USDA’s Rural Development Programs Scrutinized during Budget Hearing

The House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies held a budget hearing on USDA’s Rural Development (RD) programs on March 15.  Undersecretary for Rural Development Lisa Mensah and Administrator for the Rural Housing Service (RHS) Tony Hernandez testified about the Administration’s FY17 proposals for rural housing programs.

In his opening remarks, Subcommittee Chair Robert Aderholt (R-AL) stated that RD’s budget request, $58 million above the FY16 enacted level, includes new and untested programs that divert funds from existing programs that are proven to be effective. He also voiced concern for the increasing percentage of RD’s budget that is consumed by the rental assistance account. “While recognizing that the need for affordable rural housing is great, the current cost growth, 25% increase since fiscal year 2014, is not sustainable without considering reductions to other programs,” Mr. Aderholt said. “We would like to discuss measures the Department can take to control costs with the rental assistance program. We wish to work with Rural Development to find solutions that will control costs while serving those individuals with the greatest need and retaining a strong portfolio.”

Several lawmakers addressed the shortfall in RD rental assistance funds that required House and Senate appropriators to come up with a short-term fix in the FY16 Omnibus (see Memo, 12/21/15). USDA’s FY17 request includes $1.4 billion for rental assistance, but Mr. Aderholt said fewer housing contracts would be covered.

Both Ms. Mensah and Mr. Hernandez assured the Subcommittee that steps had been taken to better determine program costs. Instead of using a three-year statewide average, RD’s obligation tool now will collect information at the local level to more precisely determine property-by-property program costs.

Mr. Hernandez warned that the bigger issue is the fact that many RD properties have maturing mortgages and will be lost if proactive steps are not taken. He said that RD is currently working to incentivize current RD property owners to transfer ownership to nonprofit organizations who have partnered with RD. He also said that the Subcommittee needs to be thinking about new construction, since many RD properties tend to be older buildings. Finally, Mr. Hernandez said there needs to be a change in the law to ensure tenants living in RD properties with maturing mortgages are protected if property owners decide to leave the program. The RD budget request seeks to expand eligibility for multi-family vouchers to tenants of Section 515 properties with maturing mortgages. Currently, only tenants of Section 515 properties with mortgages that are prepaid receive such vouchers.

Watch the archived webcast and read hearing testimony at: