USDA Housing is at risk because of maturing mortgages and insufficient funding
Rural America's Rental Housing USDA’s rental assistance program has
also reached a crisis point. Over the next several years, the rental
assistance program is expected to continue to grow to over $1.3 billion
annually, putting the entire USDA Rural Housing budget at risk. Neither
USDA nor Congress has adequately funded the program. In fact, both have
resorted to budget gimmicks to reduce funding in the short-term, only to
see long-term costs increase. More recently, USDA proposed additional
policy changes aimed at educing the burden on its rental assistance
program—with mixed reviews from housing developers and advocates who are
concerned that these proposals willharm tenants and properties. In
light of these new budget realities, the purpose of this report is to
analyze federal strategies to preserve affordable, rural rental housing.
In addition, this report identifies workable policy solutions to help
Congress and the Administration use its limited resources to most
effectively serve low-income, rural individuals and families. Most
importantly, these policy solutions aim to resolve USDA’s Rural Housing
budget crisis, while protecting tenants from losing access to affordable
housing, preserving the entire multifamily housing portfolio, and
strengthening the quality and sustainability of the portfolio for future
8/4/15 Gideon Anders on National Housing Law Project reports:
Hi everyone, Some owners of Rural Development (RD) rental (Section 515) and farm labor housing (Sections 514 and 516) are sending out rent increase notices to residents who are receiving Rental Assistance subsidies. These subsidies enable residents to pay no more than 30 percent of income for rent and utilities. The notices state that the residents’ rents will be increased to the development’s ‘Basic Rent,’ which is based on the owner operating the development under a shallow interest subsidy; thus, the Basic Rent is not tied to household income and does not take into account the cost of tenant paid utilities. If these rent increases are not explicitly authorized in the residents’ leases and are made during residents’ one-year lease term, they are illegal and should be challenged. Also, if the rent increases are implemented without the RD required 30-day notice, or not in conformance with more restrictive state or local law, they are also illegal. The rest of this e-mail discusses the reasons for these notices and why they are illegal.
Owners are sending these rent increase notices because some RD Rental Assistance contracts that were entered into after Dec. 16, 2014, are underfunded and are running out of Rental Assistance funding before the end of the one-year contract term. RD is unable to renew or extend these contracts because the Fiscal Year 2015 appropriations legislation—under which RD is currently operating— has a provision prohibiting the agency from renewing any contracts during the 12-month term of the contract. Owners are running out of funds because RD has been using a three-year statewide Rental Assistance usage average to determine the amount of Rental Assistance subsidy that all developments in each state need to operate their developments. This formula shortchanges some developments that have higher operating costs and a legitimate need for additional subsidies. RD has advised owners that it will work with them to deal with the problem and assist them in avoiding rent increases by allowing them to defer mortgage payments, suspend payments into the development’s reserve accounts, and use reserve accounts to fund operations. It has been reported that some RD offices are also allowing owners to raise rents to the project’s Basic Rent upon giving the residents a 30-day rent increase notice regardless of the terms of the resident’s lease. Such rent increases violate RD regulations and residents’ leases. RD regulations require owners whose Rental Assistance contracts are not renewed to notify borrowers of rent increases in accordance with the terms of their lease, and in conformance with state and local law. 7 C.F.R. § 3560.255(b)(2). Most RD leases are not likely to contain provisions allowing owners to increase the rent during the one-year lease term except when the household income increases.Thus, any attempts by owners to increase a resident’s rent prior to the end of the lease term and without a proper 30-day notice are illegal and should be challenged.
Please note that residents who receive a legitimate rent increase notice may vacate their housing without penalty in accordance with their lease terms. Id.
Nearly 62 percent of households living in RD rental housing are households headed by an elderly person or a person with a disability. These households, as well as other households receiving Rental Assistance, cannot afford significant rent increases and are likely to be displaced by any rent increase. Therefore, the National Housing Law Project (NHLP) urges that attorneys and other advocates working in areas with RD rental housing inform residents of their rights under RD regulations and their leases. NHLP expects to have a resident notice available sometime next week.
Click on your state and county (or counties), and the site will list all RD developments in the county that you selected. If you click on an individual development, it will show the number of units in the development, if any, that are receiving Rental Assistance. NHLP would appreciate hearing from advocates and attorneys representing residents whose rents are being increased. We are exploring ways to challenge rent increases at the end of a lease term and would appreciate knowing where they are occurring. Please contact Gideon Anders at firstname.lastname@example.org any information that you may secure about rent increases in RD developments, regarding questions that you may have about this memo, or the representation of clients facing rent increases or evictions.
Rural Housing Programs in Decline The Daily Yonder carries a nice overview of USDA Housing Programs. The authors conclusion is that housing
programs in USDA Rural Development appear to be on a glide path to
elimination, says this analysis from advocates at the Housing
Assistance Council. The Obama administration's proposed budget for
next year continues the downward funding trend. Read it here. Good
graphs, provoked some heated discussion on Ohio Preservation Network