in 87% of all U.S. counties, and the Section 515 program alone has produced 550,000 affordable apartments in rural communities. However, rural renters continue to face severe housing needs and low incomes – for example, the average USDA rental assistance recipient has an income of just $13,696. Despite the growing need, there has been no new construction of rural rental homes under the Section 515 program since 2012, and the FY23 Multifamily Housing Occupancy Report calculated USDA’s current stock of Section 515 units at only 390,000, down from its peak of 550,000 units produced with USDA Section 515 loans.
NLIHC has long advocated for “decoupling” of mortgage maturation from rental assistance. NLIHC has endorsed legislation that would decouple such properties and in August 2023 sent a letter to USDA with the National Housing Law Project in support of decoupling (see Memo, 8/7/2023).
The FY24 appropriations bill included funding for a USDA pilot program to decouple Section 515 mortgages from Section 521 rental assistance for up to 1,000 rental assistance units. According to USDA’s Multifamily Housing Stakeholder Announcement, dated April 16, 2024, “a notice to identified maturing mortgage borrowers will be issued to outline eligibility requirements, rent-setting structure, terms of the new RA contract, and Agency oversight requirements. In addition to the notice, a Fact Sheet with questions and answers is under development and will provide consistent and updated information for MFH staff and external partners.” Finally, USDA-financed property owners should be aware that decoupling is not available to owners or borrowers who “submitted, and the Agency processed the final loan payment prior to the enactment of the decoupling authority on March 9, 2024. Additionally, decoupling is not available to borrowers through the prepayment process.” For further information, contact USDA’s Decoupling Team at [email protected].
In the announcement, USDA invited advocates to attend a stakeholder engagement call, “Decoupling Program Development Stakeholder Session,” on April 25 at 2 pm ET; register here. USDA will provide a platform to highlight the authority, discuss implementation strategy, and solicit important stakeholder feedback.
Register for the April 25 Decoupling Program Development Stakeholder Session here.