Owen & Crain: Rural Affordable Housing and the USDA

In Rural Housing in the Crosshairs: How USDA Affordable Housing is Targeted for Market Rate Conversion and What Advocates Can Do to Preserve It, Kelly Owen and Scott Crain (both of Northwest Justice Project) discuss USDA financed and subsidized low-income affordable housing in rural communities and assert that these housing opportunities are being lost in rural communities “at an alarming rate,” in part because of what they identify as USDA’s failure to enforce its own regulations.

Rural Housing in the Crosshairs begins with a helpful overview of USDA housing programs. The USDA-supported multifamily rental properties that are the focus of this chapter tend to be privately owned but are deeply supported by federal loans and ongoing federal subsidies. The authors identify these rural rental units as “crucial for the well-being of very-low-income rural residents.” USDA-supported units are particularly beneficial because “rents are based on the tenant’s income” and the program ensures other strong tenant protections, allowing many families to stay in these units for many years and benefit from housing stability. Rental housing markets in many rural communities are otherwise “extremely tight,” with very low vacancy rates and aging housing stock.

Despite their importance, the authors note that many of these USDA-supported rural affordable housing rental units are being lost, with the number of properties decreasing 1.4% to 2% each year between 2017 and 2020. In part, these units are being lost because their private owners are cashing out early—pre-paying their USDA loans despite a web of federal rules and regulations designed to discourage this kind of pre-payment.

The authors explain the detailed and complicated prerequisites imposed before a borrower can prepay their loans. These prepayment approval requirements are intended to continue to protect current tenants but the authors assert that the frequent result is, instead, “actual immediate release of the owner from all obligations simply because the owner manipulates the process and/or USDA fails to enforce its statutes and regulations.” The authors assert these failures “are causing affordable housing to disappear.”

Finally, drawing on the Northwest Justice Project’s experiences in the Pacific Northwest, Rural Housing in the Crosshairs outlines a series of potential litigation and advocacy strategies that could help preserve some of this USDA housing. This section includes specific “practice tips” for advocates seeking similar results in their communities.