Washington, DC–The U.S. Department of Agriculture has unveiled a new program to provide low-interest loans to rehabilitate multifamily housing in rural areas. Nonprofit groups and public entities have until Jan. 10, 2011, to apply for a piece of the slightly more than $14 million of funding being made available.
The assistance is being made through USDA Rural Development’s Preservation Revolving Loan Fund. The fund is intended to preserve rental and farm-labor housing for low- and very-low-income rural residents. Loans will be provided to eligible entities who in turn re-lend that money to organizations with existing Rural Development Section 515 loans (for rural rental housing), or Section 514 loans and Section 516 grants (for farm-labor housing).
The program is designed to give a further boost to nonprofits and others that are already experienced in this kind of specialized rehabilitation that, like any affordable-housing venture, tends to be a complicated undertaking. Priority will be given by the USDA to entities that have equal or greater matching funds from third parties, and entities with experience administering revolving loan funds and preserving multifamily housing.
According to the National Rural Housing Coalition, there’s a particular need for more affordable housing in U.S. rural areas. The organization notes that 35 percent of rural renters are cost-burdened, paying more than 30 percent of their income for housing costs, and almost 1 million rural renter households suffer from multiple housing problems–60 percent of whom pay more than 70 percent of their income for housing. Moreover, more than 900,000 renters live in “moderately or severely” inadequate housing.
Section 515 of the Housing Act of 1949 is the principal source of financing for rental housing in rural areas. Under that provision, nonprofit and for-profit entities can receive 1 percent loans for acquisition, rehabilitation or construction of rental housing and related facilities.
For much of the history of Section 515, the loan term was 50 years, but recently the term was reduced to 30 years in a cost-cutting move. Most Section 515 loans have gone to for-profit entities, who combine the subsidized loan with rental assistance and tax subsidies to finance housing. Currently USDA Rural Development has an existing portfolio of more than $142 billion in loans and loan guarantees.
Loans made under the recent notice will also be for 30 years at 1 percent interest, according to the USDA. The maximum loan is $2,125,000.