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Nearly 450,000 elderly and other households depend on federal assistance to live in multifamily rural rental properties that were constructed with subsidized federal loans. Because the properties were built in areas when and where privately financed housing units, affordable by lower income households, were not considered economically feasible, the U.S. Department of Agriculture's Rural Housing Service (RHS) has made direct loans available to developers of affordable multifamily housing under its section 515 program. RHS has funded many more new properties than the portfolio has lost through prepayment. The number of new properties added to the portfolio exceeded the number that left the program after prepayment in every year except 2001. If the statutory requirement restricting prepayment for loans made before December 1989, were changed to allow prepayment without restrictions after 20 years from the date of the loan, prepayment could be an option for the owners of 3,900 of all section 515 properties over the next eight years. RHS field staff routinely inspect properties, complete and retain detailed descriptions of noted deficiencies, and transmit the summaries of the deficiencies identified to a central database. Only current deficiencies are identified, however, so the data are of only limited value for determining the cost of the long-term rehabilitation needs of individual properties.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Agriculture To better ensure that limited funds are being spent as cost effectively as possible, the Secretary of Agriculture should direct the RHS Administrator to undertake a comprehensive assessment of the section 515 portfolio's long-term capital and rehabilitation needs. Further, the results of the assessment should be used to set priorities for the portfolio's immediate rehabilitation needs and to develop an estimate for Congress on the amount and types of funding needed to deal with the portfolio's long-term rehabilitation needs.
Closed - Implemented
The Senate Appropriations Committee included $1 million in its 2003 budget to conduct a capital needs assessment as outlined in the GAO report (GAO-02-397). USDA told Senate Appropriations in 2003 that it had "accepted the Committee's recommendation to conduct a capital needs assessment of the multifamily housing portfolio as outlined in the GAO report, GAO-02-297." In November 2004 RHS released its Comprehensive Property Assessment Report, which analyzes and develops solutions for the increasing rehabilitation and recapitalization needs of the aging section 515 portfolio. The report lays out detailed cost projections for the section 515 portfolio categorized by 5 levels of need through fiscal year 2012. Based on the study, the Administration is evaluating a three phase strategy to revitalize the aging portfolio. The Administration proposed $214 million for the initial stage to fund a tenant voucher program to protect tenants at immediate risk of losing their housing and $27 million for direct loans to meet immediate revitalization needs in the fiscal year 2006 budget. In 2006 the administration proposed legislation on its voucher program proposal, which was introduced as H.R. 5039--the Saving America's Rural Housing Act on 2006. The House Financial Services subcommittee on Housing and Community Opportunity held a hearing on the bill on April 25, 2006 and marked up the bill on May 23, 2006.

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