Rural Spotlight: What's at stake for these affordable housing communities across America.

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Author: Barbara Jaco
Date: July-August 2021
From: Journal of Property Management(Vol. 86, Issue 4)
Publisher: Institute of Real Estate Management
Document Type: Article
Length: 2,394 words
Lexile Measure: 1330L

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Social gatherings can be awkward, even for extroverts. When I meet someone new, the topic of what we each do for a living is the question that follows the formal introduction. When asked, I respond with a large enthusiastic smile: "I manage affordable housing in rural areas across the Southeast!" Next comes the predictable pregnant pause, the head tilt, and the forced smile.

I am familiar with the preconceived notions that people have when they picture affordable housing. While they usually envision the distinctly urban housing projects that for many years represented the public's idea of what public affordable housing looked like, I am proud to educate them on the wonders of rural affordable housing and the many unique characteristics of these homes. Most of my adult life has been spent developing and managing these communities, and I am passionate about the government programs that make them possible.

Our properties are special and home to amazing people with unique life stories. My career has been dedicated to the management and ownership of such affordable communities, with a heavy emphasis on one housing program: Farmers Home Administration Section 515, now known as the USDA Office of Rural Development (RD). RD 515 is among the few rental housing production programs specific to rural communities. To understand America's affordable rural housing communities in 2021, we first must look at their history.

Deep roots

In 1946, following the effects of The Great Depression, the Farmers Home Administration (FmHA) was approved by Congress as a financing tool designed to reestablish self-sufficiency The FmHA was renamed several times before becoming USDA Rural Development (RD). In the 1960s, the War on Poverty brought about new ideas on how to provide housing for the poor. This included moving away from government-owned housing and toward public-private partnership arrangements in which the private sector would build and manage affordable housing, and in the process, crucially, benefit from federal tax incentives.

Section 515 Rural Rental Housing was established in 1963 and has financed nearly 28,000 rental properties consisting of over 530,000 affordable units. Also included under RD's financing umbrella are general water and sewer projects as well as housing for non-farmers in rural areas.

Fast forward a bit: What happened to those mortgages made in the 1960s with their expiring terms? An increase in rents and a displacement of residents. In the 1980s, owners of Section 515 loans started prepaying their mortgages, converted their communities to market-rate housing, and were no longer restricted to the RD rules and regulations. By the 1990s and into the 2000s, properties were clearly showing their age and needed funds for renovation.

Realizing the affordable housing crisis was only getting worse, federal agencies including RD contended with owners to stop mortgage payoffs. Owners fought back through filing lawsuits. While these owners did not have their prepayment rights restored, a 9-0 ruling by the U.S. Supreme Court stated that Congress had abrogated the contracts that had been signed by the government and owners (Franconia Associates v. United...

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Gale Document Number: GALE|A669130206