Join the New York State Rural Advocates In Cooperstown

NYS Rural Advocates invite you to join us for a day long discussion of state and federal housing policy at our annual Policy Retreat at the beautiful Otesaga Resort Hotel in Cooperstown.  Our meeting will convene at 11:00 AM on Wednesday, October 30.  The discussion will be used by Rural Advocates Board of Directors as we develop our 2020 Legislative Agenda.

Wednesday meeting will include coffee and pastries in the morning and wonderful Otesaga luncheon buffet.  If you can join us for an overnight, you will be treated to a late afternoon reception in one of the hotels lovely suites followed by an elegant sit down dinner in the Otesaga’s main dining room.  Thursday morning, after breakfast, the Board will hold its annual re-organizational meeting and adopt a legislative agenda.  Fee for the event is $110.  Overnight stay at the Otesaga is $243 which includes a great room and three delicious meals.  For meeting registration click here. For Room reservations, please contact the hotel directly (607) 547-9931 between 8 and 5 Monday through Friday and mention NYS Rural Advocates.

NYS Rural Advocates to Convene in Albany

New York State Rural Advocates will hold their annual Legislative Conference February 26 and 27 in Albany.  The Legislative Conference offers Advocates’ members and supporters an opportunity join with colleagues to discuss current legislative and policy issues.  It is also the time to meet with elected officials to discuss how the state budget and legislative initiatives will impact their communities.

The event kicks off with a Rural Advocates’ Board dinner on the evening of February 26 at the Holiday Inn express in downtown Albany.  On Wednesday morning the 27th the event moves to the State Capitol complex with a breakfast meeting in the Albany room.  The chair persons of the Assembly and Senate Housing Committees have been invited to join us as Advocates prepare to spend the day visiting with elected officials and legislative staff.

Additional information and registration materials are available here  2019 Legislative Meeting Registration

NYS Rural Advocates’ road to Albany goes through Cooperstown!

New York State Rural Advocates have set November 8 for their Annual Meeting and Policy Discussion at the Otesaga Hotel in Cooperstown.

This year’s meeting is timed to allow for a discussion of critically important November 6th state and federal elections.  The U.S. House of Representatives and the New York State Senate both may face a change in the majority party.  There is even a chance that the U.S. Senate could flip.  A change of the party in control of any or all of those bodies will result in new Legislative leadership, new committee chairs and a change in status for your elected representative.  This will be our first chance to discuss what any changes might mean.

The annual fall meeting is where the Rural Advocates begins building our state legislative agenda for the 2019 session of the New York State Legislature.  In order to better understand the needs of rural New York, Advocates solicits input from members, colleagues and peers and we use that information to craft our initial legislative agenda.

Please join us in Cooperstown for this important gathering.  Find the registration and hotel details here NYSRA annual meeting notice 2018


Housing Fairs Well in New York’s FY 2019 Budget

After a banner year in 2017/18, the New York State budget for FY 2019 returned housing spending to more customary levels in the recently adopted appropriation plan.  Even so, the final budget bill increased housing spending by some 63% over Governor Cuomo’s proposed executive budget to over $687 million for the accounts tracked by NYS Rural Advocates.

Rural and Neighborhood Preservation companies were spared a proposed 37% cut as the Assembly and Senate Housing Chairs negotiated an additional $6.172 million in Aid to Localities to supplement just over $12 million from the Mortgage Insurance Fund reserves proposed by the Governor.  For the Rural Preservation Program the final 2019 appropriation totaled $5.360 million with $150,000 carved out for training and technical assistance to be provided by NYS Rural Housing Coalition.  The RHC funding level is one hundred thousand dollars less than Rural Advocates had been calling for and came in spite of the Senate proposal to increase funding for the Coalition to $250,000.

The New York State Rural Rental Assistance program which provides section 8 like rent subsidies to residents of USDA Section 515 Rural Rental Housing is funded at $23,649,000 – an amount sufficient to meet anticipated demand for the program.

The 2019 budget plan will provide $132 million towards Governor Cuomo’s five year plan to create or preserve 200,000 units of affordable housing and to provide an additional 6000 units of supportive housing.  The Capital Projects bill allocates $44.2 million to the Housing Trust Fund; $14 million for Homes for Working Families; $4.2 million for the New York Main Street Program and $63 million for the Homeless Housing and Assistance Program. Capital Projects bill also contains a new appropriation of $250 million for critical repairs and improvements for the New York City Housing Authority.

An allocation from the Mortgage Insurance Fund will provide the City of Albany $9 million to address its anticipated budget shortfall.

In an important policy change, the budget contains language that will allow for the bifurcation of the State Low Income Housing Tax Credit.  This change will allow project developers to de-couple SLIC from federal Low Income Housing Tax credits in any given deal.  This change is expected to vastly improve both the marketability and pricing of the State’s tax credit program.

Not included in the final budget agreement were two programs proposed by the Senate and supported by New York State Rural Advocates.  The Senate one house budget bill included $10 million for the establishment of an Affordable Independent Senior Housing and Resident Advisor Program inspired by HUD’s Resident Advisor program.  The Senate proposals would have appropriated another $10 million for the creation of a Statewide Manufactured Home Park Preservation Loan Fund to provide loan funds for improvements to park infrastructure and to replenish the fund used to assist in financing Mobile Home Park coop conversions.  While neither proposal was included in the final budget, efforts to fund both programs are expected to continue.

The Senate one house budget bill would also have added $4 million to the Access to Home Program and $3.6 million for the HOPE/RESTORE program from the Mortgage Insurance Fund.  In the final agreement, those programs were funded as the Governor proposed in the Capital Projects budget at $1 million for Access and $1.4 million for RESTORE.  The Affordable Housing Corporation was funded at $26 million; $10 million less than was recommended by NYS Rural Advocates.

Two ongoing “budget” programs were created in state law with some important improvements to both.  Again, resulting from efforts of the Senate Housing Committee, The HOPE/RESTORE program has become Article 29 of Private Housing Finance Law In codifying the RESTORE program, the Legislature acted to insure that grantees will be allowed administrative fees of 7.5% and provided for concrete time frames to complete programs.  The new Article 30 of PVH is the New York Access to Home for Heroes Program.  The program currently being funded as Access for Veterans has been placed in statute and definitions of eligible veterans has been modified to make the program available to a much wider group of military veterans.

A table comparing 2017/18 to the FY 2019 budget for items tracked by NYS Rural Advocates is included below.

New York State Housing Budget
Capital Projects Fund 2018 Enacted 2019 Proposed 2019 Adopted
Affordable Housing Corp $26,000,000 $26,000,000 $26,000,000
Homes for Working Families $14,000,000 $14,000,000 $14,000,000
HOPE/RESTORE $1,400,000 $1,400,000 $1,400,000
Housing Program $541,525,000 $132,000,000 $132,000,000
Housing Trust Fund $44,200,000 $44,200,000 $44,200,000
New York Main Street $4,200,000 $4,200,000 $4,200,000
Public Housing Modernization $6,400,000 $6,400,000 $6,400,000
Access to Home $1,000,000 $1,000,000 $1,000,000
Homeless Housing and Assistance Program $63,000,000 $63,000,000 $63,000,000
New York City Housing Authority Program $250,000,000
Total $701,725,000 $292,200,000 $542,200,000
Aid to Localities
Housing Development Fund $8,227,000 $8,227,000 $8,227,000
CDBG $40,000,000 $40,000,000 $40,000,000
Weatherization $32,500,000 $32,500,000 $32,500,000
Local Area Program $4,256,000 $3,140,000 $3,140,000
Rural Preservation $1,821,000
Neighborhood Preservation $4,351,000
Total $84,983,000 $83,867,000 $90,039,000
Mortgage Insurance Fund*
Rural Rental Assistance $22,960,000 $23,649,000 $23,649,000
Neighborhood Preservation $8,479,000 $8,479,000 $8,479,000
Rural Preservation $3,539,000 $3,539,000 $3,539,000
Mitchell Lama $39,500,000 $0
Community Investment Fund $34,500,000 $0
Housing Trust Fund $21,000,000 $0
Homes for Working Families $2,000,000 $0
HHAP/AIDS operational support $6,522,000 $8,333,000 $8,333,000
HHAP Supportive Services $0 $0 $2,000,000
City of Albany $12,500,000 $0 $9,000,000
Mobile Home Replacment $1,000,000 $0
Land Trusts $1,000,000 $0
NORC $1,000,000 $0
NORC $1,000,000 $0
Total $155,000,000 $44,000,000 $55,000,000
Total Housing spending $941,708,000 $420,067,000 $687,239,000
* Appropriations from the Mortgage Insurance Fund were moved from the ELFA Article VII to the State Revenue Bill in the final budget




Trump’s 2019 Budget Would Devastate Affordable Housing Efforts: Rural Housing Advocates Have More Immediate Concerns

President Donald Trump’s administration released its FY 2019 federal budget proposal on Monday (2/11/2018) and as with his 2018 budget; the President proposes to slash affordable housing and community development programs.  Trump would zero out the HOME Partnership Program, Community Development Block Grant (CDBG), and the National Housing Trust Fund.  At USDA Rural Development the budget eliminates funding for the Section 502 direct mortgage loan program, Section 504 loans and grants, Water and Wastewater grants and guarantees and Community Facility Loans.  The list of cuts and program eliminations goes on and on but as was the case with the President’s 2018 budget, Congress is expected to ignore the President’s proposal.   (A table is appended to the end of this article with 2017 adopted budget and 2018 budget proposals from the Senate and House).

As of this writing, Congress and the President have our federal government operating on the fourth of a series of Continuing Resolutions (CR) that generally funds the government at 2017 levels.  Both Houses of Congress now believe that they are closing in on a deal for a FY 2018 budget that would cover the period October 1, 2017 through September 2018.  In adopting the current CR, Congress agreed to lift the 2011 Budget Control Act limits allowing defense spending to increase by $80 billion and domestic spending to rise by $63 billion in FY18.   This step was not assured but was absolutely necessary if they were going to avoid deep cuts in a range of domestic spending including HUD and USDA programs.  Advocates should be watching as the Congress attempts to negotiate an FY 18 budget by early next month.  Generally, housing advocates would favor the Senate’s approach to the budget over the House proposal.

Meanwhile, the recently adopted federal tax bill and the Cuomo administration’s proposed FY 19 New York State budget contain serious challenges for the development of affordable rental housing.  While housing advocates were successful in lobbying for the continuation of the federal Low Income Housing Tax Credit (LIHTC), Private Activity Bonds and their associated 4% tax credits in the tax bill, the value of these tax credits will be somewhat diminished as the corporate tax rate falls from 35% to 21%.  The net result is that New York’s commitment to invest $2.55 million in affordable housing will leverage less in private equity investment than would have been the case under the previous tax law.

Further diminishing the leverage of state housing capital, Governor Cuomo proposes to defer claims for the State Low Income Housing Credit (SLIHC) for two years.  While this action does not stop the allocation of SLIHC it is expected to cool the interest of investors and result in a reduced amount of equity that developers will raise through the sale of the credits.

Below is the table that NYS Rural Advocates will be using to track progress towards the FY 2018 and FY 2019 federal budget.  Once again, we would like to thank Rapoza Associates and the National Rural Housing Coalition for this template.

Federal Housing and Community Development Programs
HUD Appropriations – Selected Programs,  FY 17 Final, FY18 Budget, House, Senate and FY 19 Budget — $ in millions
HUD FY 17 Final FY 18 Budget FY 18 House FY 18 Senate FY 18 Final FY 19 Budget
HOME 950 0 850 950   0
Capacity Building 0 0 0 0   0
Transformation Initiative 0 0 0 0   0
Housing Counseling 55 43 50 47   43
Community Development Fund 3060 0 2960 3060   0
  CDBG Formula funding 3000 0 2900 3000   0
Choice Neighborhoods Initiative 137.5 0 20 50   0
Housing Trust Fund** 220 0       0
SHOP ## 54 0 45 54   0
Section 108 Program Level 300 0 300 300   0
Section 202 Housing for Elderly 502.4 510 573 573   566
NeighborWorks 140 0 140 140   27.4
EPA FY 17 Final FY 18 Budget FY 18 House FY 18 Senate FY 18 Final FY 19 Budget
Clean Water SRF 1393.8 1393 1143.8 1.394   997
Safe Drinking Water SRF 863.2 863.2 863.2 864   863
**Mandatory Account authorized under HERA of  2008 and proposed for elimination in 2018
## House number includes $30m ($ 5m for rural) for Sec.4;$5 million for national technical assistance for rural; $10 M for SHOP loans
Senate number includes $35 m for capacity building for Sec.4 ;$5 m for rural; $10 m for SHOP loans;$4 m for veterans



Agriculture Appropriations — Selected Programs  FY 17 Final, FY18 Budget, House, Senate, FY 19 Budget  — $ in millions

RHS/RUS Programs FY 17 Final FY 18 Budget FY 18 House FY 18 Senate FY 18 Final FY 19 Budget
502 Single Family Direct 1,000 0 900 1,000   0
502 Single Family Guaranteed 24,000 24,000 24,000 24,000   24,000
504 Loans 26.278 0 24 26.278   0
504 Grants #28.7 0* [0] #28.7   0
514 Farm Labor Housing Loans 23.855 0 15 23.855   0
515 Rural Rental Housing 35 0 23.398 35   0
516 Farm Labor Housing Grants 8.336 0 6 8.336   0
521 Rural Rental Assistance 1,405.03 1,345.29 1,345.29 1,345.00   1,371.00
523 Self-Help TA 30 0 25 30   0
533 Housing Preservation Grants #5 0 [0] #5   0
538 Rental Housing Guaranteed 230 250 230 230   250
Multi-Family  Restructuring (BA) 41.4 20 35 41.4   0
Housing Preservation  Demonstration 0 0 (15) (22)   0
Voucher Demonstration (19.4) (20) (20) (19.4)   0
Supervisory TA Grants 0 0 0 0   0
Community Facility Loans 2,600 3,000 2,600 3,000   3,500
Community Facility Grants 30 0* [0] 30   0
Community Facility Guarantee 148.305 0 148.305 148.305   0
Water-Wastewater Disposal Program Account 571.19 0 472.70 550.38    
Water-Wastewater Loans 1,200 0 1,200 1,200   1,200
Water-Wastewater Grants 391.98 0 358.9 393.98   0
Water-Wastewater Guarantee 50 0 50 50   0
Solid Waste Grants 4 0 4 4   0
Small Systems Revolver 1 0 1 1   0
Rural Business Enterprise Grants 24 0 24 24   0
Intermediary Re-lending 18.889 0 17.5 18.889   0
RCDI 4 0 0 4   0
B&I 919.765 0 919 919   0
Rural Microenterprise Investment BA/Program Authority 0/0 0/0 0/0 0/0   0
   Rural Economic Infrastructure Grants N/A 162 122.692 0   0
            REIG – Appalachian  Region   [80] [60] N/A   0
( ) included in amount displayed for Multi- Family Restructuring
* Included in Rural Economic Infrastructure Grants, established in the 2018 Budget Request.
# Included in the amount provided for Rural Housing Assistance Grants – $33.701 million.
[] included in the amount for REIG


Rural Advocates schedule 2018 Legislative Conference

NYS Rural Advocates 2018

Legislative Conference

 February 26, 2018 – Hilton Garden Inn, Troy

February 27, 2018 – The Albany Room, Empire State Plaza

Monday, February 26, 2018

New York State Rural Advocates has secured a small block of rooms at the Hilton Garden Inn in Troy 235 Hoosick Street, Troy at the very special rate of $111/ night (The HGI is 10 miles and 15 minutes from the Empire State Plaza).  For room reservations, call the HGI reservation desk at (877) 782-9444 and mention room code RADV.  The room block is valid through 2/5/2018.

Rural Advocates Board and guests will gather for dinner at 5:30 at the HGI where we expect to put the final touches on our Legislative Agenda.  Dinner will be some form of “Dutch treat” and all are welcome to join us.

Tuesday, February 27, 2018

 Rural Advocates will host a Legislative Briefing and Breakfast in the Albany Room on the Concourse at the Empire State Plaza.  All Rural Advocates members are encouraged to attend.  Our agenda will include an overview of Rural Advocates 2018 Legislative Agenda, updates on legislative action to date,  a review of Tuesday’s legislative appointment schedules, and tips on making the ask.  We want to make the most of your time in Albany.  Our discussion will focus on of YOUR rural housing concerns including our top priority of securing an increase in Rural Preservation funding and protecting the housing programs we use.  We expect to be joined at the meeting by several leading members of the New York State Legislature.

After a hot breakfast in the Albany Room, we move to the Capitol for legislative visits. Plan on making appointments with your Senators and Assembly Members and join with others from your region to remind your elected officials of the impact of your work.  Rural Advocates will coordinate meetings with Legislative and Administration leaders.  Please contact us at nysruraladvocates if you need assistance.

Registration Deadline Feb 15, 2017: Return the form below with payment to NYS Rural Advocates: PO Box 101, Cambridge, NY 12816.   Phone: 518-573-2255. Registration of $110 includes breakfast, gratuities and advocacy materials.


NYS Rural Advocates 2018

Legislative Conference

 February 27, 2018 – Empire State Plaza


I (we) will be participating in NYS Rural Advocates’ Legislative Conference and will be advocating for the Rural Preservation Program and for a fair shake for Rural New York!

Name: _____________________________________________________________

Organization: _______________________________________________________

Number of Attendees: _________________

Amount Enclosed ($110/attendee) $ ___________________

Names of Additional attendees: ________________________________________









2018 Legislative Meeting Registration

Rural Advocates and Rural Housing Coalition present budget testimony


Presented to a Joint hearing of

New York State Senate Finance Committee


New York State Assembly Ways and Means Committee, January

Presented by

Blair W. Sebastian, for New York State Rural Advocates

Colin McKnight, New York State Rural Housing Coalition


Good Morning Senator Young, Senator Krueger, Assemblywoman Weinstein, Senator Little, Assemblyman Cymbrowitz, distinguished members of the panel.  On behalf of the New York State Rural Advocates and the New York State Rural Housing Coalition, thank you for this opportunity share our thoughts and observations about the impact of the proposed 2017/18 executive housing budget on small towns and rural places across our State.

My name is Blair Sebastian, I represent NYS Rural Advocates and I am joined today by Colin McKnight.  Colin is the acting executive director of the New York State Rural Housing Coalition.  Together we represent private and nonprofit organizations, developers and architects, engineers and accountants that work to address affordable housing needs in New York State’s rural communities.

As you know, Governor Cuomo’s Executive Budget proposals on housing for the New York State fiscal year 2018/2019 are lean in many areas.  After last year’s robust housing budget, this proposal is a bit of a rude awakening but given the State’s current financial position, it is no surprise.  Lean budgets are to be expected in difficult financial times.  The key to successful budgeting in tough times is to focus on priorities and attempt to invest precious resources towards our State’s most pressing housing needs.

We would like to begin by calling your attention to an article that appeared in the Albany Times Union this past week.  The TU story uses data from the Economic Innovation Group’s Distressed Communities Index (DCI) to compare Saratoga County, the County with the lowest DCI to adjacent Montgomery County with the highest Distressed Communities Score in the State.


Source: EIG Distressed Communities Index

We have reprinted the EIG’s map of distressed communities for New York State above and it comes as no surprise to those of us who work in rural communities that the Counties that rank most distressed on the map, with the sole exception of Bronx County are all rural.

With that economic distress we also find distressed housing markets.  Housing tenure in rural New York is dominated by homeowners with over a half a million owner occupied units comprising more than 70% of the rural housing stock.  Rural New York’s housing stock is decidedly old with more than one third of rural New York’s occupied housing having been built before 1939.  Thirty percent of the housing stock in rural communities is deemed inadequate.  Over one quarter of all owner occupants in rural New York are considered “cost burdened” paying 30% or more of their income for housing.

Meanwhile, of over $541 million included in the 2017/2018 Capital Projects budget towards Governor Cuomo’s $2.55 billion five year housing plan, only 10% was directed at homeownership programs (including mobile homes).  In the 2018/2019 proposal Capital Projects budget,18% of $229 million is directed toward owner occupied housing.  We think it is time that we provide New York’s rural homeowners with a fair shake by more aggressively funding programs that invest in owner occupied housing.

These are the communities served by New York State’s Rural Preservation Companies – they are among the most distressed counties in our State and they are dominated by homeowners. Much of our housing stock is old and substandard, our rental properties are equally distressed and small in scale and our efforts to assist in these matters are decidedly underfunded.

According to NYSHCR’s Annual Program report, Rural Preservation Companies leveraged and delivered over $115 million in state, federal and private funds to meet the affordable housing needs in rural communities in the State.  With New York’s increasing commitment to small development projects, we are seeing Rural Preservation Companies beginning to return to the work of developing important new, appropriate scaled rental projects and they are always looking for serving their rural communities access other state and federal funds.

To this end, NYS Rural Advocates encourages NYSHCR to repeat last year’s Small Rental Development Initiative funded with federal HOME funds.  As the response to this program was overwhelming, Rural Advocates recommends an addition of $10 to the Capital Project Fund to enhance a second round of SRDI.

RPCs are now facing a reduction of some 35% of their core funding as a result of the exhaustion of the JP Morgan Chase settlement funds. Governor Cuomo is proposing to provide $3,539,000 for the Rural Preservation Program (RPP) and $8,479,000 for the Neighborhood Preservation Program (NPP) from excess reserves of the Mortgage Insurance Fund and we appreciate this core support.  In order to maintain current funding levels, NYS Rural Advocates is recommending the addition of $6.5 million from MIF or other sources for RPP/NPP.  Even with this addition, we will be left with a half dozen high need rural counties that are not being served by an RPC.  In order to reach those high need rural counties, Rural Advocates recommends an additional $500,000 to fund five new RPCs.

Rural Advocates recommends the addition of $250,000 to support the work of the New York State Rural Housing Coalition that provides technical assistance and training to the Rural Preservation network.  Since the beginning of the Cuomo Administration we have seen a dramatic reduction in the number of NYSHCR staff devoted to managing the Rural and Neighborhood Preservation Programs.  Gone are the days when an organization could expect to see a HCR contract manager visit their site on a regular basis.  Gone are the days when HCR staff would coach and guide new directors or demand the most aggressive workplans possible from an organization.  That important work now falls to the Rural and Neighborhood Coalitions.  In addition to its training and TA role, the New York State Rural Housing Coalition has undertaken a project to place federal VISTA volunteers in a number of RPCs.  NYSRHC assists RPC boards of directors to plan for leadership succession and they provide critical training and orientation to new RPC directors.  The Rural Housing Coalition has identified a growing need to assist small municipalities in the use of federal CDBG and HOME block grants and proposes to incorporate that activity into its contract workplan.

Rural Preservation Companies are important for the role they play in delivering an array of state and federally funded programs.  These include the federal CDBG and HOME programs along with State funded programs including Affordable Housing Corporation (AHC), Access to Home, HOPE/RESTORE, NYS Main Street Program and Access to Home for Veterans.

This last program, Access to Home for Veterans has been particularly challenging and Rural Advocates members have been disappointed in their lack of ability to serve those who have served our country and who are now faced with housing related challenges due to a disability.  This program is funded with proceeds from the JP Morgan/Chase settlement and is intended to provide for accessibility improvements and removal of barriers in housing occupied by disabled military veterans.  Without specific guidance from the legislation, HCR – needing a definition for a disabled veteran – adopted the definition found in the Access to Home Program (Article 25, Section 1201 of Private Housing Finance Law).  This definition limits program benefits to veterans with service related disabilities – a population that is already being served by the United State Veterans Administration.  NYS Rural Advocates recommends the adoption of the NYS Access to Homes for Heroes Program (S. 3933) amended in such a way as to allow any honorably discharged veteran with a disability and an income of 80% of area median income or less to be served by the program.  The Program should continue to allow Veterans with a service related disability to be eligible for assistance if their income equals 120% of area median or less.  We believe that these changes to the existing program would allow for a much more active and effective program.

Rural Advocates believes that a significant increase in funding for the Affordable Housing Corporation program would go a long way in achieving a more appropriate balance between our State’s investment in homeownership programs and rental housing in rural areas.  AHC provides funding for important owner occupied rehabilitation programs that protect our single family housing stock and allow low income homeowners to invest in their properties.  AHC also provides subsidies that facilitate the acquisition and rehabilitation of existing one to four family housing and the supports the new construction of owner occupied housing.   Rural Advocates recommends an increase in Capital Project Funding from the proposed $26 million to $35 million in 2018/2019.

The experience of our members suggests that the foreclosure crisis which began with the 2008 collapse of the housing market is still impacting upstate and rural communities.  Mortgage foreclosures continue at an unacceptably high level in our communities.  New York State Rural Advocates has long argued that a more well developed pre and post home purchase counseling program would have prevented a great many of these unfortunate events.  Rural Advocates urges the appropriation of $3 million to allow RPCs and NPCs to provide housing counseling services.

Rural Preservation Companies are active participants in the HOPE/RESTORE program which provides for emergency home repair grants for low income seniors.  The Executive Budget proposes to fund HOPE/RESTORE from the Capital Projects Fund at $1.4 million.  Rural Advocates recommends an increase of $1 million for a total program of $2.4 million. We wish to call your attention to an ongoing problem concerning the cost of delivering the program.  HOPE/RESTORE has become increasingly expensive to deliver as overall costs have risen and NYSHCR has added requirements for environmental clearances, fully developed work specifications and exposure of the projects to multiple contractors.  While appropriators have been careful to insist on providing a percentage based administrative fee for the program, the very small size of these projects means that the not for profit delivering HOPE/RESTORE find that allowed fees fall well short of what it takes to recover the cost of delivering the home repair projects.  Rural Advocates suggests that appropriators include a flat fee administrative reimbursement for each project undertaken by a not for profit housing agency in an amount of not less than $350 per unit.

The New York Main Street Program has proven to be a particularly useful tool for the revitalization of small downtowns all across our State.  The Executive proposes to fund NYS Main Street with $4.2 million from the Capital Projects Fund.  NYS Rural Advocates has repeated called for a substantial increase in funding for the Main Street Program but we understand that NYSHCR is concerned that they and their communities may lack the capacity to administer a larger program.  Rural Advocates recommends the creation and funding of a New York Main Street Center that would provide for adequate staffing to manage a larger program and to assist in the development of local capacity to deliver Main Street programs.  Rural Advocates further recommends that the program be removed from the Regional Economic Development Council administration in favor of a direct NYS HCR Request for Proposals.  The NY Main Street experience suggests that these modest programs often fail to show up on the REDC radar and routinely fail to gain the support of some Regional Councils.  This leaves communities in some Regions without access to this small but powerful community revitalization tool.

Many Rural Preservation Companies have developed and now own and manage multifamily projects funded by the USDA’s Rural Development, Section 515 program.  New York State has invested in this program and has leverage many millions of federal dollars by providing rental subsidies through the Rural Rental Assistance Program (Article 17-A of PVH).  Governor Cuomo’s Executive budget proposed to fund RRAP with $23,649,000 from the Mortgage Insurance Fund.  NYS Rural Advocates support this appropriation.

Rural Advocates are pleased that the Governor has continued his commitment to his $2.55 billion, five-year Capital Housing Development Plan by proposing to appropriate $132 million from the Capital Projects Fund.  Rural Advocates continues to argue that such appropriations should include a detailed allocation plan to allow the Legislature and the public to fully evaluate the proposal and facilitate later evaluations of the program’s performance.

Rural Advocates express reservations about the executive budget proposal to provide $8.227 million from the general fund to the Housing Development Fund.  Our organization continues to support the role of the HDF as a source of bridge loans, interim and construction financing.  By statute, HDF is a revolving loan fund. The HDF has been provided with funds for each of the 40 years of its existence and it would seem, as a revolving fund, it should have sufficient fund balance to carry it through a lean period at a time when current funds might be better used in support of other affordable housing efforts.

The Homeless Housing and Assistance Program provides essential capital funding for appropriately scaled projects that provide safe, decent and affordable housing for homeless families and individuals in all parts of our State.  HHAP has a proven record of addressing homelessness in small communities and rural places.  NYS Rural Advocates supports the appropriation of $64 million from the Capital Projects Fund for HHAP projects.

Rural Advocates 2018 Legislative Conference

New York State Rural Advocates is currently working to complete plans for our 2018 Legislative Conference.  The Rural Advocate’s Conference will begin with a late afternoon legislative briefing and dinner on Monday, February 26, 2018 and will move to the State Capitol complex on Tuesday the 27th for meetings with your elected representatives.

Rural Advocates’ Legislative Conference is an important opportunity for rural housing practitioners to make our priorities known to Senators, Assembly members and Executive Chamber staff.  2018 will be a particularly challenging year for funding and it is important that we make our case for adequate funding for RPC, the Rural Housing Coalition, RESTORE and Access to Home, Rural Rental Assistance and all of the programs that we use meet the affordable housing needs of our neighbors in Rural New York.

Please plan on attending.  Details and registration materials will be available soon!

FEDERAL TAX CUTS PASSED: Affordable Housing tax breaks remain

President Trump will sign a Republican tax cut bill that dramatically reduces the corporate tax rate while retaining many cherished tax breaks including the Low Income Housing Tax Credit (LIHTC) and Private Activity Bonds (PAB) along with the associated 4% as of right tax credit.  The important Historic Tax Credit is also retained but under the bill, Historic Credits will only be available for buildings on the Federal Register of historic places.  The final bill also offers real estate investors a 20% tax dedication against some specific forms of real estate investment.

While housing advocates were successful in their efforts to convince Congress to retain the affordable housing tax credits, the ultimate value of the credits remain to be seen.  By reducing the Corporate and top end personal tax rates, the investment value of the credits will be diminished and therefore it is expected that the amount of equity raised through both the 9% and 4% credit will likely be less.

The final tax bill also retains the popular mortgage interest deduction though again, the value has been reduced by lowering the ceiling on the deduction from $1 million to $750 thousand.  As you know, NYS Rural Advocates has been a supporter of the United For Homes Campaign’s proposal to reduce the ceiling for the MID to $500 thousand and to use the savings to fund the development of affordable rental housing and to provide a tax credit to lower income homebuyers.  Congress and the President do not enact those proposed affordable housing benefits in bill.

Perhaps of greater importance to nonprofit affordable housing interests, the tax bill is expected to result in the loss of more than a trillion dollars in federal revenue over the next ten years which will put tremendous pressure on Congress to reduce spending.  President Trumps first federal budget proposal would have devastated affordable housing programs by eliminating HOME , CDBG and Section 502 direct loans among many other programs.  The Trump proposal would have further reduced HUD Housing Counseling and would combine several smaller USDA housing programs into a fuzzy infrastructure fund.

In their FY 2018 budget proposals, both the House and the Senate restore most of President Trump’s affordable housing cuts and the ongoing Continuing Resolution protects most programs at 2017 funding levels.  Congress is now expected to pass yet another Continuing Resolution before the end of the year, pushing the real battle over funding into early 2018.

National Rural Housing Coalition issues Recommendations for Rural Development

Recommendations for Rural Development

The National Rural Housing Coalition (NRHC) is a national membership organization consisting of housing developers, non-profit housing organizations, state and local officials, and housing advocates.  Since 1969, NRHC has promoted and defended the principle that rural people have the right—regardless of income—to a decent, affordable place to live, clean water, and basic community services.

NRHC has prepared the following list of recommendations for improvements to programs administered by the Rural Housing Service (RHS). We look forward to continuing our partnership with the U.S. Department of Agriculture (USDA) and working with you to improve the effectiveness of RHS programs.

Single Family Housing Programs

Mutual Self-Help Housing Program

For over 50 years, the Mutual Self-Help Housing program has been one of the most successful housing programs the federal government has ever seen, and is responsible for more than 50,000 low- and very-low income rural families building their own homes with assistance from dedicated  nonprofit community-based organizations, several regional technical assistance providers, and USDA working together in partnership. Despite the program’s success, a combination of uncertain and uneven funding levels, the worst economic downturn since the great Depression, and antiquated delivery systems have reduced the impacts of the program in recent years.

USDA could take several steps to improve the Mutual Self-Help Housing program and increase its impact. First, Section 523 Grantees should be encouraged and expected to become robust partners with Rural Development, including becoming Section 502 Loan Packagers, and where possible, performing custodial accounting of construction funds.  Additionally, USDA should recognize regional variations in construction and delivery methods in the implementation of the Mutual Self-Help Housing program. Specific recommendations for different aspects of the Mutual Self-Help Housing program are provided below.

Section 523 Grants

Currently, USDA staff and grantee organizations duplicate their work with borrowers, including redundant entry of data. USDA should apply the Section 523 grant program rules evenly across the board and adopt best practices to increase the program’s effectiveness. There are several Section 523 grantees that have participated in the program for several decades, including Self-Help Enterprises in California and Florida Non-Profit Housing. USDA should look to these groups to develop a best practices list and to identify areas where USDA could collaborate with Section 523 grantees to reduce the workload on Rural Development staff and increase efficiencies in the program.

Due to limited funding availability, grantees are restricted in their ability to grow their program – either within their existing service area or by adding to it. As a result, the overall impact of the program is stifled. Limited funding has become an even greater issue in recent years as construction costs have increased. Simply put, these factors and the caps on grants mean current grantees are able to produce less each successive grant period. USDA should make grant awards up to 6 years for experienced grantees in good standing, extendable for two years through renewal options. This flexibility would allow for continuous funding of experienced grantees, and help families to start the program under one grant period, and finish in another, following the “carryover” method.

To address the funding issues and allow the program to grow and assist more families, USDA should propose and support a baseline Section 523 budget of $40 million annually, with a 5 percent increase each year.  With this increased funding, USDA should also allow Section 523 grantees to enter into new service areas and increase their level of production. USDA should encourage new grantees in underserved and unserved states, such as North Dakota. Two grantees should be allowed in the same market area only where there is a memorandum of understanding in place.

USDA must also recognize that different parts of the country have different local costs and regional funding sources. Because of these differences, the “one size fits all” approach to allowable Technical Assistance should be revised. Finally, grantees should not be penalized when their performance is curtailed by factors outside their control. While reasonable cuts in grant expenses should accompany such delays, funding should not be cut off completely. Where de-obligation of grant funds is necessary, it should be made in a timely fashion so that the unused funds can be made available to other grantees.

Technical & Management Assistance (T&MA) Contracts

The T&MA contractors assist participating organization in implementing the Mutual Self-Help Housing program. The four T&MA contractors are: Florida Non-Profit Housing, Inc., Little Dixie Community Action Agency, NCALL, and the Rural Community Assistance Corporation (RCAC). There are several improvements to the T&MA contract that we recommend. First, T&MA contract deliverables should be updated, where necessary, to address current program needs and foster program expansion. Language should be added to the T&MA contracts to allow for more flexibility and the utilization of technology for Qualified Residential Mortgages (QRM) and quarterly site visit attendance. Further, all T&MA contractors should be certified Section 502 Direct packagers and expected to work with new grantees, new packagers, and experienced grantees in situations where Rural Development processing of loan applications is not meeting expectations. T&MA contracts should be modified to allow for promotion, growth and grantee development the goal of expanding the program. Finally, the contracts should be modified to allow T&MA contractors to hold regional and national conferences on a regular basis.

Recommendations to Improve the Construction Period

USDA should allow third parties to conduct construction inspections, including final inspections, at the request of the grantee, unless there are no certified providers in the area. Additionally, Rural Development should hold grantees accountable for loan disbursements for construction costs, but should not be involved with the actual disbursement process. Rural Development should revise task lists to provide clarity on labor requirements, and allow a lesser standard (as low as 50 percent) if a grantee makes a compelling case for lower participation in projects with compensating factors such as high sweat equity. Custodial accounts should be allowed for all grantees that have the capacity (to be reviewed by the T&MA contractor) and requests it. Finally, flexibility should be allowed on placement of Builders Risk policies to conform to insurance policy limitations.

Section 502 Direct Loan Program and Packaging Program

USDA’s Section 502 Direct Loan program is a critical source of single-family housing financing for low- and very-low income families and essential to the success of the Mutual Self-Help Housing program. To improve the program, USDA should establish uniform performance standards for Rural Development’s review, approval, and loan closing timeframes. Additionally, to address understaffing issues at Rural Development, USDA could allow Mutual Self-Help grantees with demonstrated capacity to have remote electronic access to input data into USDA’s loan origination system, which would speed up the application process. USDA could also adopt standards for an accelerated loan approval process for applicants that meet basic threshold requirements and allow for increased flexibility on loans that involve multiple financing sources. Finally, all grantees should take the Section 502 loan packaging training, and should be expected to work with their T&MA contractors for at least a start-up period.

Several of these improvements are already in the works at USDA. NRHC looks forward to the results of this process.

Multifamily Housing Programs

Provisions on Maturing Section 515 Mortgages

As you likely know, the U.S. Department of Agriculture (USDA) RHS multifamily housing portfolio, which is primarily comprised on Section 515 and 514 properties, is facing two confounding issues. First, there is a massive shortfall in the funds needed to maintain the habitability of existing properties. The average age of the USDA rural rental housing portfolio is 34 years. As the 2016 USDA Comprehensive Report indicated, there is a 20 year, $5.5 billion cost for maintaining and preserving existing rural rental housing developments and the approximately 470,000 units of existing rural rental housing (Section 515 and 514). Second, there is a rising tide of maturing mortgages, which will result in increasing affordability issues for low- and very-low-income rural renters. As Sections 515 and 514 loans mature, those developments and their tenants are no longer eligible for rental assistance.

USDA has already lost a substantial number of units – 2,646 units from 205 properties in 2015 alone – and this trend is expected to continue over the next several decades. According to the Housing Assistance Council’s analysis of USDA data, rate of maturation of Section 515 mortgages between 2016 and 2027 is expected to average around 74 properties per year. However, the number of properties exiting the USDA portfolio sky rockets in 2028 to 407, and averages 556 properties per year for the next five years (2028 through 2032). Between 2032 and 2050, an estimated 12,530 properties will mature or be prepaid, with the greatest loss, 927 properties, with some 30,831 units, exiting in 2040.

Congress has taken action to address these issues. In the Fiscal Year (FY) 2017 Omnibus (H.R. 244), several provisions were included that are designed to address the issues facing the RHS multifamily housing portfolio. In addition to providing slight funding increases to the Section 515 program, the Omnibus also directs the Secretary to provide incentives for the acquisition of RHS multifamily housing properties nonprofit organizations and public housing authorities that commit to keep the properties in the RHS multifamily housing program for a period of time as determined by the Secretary.

The Omnibus further details several incentives, noting that the list is not exclusive. Incentives include: allowing nonprofits and public housing authorities to earn a Return on Investment (ROI) on their own resources to include proceeds from low-income housing tax credit syndication, own contributions, grants, and developer loans at favorable rates and terms, invested in a deal; and allow reimbursement of organizational costs associated with owner’s oversight of asset referred to as ‘‘Asset Management Fee’’ (AMF) of up to $7,500 per property. These were also included in both the House (H.R. 3268) and Senate (S. 1603) Agriculture Appropriations Bills for FY 2018.

Additionally, the FY 2017 Omnibus and S. 1603 both include $1,000,000 for a pilot program to provide grants to qualified nonprofit organizations and public housing authorities to provide technical assistance, including financial and legal services, to RHS multifamily housing borrowers to facilitate the acquisition of RHS multifamily properties in areas where the Secretary determines that there is a risk of loss of affordable housing.

The provisions in the Omnibus bill for FY 2017 and House and Senate Agriculture Appropriations bills for FY 2018 reflect an important step to meeting the affordability and quality demands for improving rental housing in rural communities. We encourage you to work with the Secretary to begin fulfilling these provisions.

Fix 4 Percent Rate

When the Low Income Housing Tax Credit (LIHTC) was created, Congress set the credit rates (which determine how much LIHTC equity can go into a particular project) at 9 percent for new construction and substantial rehabilitation and 4 percent for the acquisition of affordable housing and for multifamily Housing Bond-financed housing (hence, how the “9 percent” and “4 percent” credit labels were derived).  However, since then, Housing Credit rates have fluctuated according to a formula related to federal borrowing rates, which have sunk to historic lows and yielding much lower credit rates.  (Currently, the 4 percent rate is only 3.22 percent).  As a result, there is 15 to 20 percent less Housing Credit equity available for any given affordable housing development today than the original rates provided.

Recognizing the impact of declining rates of the program, Congress permanently enacted a minimum 9 percent credit rate in 2015, but there is still no corresponding minimum 4 percent rate.  While the increased equity this permanent rate brought into a project (often resulting in the reduction or even elimination of new permanent debt), the majority of preservation transactions in rural markets are completed by utilizing the 4 percent Housing Credit (tax exempt bond financing).

Section 301 of the Affordable Housing Credit Improvement Act of 2017 (S.548), establishes a minimum 4 percent rate for Credits used to finance acquisitions and Housing Bond-financed developments (similar to the fixed 9 percent rate).  This would not only provide more predictability in transactions, it would also  provide additional capital which in turn will help close funding gaps  – or better yet, reduce the amount of new senior debt required.  Developers could then be encouraged to target more apartments to very- and extremely-low income households at rents they could afford, as well as make more types of properties in need of preservation financially feasible.

Income Averaging

USDA should allow for income averaging in properties that are financed with Rural Development loans and the Low Income-Housing Tax Credit (LIHTC). Section 201 of the Cantwell-Hatch Act allows for income averaging in Housing Credit properties.  If this bill is enacted, Rural Development will need to modify some restrictions in order for owners/developers to take full advantage of the Act.  Housing Credit properties currently serve renters with incomes up to 60 percent of area median income (AMI), and rents are comparably restricted. While states are encouraged to give preference to developments that serve the lowest-income populations, it can be difficult to make such developments financially feasible, especially in rural areas with very-low median incomes, in economically depressed communities pursuing mixed-income revitalization, and in high-cost markets where it is difficult to target apartments to the lowest-income tenants without significant additional subsidy.

If enacted, this new provision would create a new test known as “income averaging,” that would allow 60 percent of AMI ceiling to apply to the average of all apartments in a property rather than to every individual Housing Credit apartment.  The maximum income to qualify for any unit would be limited to 80 percent of AMI, which is still considered low-income.  The higher rents that households with incomes above 60 percent AMI (up to the max of 80 percent  AMI) could afford have the potential to offset the lower rents that households below 40 percent or even 30 percent AMI could afford, allowing developments to maintain financial feasibility while providing a deeper level of affordability.

Furthermore, the diversification of rents within a given project would broaden the marketability of a project and provide more flexibility and responsiveness to local needs. As such, projects with tiered rents would be more attractive to Housing Credit investors, potentially bringing in more capital to rural developments.

However, Rural Development currently prohibits tiered rents (i.e., targeted rents based on varied income levels). This adversely impacts the affordability for some extremely-low income households and makes projects infeasible.

Contracts for Rental Assistance

Even before the current LIHTC market contraction began, investors have grown increasingly concerned that the federal government might fail to renew the subsidies promised in HUD’s project-based Section 8 contracts and USDA’s Section 521 Rental Assistance.  As a result, many LIHTC investors show preference to those projects that currently have 20 year subsidy contracts (i.e., 20 year HAP contracts).  Although the funding of such long-term contracts is still subject to annual appropriations, the capital market has a perceived confidence the government will honor existing contracts. Depending on the government for contract renewal or establishing new contracts is however a greater risk. As such, some investors demand that preservation projects with partial or short term contracts establish large, additional cash reserves to hedge this perceived subsidy risk. Because the price that LIHTC investors pay has fallen, establishing an extra Rental Assistance reserve has become even more difficult and makes it impossible to finance preservation projects that are otherwise perfectly sound.

If Rural Development went back to providing long-term 20 year Rental Assistance contracts, subject to annual appropriations, the capital market will view this favorably and be willing to pay a slightly higher equity pricing for the reduced risk.

Align Rural Development’s Underwriting Thresholds with the Private Lending Sector to encourage more private investment in USDA rental properties

Rural Development currently maintains several restrictive underwriting parameters that were originally implemented to reduce Agency risk when USDA was the only debt provider for the development of affordable rural housing projects.  However, these restrictions are inconsistent with the private industry, and in turn, artificially hinder the amount of private investment (debt and equity) brought into the preservation of those existing 515 projects.  While efforts to better align some of Rural Development’s fiscal thresholds in a potential Pilot with Freddie Mac are underway, expanding such provisions to all preservation transactions would certainly allow more projects to be preserved.

For example, USDA could allow new senior debt to mature ahead of subordinate 515 debt. Currently, RHS requires any senior debt to be co-terminus with their sub-debt (30 years), which adversely affects the interest rate for the borrower and in turn increases the amount of rent increases needed to support the new debt.  While this has been a requirement by USDA, it is not a regulatory or statutory requirement per the HB-3560.   USDA should allow a minimum of 16 or 18-year term (when LIHTC partner would exit) to secure lowest MBS rate, increasing the leveraging of new debt.

Rural Development could also allow underwritten pro forma rents in place at initial closing.  Most non-USDA loan products will not allow an immediate-delivery loan product if new rents are not in place at closing (costing properties anywhere from 0.50 percent-1.00 percent increased interest rate due to a forward component) which adversely affects rental assistance and feasibility.  This artificially reduces the amount of private debt a project can support, as well as reduces the options of various debt products.

USDA should defer to the lender or housing finance agency in determining annual deposit to replacement reserves (ADRR).  Most are using a 10-year (plus 2 years for I/O period) post rehab capital needs schedule compared to Rural Development’s 20-year schedule.  This will decrease the amount of funds required from annual CF, and in turn decrease rent needed to support new ADRR.  RHS could consider requiring an updated CNA ever 10 years to ensure sufficient funding reserved for future capital needs.

USDA should eliminate the artificial inflation of historical vacancy by 2 percent.  Most private lenders and investors will use a blend of historical performance and current budget to determine the underwritten vacancy factor.  A potential change to the performance is already captured in the pro forma trending of 2 percent.  By inflating the initial vacancy by another 2 percent (regardless of past performance), the potential new debt necessary to support a preservation transaction is artificially reduced and often renders a project infeasible that otherwise would be supportable.  Or, the rents are artificially inflated over what is needed in order to obtain the necessary income to support the needed debt stack.

Rural Development has historically managed its properties under a zero-based budget, in which the managing agent determines annually what the project will incur in expenses to operate the property.  And through that process, they then back into the amount of rent it will need to cover those expenses.  This method is effective in minimizing the amount of rent charged to the RA program and to the individual tenants who may not receive a monthly rent subsidy. However, this method of rent sizing is inconsistent with the way in which the private sector operates, and the way in which projects are evaluated when they are being underwritten by new debt and equity providers. As a result, there is a continued lack of interest in the debt and equity community to pursue Rural Development transactions.  Furthermore, this inconsistency with the market often results in equity pricing cuts from those capital partners that are willing to invest.

Asset Management Fee

As mentioned, the FY 2017 Omnibus (and House and Senate Agriculture Appropriations Bills for FY 2018) included a provision that allows for reimbursement of AMF of up to $7,500 per property. Chapter 4 of the Handbook, which covers Financial Management, has not been updated to reflect this change, and still limits AMF to up to $7,500 per owner (even where the owner manages multiple properties).[1]

Members of our Board have stated that state Rural Development offices have disapproved of budgets because the borrower included an AMF in each property. In at least one situation, a borrower, Coachella Valley Housing Coalition in California, was asked to pay back previously approved per-property AMFs for FY 2016-2017 for a wholly-owned farmworker housing project.

The Omnibus makes it clear that entities are eligible to be reimbursed an AMF per property. Rural Development should provide guidance to the National and State offices, and update the Handbook to reflect this change.

Multifamily Preservation and Revitalization Program (MPR)

One of the primary tools currently available to USDA to address the issues facing its multifamily housing portfolio is the Multifamily Housing Preservation and Revitalization Demonstration program (MPR). Established by Congress in 2006 in response to findings from a 2004 USDA comprehensive report on the portfolio, the MPR program authorizes USDA to employ a variety of financing options in order to preserve the Section 515 and Farmworker housing properties in its portfolio. By leveraging other federal and state resources, including grants, private debt guaranteed under the Section 538 program, the Low-Income Housing Tax Credit (LIHTC), and other sources, the MPR is able to recapitalize properties by restructuring Section 515 and 514 loans in order to maintain the properties’ affordable use. While the MPR remains a demonstration program subject to annual appropriations, it has successfully preserved the affordability of many properties in the USDA portfolio; between 2006 and 2014, an estimated 26,459 units in 1,218 properties were financed through MPR.

USDA should remove the pilot designation from the MPR and authorize RHS to defer existing Rural Development debt. Organizations like Southwest Minnesota Housing Partnership (SMHP) are currently stalled in their rehabilitation process because Rural Development over allocated MPR for 2017 and so SMHP has to wait until 2018 to acquire and rehabilitate a portfolio of 11 515 properties, even though the organization has soft funding from the state and were told by Rural Development National that MPR would be available.

Clarify Rules for Use of LIHTC with Rural Development Funds

The Low Income Housing Tax Credit is an essential source of funding for affordable multifamily housing, and USDA should update its policies and procedures to facilitate the use of LIHTC with both Section 515 and Section 514 financing.

Rural Development should provide guidance on if/when/how LIHTC can be used with new construction and/or preserving farm labor housing and multifamily housing. If the use of both financing sources is problematic, Rural Development should provide guidance so borrowers can plan to avoid or address problematic situations.  Specifically, USDA should create a best practices playbook for use of Section 514 and Section 515 with LIHTC.

Currently the use of LIHTC and Section 514 is difficult. For example, Motivation, Education and Training, Inc. (MET) is doing a $28 million tax credit deal with $6 million in Section 514.  Without LIHTC, MET could only build 1/5th of the units.  If Rural Development would let MET, and other borrowers, do a proportion of farm worker units equal to the percentage of funding from Section 514, which is supported in both current regulatory and handbook language, borrowers like MET could build developments that respond to the needs of rural communities, rather than segregating low-income farmworkers in farmworker-only developments.

Other examples include Community Housing Partners, which had a horrific experience in last year with trying to use LIHTC and Section 515 in Virginia. Because USDA was so slow in processing, Community Housing Partners had to return the credits. As a result of the Rural Development staff, timing issues, and lack of relevant market experience and knowledge, the organization is getting more reluctant to go after Section 515.

Financing Services to Tenants

Many USDA multifamily properties also offer services to the tenants. Notably, however, all of the services provided are funded through the borrower’s own cost or through HUD. Currently, rent funds can only be used to pay for “bricks, sticks, and operating costs.”  Because of this, the amount of services that borrowers can provide to tenants in their properties is limited to having another funding source for those services. Even so, many borrowers already link nutrition and other programs to their sites. The historical problem with Rural Development on this issue has been their insistence that any costs associated with these services cannot be paid through the project or RA.

Rural Development should reconsider the funding of resident service programs out of the operating budget for Section 515 and Section 514/516 developments.  Rural Development made the expense unallowable, based on the interpretation that RA funds were for housing only subsidies and not for services. This change would benefit the residents of USDA multifamily housing properties. For example, Laconia Area Community Land Trust (LACLT) in New Hampshire has found that “providing resident services is difficult when USDA does not allow us to build that into our property budgets. The properties would get a higher level of service if we could do that, which would benefit residents. It has one resident services person for 341 apartments and no one wants to fund this necessary work.”

[1] (p. 4-21) available at: