Rural Housing in the Crosshairs: How USDA Affordable Housing Is Targeted for Market Rate Conversion and What Advocates Can Do to Preserve It

For more than 80% of USDA units, rents and landlord-provided utility costs are set at 30% of the tenant's income, with those units receiving deep federal subsidies in the form of unit-based rental assistance, project-based Section 8 assistance or HUD vouchers. Because rents are based on the tenant's income-in contrast to rents in Low Income Housing Tax Credit units that do not receive other federal subsidies, which are based on area median income-USDA apartments are truly affordable for very-low-income people, such as those living on Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), and minimum-wage or seasonal work. A complex web of federal statutes, regulations, and guidance governs the prepayment process for USDA mortgages.10 Recognizing that the nation faced a substantial loss of available affordable housing and record numbers of homeless citizens, Congress enacted detailed legislation in 1987 and 1992 to preserve affordable housing, including USDA multifamily projects, starting with Title II of the Housing and Community Development Act of 1987, Pub. In response, USDA is required to offer financial incentives to the owner to stay in the program.13 Should the owner turn down the incentives, the owner may voluntarily offer the project for sale to a nonprofit or public body.14 Otherwise, the owner's right to prepay is governed by the result of a Civil Rights Impact Analysis (CRIA)15 conducted by USDA to determine two factors: (1) whether prepayment will materially affect housing opportunities of minorities in the development or community at large, and (2) whether an adequate supply of "safe, decent and affordable housing" exists in the market area, and sufficient actions have been taken to ensure that such rental housing will be made available to each tenant upon displacement. If USDA determines that the prepayment will have a material impact on minority housing opportunities, the owner is required to offer the property for sale, for a six-month term, to a nonprofit or public agency at its appraised market value.16 During that 180-day period, if a nonprofit or governmental agency makes a good-faith purchase offer for the property, the owner must accept that offer, and the property remains in the USDA program.17 An offer is considered bona fide if it is at the full appraised price and the party making the offer has identified a reasonably likely source of funding for the purchase.18 The owner must work with the nonprofit f