USDA Rural Rental Housing programs face cuts in the short term...and then things get much worse
Storm Clouds over USDA housing (part 1: the RA shortfall)
Tenants who live in USDA housing in Ohio and around the country face a short term crisis in the form of unexpected rent increases and a long term crisis in the form of permanent loss of subsidies over the next decade. RHINO will tackle the long term crisis in a future story. Right now it's important for tenants and their advocates to focus on rent increase notices that could be coming before the end of the year.
Tenants in some USDA properties are beginning to receive rent increase notices. The problem is that some properties have spent their annual appropriation for Rental Assistance (RA) in less than a year. Rental Assistance is the USDA form of rent subsidy, analogous to HUD's project based Section 8.
In past years, when a property ran out to RA funds, USDA would extend the contract to cover the needs. Last fall, at the request of USDA, Congress adopted a "no re-renewal" rule that prevents the department from renewing RA contracts before the end of the current contract. Housing Assistance Council (HAC), a national rural advocacy organization, reported in early September that USDA estimates that 50 properties across the country will have shortfalls before the end of September (three days from now). HAC further reports that USDA estimates that another 700-800 properties will be affected in "early Fiscal Year 2016", which begins on October 1st. According to HAC, USDA staff "reportedly are telling property owners they can request permission to raise rents." National Housing Law Project (NHLP) has issued a warning that rent increases would be illegal and threatens litigation. NHLP says: "Nationally, it is estimated that as many as 20,000 households will receive these notices, with 60 percent [of] them likely to be elderly households or households that include a person with a disability. They likely cannot pay the increased rents and are at risk of displacement or eviction."
A recent Des Moines Register article reports on 145 tenants in 6 projects in Iowa who are at risk of receiving rent increase notices. The Clarion News (IN) cites another case in southern Indiana where a community based non profit sponsor can't just eat the costs of non renewal. "Although the agreement was renewed in February, Lincoln Hills Development Corp., which built the apartments in 1996 with a 50-year loan from Rural Development, received notice that its funding is about to be exhausted and it is not eligible for another renewal until next February." Ohio's USDA office has told the Coalition on Homelessness and Housing in Ohio (COHHIO) that it knows of two properties that have run out of Rental Assistance funding. COHHIO and Legal Services are still investigating these cases from Ohio.
Most Ohioans have never heard of USDA housing (Section 515) or Rental Assistance (Section 526), but the programs have been around since the early 1940's. USDA housing is kind of like privately owned developments with project-based Section 8, with two differences. The properties are usually smaller than HUD projects and they are located in rural areas, far from mass media attention. Private owners get a low interest mortgage in exchange for maintaining low rents and some of the units receive an additional rent subsidy (Rental Assistance) for the lowest income households. In Ohio there are about* 14,536 USDA units in 396 developments. USDA tenants have an average rent of $396.10 (without Rental Assistance). Very affordable! But, many of these projects are "tired" and need rehabilitation, in part because, in order to keep rents down, owners have very little money for capital improvements. NOTE: RHINO says "about" because these data are from 2010.
A short term Continuing Resolution to keep the government operating won't help and may make the problem worse. Because Republicans and Democrats in DC can't agree on a spending plan for Fiscal Year 2016, Congress is expected to adopt a Continuing Resolution which extends current funding levels and policies. There are three problems with this plan.
1. Last year's spending levels are not sufficient to renew all the Rental Assistance contracts, and;
2. A Continuing Resolution extends the "no re-renewal rule" so that short funding continues, and;
3. The administration has asked Congress to give permission to commit RA funds faster than would normally be permitted. In essence this means spending less money faster--a sure recipe for problems next summer when there will be a cash crunch.
What can tenants and advocates do right now?
1. Ask your Federal representatives (Congress and Senate) to find out what properties are at risk of running out of Rental Assistance. Congressional inquiries will help focus USDA's attention on this problem in a way that tenant and advocate inquiries have not.
2. If you know of properties where tenants are gettng rent increase notices, contact your local legal services office immediately. All of Ohio's Legal Services agencies have been alerted to watch for these calls. Some Legal Services programs are reaching out to properties to find out what's going on.
3. Then, contact the media. This crisis only gets solved if tenants and advocates alert the public. Breaking through the cone of silence is critical.
So you say, "I live in an urban community, why should I care?" Besides the obvious need to identify with the housing needs of other Ohioans, it is easy to believe that loss of affordable housing in these rural communities could send USDA tenants towards metropolitan areas. There's a long and on going history of rural families moving to cities for more opportunity. As newcomers, these economic refugees will be in competition with other low income households and accepting substandard conditions from slumlords to keep a roof over their heads. No one wins in that scenario.
Rental Assistance Shortfall 2.0 Congress gives USDA tenants a rent increase reprieve...maybe In this week's Continuing Resolution (CR), passed to keep the government in business until mid December, Congress included an "anomaly" that permits the USDA to ignore the "no re-renewal" rule so that properties which were slated to run out of Rental Assistance (RA) subsidies could be renewed. Suspension of the rule is at the discretion of the USDA Secretary, but informed opinion is that Secretary Vilsack doesn't want any more bad press. See here and here This is only a short term reprieve because the CR expires in mid December and the current appropriations bills don't include enough funding to continue to renew Rental Assistance contracts that will be expiring later in 2016. Congress and the White House are supposedly working on another "grand bargain" that could solve the short funding and long funding problems. Stay tuned! Meanwhile, if you hear of tenants in USDA housing who receive rent increase notices, direct them to their local Legal Services offices. Coming soon: The threat of USDA Mortgage Maturity