By: Katie Baughman, Policy Intern
OVERVIEW
Section 515 of the Housing Act of 1949, also called the Rural Rental Housing Loans program, is a USDA-funded federal program that provides direct, competitive mortgage loans to rural housing developers. Section 515 loans are used to finance family housing projects for low, very-low, and moderate-income households, as well as group home residences and rental properties specifically designated for elderly and/or disabled tenants. Approximately ⅔ of housing projects serve elderly or disabled tenants.
Section 515 loans are aimed at expanding the acc
essibility of affordable rental units for rural low-income individuals and families. They are lent for up to 30 years at an effective interest rate of 1%. Tenants living in Section 515 housing often also receive USDA rental assistance. Since its creation in 1963, Section 515 loans have financed nearly 28,000 rural rental properties containing over 533,000 affordable apartment units.
HOW DOES THIS AFFECT RURAL AREAS?.
Many rural communities have limited numbers of affordable housing units, with disproportionate impact on especially remote and low-income areas in the south and midwest. Section 515 is one of the only federal resources for rental housing that’s specifically designed for rural communities, and is the main financing source for the development of rural affordable housing rentals. Because Section 515-funded rentals often supply the only form of accessible short-term housing, they uniquely benefit low-income and very low-income families, and are especially important in the mitigation of homelessness in rural communities.
However, the availability of Section 515-funded affordable properties is currently declining across rural America, with many loans timing out and some projects leaving for other reasons, like foreclosure or noncompliance. The Housing Assistance Council estimates that 921 properties have left the Section 515 portfolio between 2016 and 2021, which in many cases resulted in tenants losing eligibility for USDA rental assistance and the overall reduction of properties’ affordability for tenants.
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