Major U.S. Department of Agriculture (USDA) rural housing programs remain at or near their FY10 appropriations levels in the budget deal that funds the remainder of FY11. This final Continuing Resolution (CR) does, however, eliminate the Rural Innovation Fund, which is the only HUD program targeted specifically to rural areas.
USDA Section 502 direct homeownership loans receive $1.121 billion, the same amount as in FY10. Funding is reduced for the Section 523 self-help housing program, rental preservation programs, and Section 504 repair loans for very low income homeowners. The only USDA housing program to be zeroed out is a $6 million set-aside of Section 521 Rental Assistance for preservation properties.
Despite the reductions, the CR leaves USDA’s housing programs facing the FY12 appropriations battle in a stronger position than advocates had feared based on the Administration’s budget request for FY12 (see Memo, 2/18). The budget request proposes to eliminate the self-help program and to cut 80% of Section 502 direct mortgage funding. It would emphasize homeownership assistance through the Section 502 guarantee program, which pays for itself by charging fees but serves mostly higher income homebuyers than the direct loan program because its participating lenders can charge market interest rates.
Rural housing advocates hope to educate lawmakers about the significant advantages of USDA’s self-help program, which has been a highly successful homeownership vehicle for low and very low income people since the 1960s. Working in groups of eight to ten families, participants provide 65% of the construction labor, spending long hours working on their houses in the evenings after work and on weekends. Their “sweat equity,” often combined with Section 502 direct loans at 1% interest, makes affordable, sustainable homeownership possible for those who might otherwise turn to predatory lenders.
Rural rental housing funding, too, faces an inadequate budget request for FY12. The Administration would defund most of USDA’s current rental preservation efforts, including its very popular Multi-Family Preservation and Revitalization (MPR) program. It would add preservation funds to the Section 515 program, which also finances new construction. Section 515 is not as flexible as MPR, however; for example, it does not give USDA the authority to defer mortgage payments, which is the most-often used preservation tool under MPR.
Details on the FY11 continuing resolution and the FY12 budget request are posted on the Housing Assistance Council’s website, www.ruralhome.org.
NLIHC thanks the Housing Assistance Council for contributing this article to Memo.