Rural Rental Housing:

Cost Information on FmHA's Section 515 Program and Other Housing Options

RCED-87-96: Published: Aug 18, 1987. Publicly Released: Aug 18, 1987.

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In response to a congressional request, GAO reviewed the Farmers Home Administration (FmHA) section 515 rural rental housing program to: (1) identify whom the program serves and where it provides housing; (2) assess ways to reduce program costs; (3) compare program costs with costs of other federal housing subsidy options; and (4) identify state programs that provide housing assistance in rural areas.

GAO noted that: (1) the section 515 program subsidizes housing loans to developers who are otherwise unable to obtain credit terms and conditions that would permit them to charge affordable rents; (2) the FmHA section 502 program provides loans to low-income rural households to purchase single-family homes; and (3) housing voucher programs provide cash subsidies to urban and rural households to help them rent adequate housing. GAO found that: (1) the section 515 program is benefiting mostly very-low-income households in rural areas, almost half of which pay reduced rents after moving into section 515 apartments; (2) measures to reduce section 515 program costs include reducing the size of apartments, eliminating such features as balconies, sliding glass doors, and excessive paving, and increasing the number of units constructed per acre; (3) in general, the section 515 program is the least expensive way to serve very-low-income families, although vouchers become the least expensive option as household incomes rise; and (4) only five states have programs that specifically target low-income households in rural areas.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: FmHA Rural Rental Housing Regulations were published on January 16, 1988 and effective on February 25, 1988. The regulations contain a cost-containment section consistent with this recommendation.

    Recommendation: The Secretary of Agriculture should direct the Administrator, FmHA, to finalize and implement regulations for reducing section 515 project costs. These regulations should include: (1) reducing housing size; (2) using less costly apartment styles and building materials; (3) eliminating extra features, such as sliding doors, balconies, patios, community rooms, unnecessary paving, and excessive landscaping; (4) reusing building designs; and (5) increasing density.

    Agency Affected: Department of Agriculture


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