HAC: Connecting The Dots - Full Report

Housing Assistance Council
CONNECTING THE DOTS:

A Location Analysis
of USDA’s Section 515
Rental Housing
and Other Federally
Subsidized Rental Properties in
Rural America
$10.00
May 2008
Housing Assistance Council

1025 Vermont Avenue, N.W.
Suite 606
Washington, DC 20005
202-842-8600 (voice)
202-347-3441 (fax)
hac@ruralhome.org
www.ruralhome.org
ISBN 978-1-58064-158-6
This report was prepared by Lance George, Leslie R. Strauss, and Mark Kudlowitz of the Housing
Assistance Council (HAC). The work that provided the basis for this publication was supported
by funding from the John D. and Catherine T. MacArthur Foundation. HAC is solely responsible
for the accuracy of the statements and interpretations contained in this publication and such
interpretations do not necessarily reflect the views of the MacArthur Foundation.
HAC greatly appreciates the assistance of Keith Wardrip of the National Low Income Housing
Coalition and Matt Foulkes of the University of Missouri for their valuable expertise and
comments on preliminary drafts of this report.
HAC, founded in 1971, is a nonprofit corporation that supports the development of rural low-
income housing nationwide. HAC provides technical housing services, loans from a revolving
fund, housing program and policy assistance, research and demonstration projects, and training
and information services. HAC is an equal opportunity lender.
TABLE OF CONTENTS
Executive Summary ....................................................................................................................... 1

Findings: Counties with High Proportions of Section 515 Properties................................. 1
Findings: Proximity to Other Subsidized Properties........................................................... 2
Recommendations: Connecting the Dots ........................................................................... 3
Introduction .................................................................................................................................. 5
Rental Housing in Rural America: A Backdrop .............................................................................. 6

Rural Rental Housing Characteristics................................................................................. 6
Housing Problems Among Rural Renters ........................................................................... 7
USDA’s Section 515 Rental Housing Program ............................................................................... 8

The Section 515 Prepayment Dilemma.............................................................................. 9
The Geography of Section 515 Rental Housing ............................................................... 10
Section 515 Prepayment and Minorities .......................................................................... 11
Analysis ....................................................................................................................................... 12
Methodology.................................................................................................................... 12
What’s Not Included............................................................................................. 13
A Cautionary Note About Cross-Subsidy .............................................................. 15
What is Rural? ..................................................................................................... 16
County Level Analysis ...................................................................................................... 16
Metropolitan Status ............................................................................................. 17
Population Decline............................................................................................... 20
Urbanization ........................................................................................................ 22
Minority Populations............................................................................................ 24
Housing Stress ..................................................................................................... 26
Distance Analysis ............................................................................................................. 27
How It Works....................................................................................................... 30
Discussion.................................................................................................................................... 34
Findings: Counties with High Proportions of Section 515 Properties............................... 34
Nonmetro Counties, Particularly OCBSA Counties............................................... 34
Urbanizing Counties ............................................................................................ 35
Housing Stress Counties....................................................................................... 35
Native American and Other Minority Counties .................................................... 36
Findings: Proximity to Other Subsidized Properties......................................................... 36
Recommendations: Connecting the Dots ......................................................................... 37
Endnotes to Text ......................................................................................................................... 40
Appendix A: Section 515 Rental Housing Properties in Proximity to Selected Federally

Subsidized Housing Properties............................................................................. 43
Public Housing................................................................................................................. 44
HUD Project Based Section 8 Rental Assistance............................................................... 46
Low Income Housing Tax Credit...................................................................................... 48
iii
HUD Section 202-811 Elderly and Supportive Housing ................................................... 50
HUD Section 236 Loans ................................................................................................... 52
Section 538 Guaranteed Rural Rental Housing Program ................................................. 54
Endnotes to Appendix A .................................................................................................. 56
Appendix B: Selected Data Tables ............................................................................................... 57

Table 1. Section 515 Properties and Units by State ........................................................ 58
Table 2. Section 515 Rental Housing Program and Prepayment Status .......................... 59
Appendix C: Selected State Level Maps ....................................................................................... 60

USDA Section 515 Properties and Units by State............................................................. 61
Section 515 Prepayment Eligibility Status by State.......................................................... 62
Section 515 Rental Housing Loan Prepayments 2001-2006............................................. 63
Subsidized Rental Units by Program and State ................................................................ 64
Figures
1. Housing Tenure by Residence.......................................................................................... 6
2. Housing Affordability by Tenure...................................................................................... 7
3. Section 515 Rural Rental Housing Program, FY 1963-FY 2006 ....................................... 8
4. USDA Section 515 Prepayment Status, Properties ........................................................... 9
5. USDA Section 515 Rental Housing Units ....................................................................... 10
6. USDA Section 515 Properties......................................................................................... 11
7. Location Analysis: Research Model ................................................................................ 14
8. Cross Subsidy, USDA Section 515 and LIHTC................................................................ 15
9. Section 515 Units as a Percent of All Subsidized Units by Metropolitan Status ............. 18
10. Section 515 Units as a Percent of all Subsidized Rental Units........................................ 19
11. Counties Where Section 515 Units Make up More than Half of All
Subsidized Rental Units ................................................................................................ 20
12. Population Loss Counties ............................................................................................... 21
13. Population Loss Counties: Section 515 Units as a Percent of All
14. Urbanizing Counties ...................................................................................................... 24
15. Urbanizing Counties: Section 515 Units as a Percent of All
16. Rural Minority Counties................................................................................................. 25
17. Section 515 Rental Units in Rural Minority Counties..................................................... 26
18. Housing Stress Counties ................................................................................................ 27
19. Housing Stress Counties: Section 515 Units as a Percent of All
20. Average Distance to Nearest Subsidized Property.......................................................... 29
21. Distance Buffers, USDA Section 515 Rural Rental Properties ........................................ 30
22. USDA Section 515 Rental Properties in Proximity to Other Subsidized
Housing Properties ....................................................................................................... 32
23. Percent of Section 515 Properties within 10 Miles of Another Subsidized Property....... 33
iv
EXECUTIVE SUMMARY
The U.S. Department of Agriculture’s Section 515 program provides more than 400,000 decent,
affordable rental homes for rural Americans with low incomes, but many of these rentals are now
at risk. Seeking to inform the debate on preservation of these units, this Housing Assistance
Council report examines where Section 515 developments are located with respect to other
federally subsidized rentals and reviews their role in their rural communities’ rental housing
networks. It discusses the policy implications of HAC’s research findings and makes
recommendations.
Rural renters experience some of the most significant housing problems in the United States, and
USDA’s Section 515 Rural Rental Housing program has been a critical tool in the effort to meet
the housing needs of the poorest of the rural poor. Since 1963, Section 515 has funded the
production of more than half a million affordable rental homes for low-income rural residents.
Section 515 tenants’ annual income averaged $9,785 in January 2006, the most recent data
available.
Today, however, a significant portion of the properties in the Section 515 rental housing
portfolio are at risk. Physical deterioration, or owners’ desires to remove the restrictions imposed
by their Section 515 mortgages, threaten the continued availability of these apartments as
decent, affordable homes for low-income people. At the same time, more than half of all rural
renters live in poor quality housing or spend more than the standard 30 percent of income on
rent.
Some federal policy responses to current rural housing preservation concerns rely at least in part
on the availability of other decent, affordable rental housing nearby. HAC undertook a
geospatial analysis of federally subsidized housing properties to determine the extent to which
USDA’s Section 515 rural rental housing units co-exist with other federally subsidized units, as
well as to understand their role in their rural communities.
Findings: Counties with High Proportions of Section 515 Properties
HAC’s analysis demonstrates that Section 515 units comprise particularly high proportions of the
subsidized housing stock in four specific types of counties:
o Nonmetropolitan counties, particularly the more remote counties that are Outside Core
Based Statistical Areas. In areas outside metropolitan counties, Section 515 properties
comprise approximately one-half of subsidized rental properties and over 36 percent of
subsidized rental units. The 5,878 Section 515 properties in the more remote Outside
Core Based Statistical Areas (OCSBA) counties account for 46 percent of the subsidized
rental units there.
o Urbanizing counties. The 40,000 Section 515 units in urbanizing counties make up 34
percent of the subsidized housing stock there, far higher than the 9 percent proportion in
metropolitan counties overall. Because these counties’ populations are growing and their
economies are developing, demand for housing there is increasing. Thus rents are rising,
giving owners of Section 515 developments a strong economic incentive to prepay their
restricted-use mortgages in order to charge market-rate rents, while a significant loss of
Housing Assistance Council 1

Section 515 units in these urbanizing areas could leave a substantial void in the
subsidized and affordable rental markets.
o Nonmetropolitan housing stress counties. In nonmetropolitan housing stress counties,
where at least one-third of all households experience housing problems, Section 515
accounts for 38 percent of federally subsidized units. Almost half (49 percent) of the
46,137 Section 515 units in these places are eligible for prepayment. Housing stress
counties’ economies may be either booming or stagnant, but all of these counties, by
definition, suffer a shortage of decent, affordable housing. Therefore tenants from a
Section 515 property in a housing stress county are very unlikely to be able to find
alternative rentals nearby.
o Counties with proportionately high minority populations. Section 515 accounts for about
one in every five subsidized rentals in counties that had a specific racial or ethnic
minority population of one-third or more in 1980, 1990, and 2000. In Native American
counties, Section 515 units comprise fully 44 percent of subsidized rentals. Given these
high proportions, particularly in Native American counties, these places deserve special
attention. Prepayment and preservation of Section 515 rental housing are critical issues
for minority households and in rural minority communities. In the prepayment process,
current RD regulations mandate an assessment of the potential impact of prepayment on
housing opportunities for minorities.
Findings: Proximity to Other Subsidized Properties
The Section 515 program has an extremely large reach across a vast and varied land mass.
Section 515 projects are geographically dispersed and can be found in nearly 90 percent of U.S.
counties.
Fewer than half of all Section 515 properties are very close to other federally subsidized rental
properties (within one mile). More than one-fifth are relatively far from other subsidized
properties (more than 10 miles). Nearly half (45 percent) of these more isolated developments
are located in the Midwest, and nearly the same proportion are located in OCBSA counties, the
places farthest from metropolitan centers.
Section 515 properties are more likely to be close to some types of other subsidized properties
than to others:
⌂ Over half of all Section 515 properties are within 10 miles of project-based Section 8 or
public housing properties.
⌂ Similarly, over 44 percent of Section 515 properties are within 10 miles of Low Income
Housing Tax Credit properties.
⌂ Only 30 percent of Section 515 properties are within 10 miles of U.S. Department of
Housing and Urban Development (HUD) Section 202-811 properties, which provide
rentals specifically for elderly and disabled people, and just 17 percent are that close to
HUD Section 236 properties. Only half of counties with a Section 515 property also have
a Section 202 or 811 development.
2 Connecting the Dots

These findings are particularly relevant for the approximately 60 percent of Section 515 residents
who are elderly or disabled. Federally subsidized alternative housing is scarce in many of their
communities, so a loss of Section 515 properties could have profound impacts on their housing
choices.
Recommendations: Connecting the Dots
HAC’s analysis demonstrates that geographic proximity and distance are important factors
relating to the supply of subsidized housing in rural areas, and identifies certain types of places
in which, and certain populations for whom, there may be few choices besides Section 515
properties in a search for decent, affordable housing. The analysis cannot support broad
prescriptions for prepayment and preservation policy: one cannot say, for example, that
prepayment should be prohibited for Section 515 properties in remote counties, or that
prepayment should be permitted for Section 515 properties that are close to other federally
subsidized properties. Instead, the need for the units in any given location must be determined
individually.
This analysis does point to a need for reconsidering some assumptions made about prepayment
and preservation to date.
A Comprehensive Property Assessment conducted for USDA recommended that properties for
which prepayment is economically viable, such as many of those in urbanizing areas, be allowed
to prepay and that their current tenants be protected. Tenant protection provided by Congress
and USDA has been in the form of vouchers through which USDA makes rent payments to
landlords to supplement the amounts paid by tenants. The effectiveness of vouchers for
individual households is not yet known; USDA’s voucher program is relatively new, having begun
operation in fiscal year 2006, and USDA has not released data on the vouchers it has provided or
the characteristics of the tenants affected.
The long-term impact of providing vouchers to specific tenant households is also unknown.
Under USDA’s current voucher program, if a family leaves its community, so does its voucher.
Over time, therefore, if nothing else changes, switching from Section 515 apartments to tenant
vouchers means that the number of assisted households in many communities will decrease,
without regard to changes in the number of remaining households who need subsidies in order
to find decent, affordable places to live.
Policy must also take into account the significant and growing rental housing needs in rural
America. There are still millions of rural renters with housing problems related to cost, quality,
and crowding. Section 515 rental housing is an important resource to help address these needs.
HAC recommends:
o USDA should continue to take into account the availability of alternate

affordable housing in a community, and the impact of prepayment on
minorities, when deciding whether to accept a requested prepayment.
Information about the analyses conducted for each property should be available to

tenants, their representatives, and the public. Tenants should have a right to appeal
prepayment approvals based on these analyses.
o Analyses of the availability of alternative housing should consider tenant

demographics. For example, when prepayment of a Section 515 loan will affect
elderly tenants with very low incomes, a nearby tax credit project for families with low
incomes probably does not provide suitable alternative housing.
o Research should be conducted to identify and study the actual properties

that would be affected by the Comprehensive Property Assessment’s
recommendation to allow prepayment for certain properties, estimated to comprise
10 percent of the Section 515 portfolio. HAC’s analysis indicates that at least half of
these properties may be in urbanizing counties with “hot” rental markets and few
alternative housing choices for their tenants, and thus points to a need to preserve or
replace these units for future low-income renters, rather than allowing their owners to
prepay and protecting only the current tenants.
o Data should be collected regarding the use of USDA vouchers and the
locations and housing conditions of former voucher holders. Because USDA’s
voucher program is new, too little is known about the long-term efficacy of these
vouchers to be sure that they are a good solution for protecting current tenants. The
existence of other people who need help now or in the future to obtain decent, affordable
housing must be taken into account as well.
o Research should be conducted to determine how prepaid properties and

their tenants fare after prepayment.
o Vouchers should remain available in the communities where they were first
issued if they are needed there, even after the specific tenants to whom they were
first issued no longer need them.
o Tenants in prepaying Section 515 properties should have the same

protections as Section 8 voucher tenants in prepaying HUD-financed
properties.
o Data collected by USDA should be readily available to the public.
o Research should be conducted on the extent and characteristics of

unsubsidized affordable rental properties.

INTRODUCTION
Since 1963, the Section 515 Rural Rental Housing program of the U.S. Department of Agriculture
(USDA) has funded the production of more than half a million affordable rental homes for low-
income rural Americans. Section 515 tenants include seniors and people with disabilities living
on fixed incomes, as well as families struggling to make ends meet on minimum wages and
others with scant resources. Their annual income averaged $9,785 in January 2006, the most
recent data available.1
Today, a significant portion of the properties in the Section 515 rental housing portfolio are at
risk. Physical deterioration, or owners’ desires to remove the restrictions imposed by their
Section 515 mortgages, threaten the continued availability of these apartments as decent,
affordable homes for low-income people.
Among the federal policy responses to these threats are two related to the availability of other
decent, affordable rental housing nearby. First, when a property owner requests USDA
permission to prepay a Section 515 mortgage and thus to remove USDA’s affordability
requirements, USDA considers (along with other factors) the availability of other affordable
housing in the area and the impact prepayment would have on housing opportunities for
minorities. Second, when USDA approves a prepayment it provides rental vouchers to the
property’s tenants, with the expectation that they will find landlords who will accept the
vouchers – either the owners of the former Section 515 properties, or others.
No data are available, however, to evaluate these determinations and assumptions, and no such
information is available about Section 515 properties in general. Are alternate decent, affordable
apartments usually available for tenants displaced from Section 515 developments? The answer
to this question would help determine whether current approaches to preservation and
prepayment issues are appropriate, or whether changes should be made.
As a first step towards finding an answer, the Housing Assistance Council undertook a geospatial
analysis to determine where Section 515 units are located with respect to other federally
subsidized units, and to understand their role in their rural communities’ rental housing
networks. This study provides a comprehensive look at the location, composition, and proximity
of federally subsidized rental housing properties and units in rural communities, with a special
focus on Section 515. Contextual factors such as population decline, rurality and urbanization,
minority populations, and local housing characteristics are also incorporated into the analysis.
Ultimately, this research seeks to inform the larger debate on the role, availability, and
preservation of affordable rental housing in rural America.

RENTAL HOUSING IN RURAL AMERICA: A BACKDROP
Rural Rental Housing Characteristics
In a nation that places a high value on homeownership and has committed substantial resources
to increasing ownership opportunities, the needs of renters are often overlooked. While
homeownership rates are higher in rural American than in cities, renting provides a housing
alternative for the millions of rural families unable to purchase or uninterested in owning a
home. More than 6.3 million housing units, or 24 percent of the total occupied rural housing
stock, are renter-occupied. Geographically, rural rental housing rates are consistent across much
of the United States, as only four states – Alaska, California, Hawaii, and Rhode Island – have
rural rental rates above the national average.2
Figure 1. Housing Tenure by Residence
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Metropolitan Nonmetropolitan
Tenure
Homeowners Renters
Rural renters generally have much lower incomes than rural homeowners: rural renters’ median
household income is approximately $21,000 compared to $43,000 for rural owners. Poverty
levels among rural renters are also much higher. Over 20 percent of rural renters have incomes
below the poverty level compared to less than 10 percent of rural owners.3
As is true in the nation as a whole, in rural areas a greater percentage of minorities than whites
are renters. Approximately one-fifth of rural white-headed households rent their homes
compared to 39 percent of rural minority-headed households. Nevertheless, rural minorities are
much more likely to be homeowners than their urban minority counterparts.
Rural renters are most likely to live in single-family homes or in small multifamily structures.
Nearly 40 percent occupy single-family homes – twice the rate of metropolitan area renters.
About the same proportion (42 percent) of rural renters live in multifamily structures of two or
more apartments. Manufactured housing is much more prevalent in rural areas than urban
locales and over 15 percent of rural renter-occupied units are manufactured homes. Rural

renters also live in older housing than owners; 34 percent of rural renter-occupied units were
built before 1960.
Housing Problems among Rural Renters
Rural rental households experience some of the most significant housing problems in the United
States. Renter households in rural areas are twice as likely to live in substandard housing as
their owner counterparts. Approximately 11 percent of rural renters live in either moderately or
severely inadequate housing, compared to 5 percent of rural owners. For rural minority renters,
the substandard housing rate increases to 16 percent.
Although housing costs are generally lower in rural areas than in cities, many rural households,
particularly renters, find it difficult to meet these expenses. Approximately 36 percent of rural
renter households pay more than 30 percent of their monthly income for housing costs and are
considered cost-burdened, compared to 20 percent for owners. Most cost-burdened households
have low incomes, and a disproportionate number are renters. Thirty-five percent of cost-
burdened rural households are renters, while renters comprise only one-quarter of all rural
households.
Figure 2. Housing Affordability by Tenure
40.0%
35.0%
30.0%
16.3%
Percent Cost Burdened
25.0%
20.0%
15.0% 12.1%
10.0% 20.1%
5.0% 8.8%
0.0%
Owners Renters
Severe Cost Burden (50%+ of income)
Moderate Cost Burden (30%-50% of income)
Unfortunately, housing cost, quality, and crowding concerns are not mutually exclusive – many
rural households experience multiple housing problems. Not surprisingly, rural renters are also
more prevalent among households with multiple problems. Over half of the 662,000 rural
households with multiple housing problems are renters.
Given the range of housing issues facing rural renters, federal programs have been a critical
resource in providing needed support to develop affordable rental units and subsidize low-
income renter households.

USDA’s SECTION 515 RENTAL HOUSING PROGRAM
USDA’s Section 515 Rural Rental Housing program has been the mainstay of the agency’s efforts
to serve the poorest of the rural poor for the past 45 years. The Section 515 program provides
mortgage loans to develop rental housing for very low-, low- and moderate-income households.
Section 515 is administered by USDA Rural Development (RD), successor to the former Farmers
Home Administration.
Since the program’s inception in 1963, Section 515 has produced thousands of housing
developments containing more than half a million rental homes that are affordable for low-
income rural residents.4 The current Section 515 portfolio contains nearly 16,000 projects
providing affordable homes for over 445,000 rural households. Most Section 515 residents have
very low incomes; their average annual income is $9,785. Additionally, nearly 60 percent of
Section 515 residents are elderly or have disabilities.5
Many federal rural housing programs have gone through dramatic transformations in recent
years due to budget cuts and program alterations. A prime example has been the reductions in
the Section 515 rural rental program. In Federal Fiscal Year (FY) 1994 the program funded the
development of 11,542 units of affordable rental housing. In contrast, only 486 units were
developed under the program in FY 2006, reflecting a reduction of more than 90 percent from
mid-1990s production levels.6
Figure 3. Section 515 Rural Rental Housing Program,

FY 1963 - FY 2006
45000
40000
35000
30000
Units Built
25000
20000
15000
10000
5000
0
63
66
69
72
75
78
81
84
87
90
93
96
99
02
05
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
Year

The Section 515 Prepayment Dilemma
A significant portion of the projects in the Section 515 Rural Rental Housing portfolio are at
risk of being lost as low-income housing. Under current law, owners of projects that received
loans prior to 1989 can request prepayment of the loan balances and convert the projects to
market-rate housing, albeit with some restrictions designed to encourage affordable housing
preservation. Owners of projects that received loans prior to 1979 can generally request
prepayment of a Section 515 loan at any time. Section 515 mortgages made after December
15, 1989 cannot be prepaid.
By 2007, Section 515 owners have prepaid the loans on over 50,000 affordable homes,
removing the mortgage provisions requiring them to house low-income residents. Many more
loans are likely to be prepaid over the next several years. As of 2007, approximately 7,372
Section 515 projects (encompassing over 195,000 units) are eligible to prepay. Another 2,008
Section 515 properties built before 1989 will ultimately be eligible to prepay, but “restrictive
use clauses” require them to remain affordable for low-income tenants for specified time
periods. Overall, 46 percent of all properties with active Section 515 mortgages are eligible to
prepay now and a total of 60 percent will be in the near future.
While some developments will remain affordable for low-income tenants after prepayment,
others will not. Neither USDA nor any other entity collects data on properties that leave the
Section 515 program or on their tenants.
Figure 4. USDA Section 515 Prepayment Status,

Properties
Pre 1989 Loan -
Current
Restrictive Use
Clause, 12.6%
Post 1989 Loan -

Not Eligible to
Prepay, 41.3%
Pre 1989 Loan -

Eligible to Prepay,
46.1%
Post 1989 Loan - Not Eligible to Prepay
Pre 1989 Loan - Eligible to Prepay
Pre 1989 Loan - Current Restrictive Use Clause

The Geography of Section 515 Rental Housing
USDA Section 515 properties have a broad reach across the United States. Every state, as well as
Puerto Rico, the U.S. Virgin Islands, and the West Pacific territories, has at least one Section 515
property. Nearly 2,800 counties (89 percent) across the United States have Section 515
properties located within their boundaries.I Around 12 percent of counties have only one
Section 515 project and approximately half the counties with a Section 515 property have four or
fewer projects. Forty percent have between five and ten Section 515 projects. Approximately 11
percent have 10 or more Section 515 projects.
Regionally, Section 515 properties are most prevalent in the Southern and Midwestern United
States, which are also among the most rural regions in the nation. Over 38 percent of Section
515 projects are located in the Southeast. Another 38 percent of properties are located in the
Midwest. However, 46 percent of all units are in the South and just 30 percent of Section 515
units are in the Midwest, indicating that the Midwestern projects are generally smaller than those
in the South. The Northeast and Western portions of the United States have substantially fewer
Section 515 properties than the South and Midwest.
Figure 5.
USDA Section 515 Rental Housing Units
Legend
Counties
Section 515 Units
2.00 - 101.00
101.01 - 215.00
215.01 - 387.00
387.01 - 751.00
751.01 - 2137.00
No Section 515 Properties
I
Approximately 126 Section 515 rental projects are located outside the United States in Puerto Rico, the U.S. Virgin Islands, and
West Pacific Territories.

Figure 6.
USDA Section 515 Properties
Legend
Section 515 Property
Section 515 Prepayment and Minorities
Recognizing that prepayment and preservation of Section 515 rental housing are critical issues
for minority households and in rural minority communities, the statutory restrictions on
prepayment require USDA and property owners to take into account the impact on minorities.7 If
an owner applies for permission to prepay a Section 515 mortgage and rejects incentives offered
by USDA to keep the property in the program, USDA must evaluate the impact of the prepayment
on housing opportunities for minorities and the adequacy of the supply of other affordable
housing in the community. If prepayment would adversely impact housing opportunities for
minorities then, regardless of the existence of other affordable housing in the community, the
owner must offer the property for sale to a nonprofit organization or public agency for 180 days.
The mortgage can be prepaid only if no feasible offer is received within 180 days or if a potential
purchaser cannot complete the purchase within 24 months.
It is possible, therefore, for a prepayment to occur despite a negative impact on minorities. In

such a situation, tenants – like tenants of any prepaying property – are eligible for USDA
vouchers (unless they already have HUD Housing Choice Vouchers), which can be used to rent at
the prepaying property or another eligible development.8

ANALYSIS
Methodology
The study undertakes a location analysis of federally subsidized housing properties in rural
America. Data on federally assisted housing are used to illustrate the location and scope of
subsidized rental properties across rural areas. The analysis also helps determine the extent to
which USDA’s Section 515 rural rental housing units co-exist with other federally subsidized
programs, as well as understanding their role in a rural community’s rental housing network.
The report investigates the geographic interplay between Section 515 properties and other
federally subsidized properties through a two-tiered analysis from the 1) county and 2) distance-
specific perspectives. The county level analysis provides the ratio and composition of subsidized
rental housing with an emphasis on various contextual and demographic factors particularly
salient to the provision of affordable rural rental housing. For greater depth and detail, this is
followed by a distance-specific analysis of Section 515 and other subsidized rental properties.
Both levels of analysis also focus on the issue of prepayment of Section 515 projects in relation to
geographic location.
The federally subsidized housing programs incorporated into the geographic analysis include:I
⌂ USDA Section 515 Rural Rental Housing. USDA Rural Development’s primary rental
housing program, Section 515 is targeted to rural areas and currently encompasses
15,988 properties with 445,681 housing units. The most recent available data show that
tenant households’ annual incomes averaged $9,785 as of January 2006.9
⌂ HUD Public Housing. The public housing program administered by the U.S. Department of
Housing and Urban Development (HUD) is one of the oldest and largest subsidized rental
housing programs in the United States. Public housing was created in 1937 and currently
encompasses over 1.2 million housing units located within 14,000 public housing
properties operated by 3,050 public housing authorities.10 The average household income
for public housing tenants was $10,000 in 2000.11
⌂ HUD Project Based Section 8 Rental Assistance. Project Based Section 8 properties are
privately owned, multifamily developments that receive federal subsidy through a
mortgage and/or rental assistance. Over 1 million households live in homes with Section
8 project-based assistance, and more than two-thirds of these housing units are occupied
by elderly or disabled residents.12
⌂ Low Income Housing Tax Credit. Created by Congress in the 1986 Tax Reform Act, the
Low Income Housing Tax Credit (LIHTC) provides a reduction in the dollar amount of
federal taxes owed by an individual or corporation, in exchange for its investment in low-
income rental housing. There are over 25,000 LIHTC properties located across the United
States and Puerto Rico encompassing 1.4 million units of rental housing. Approximately
90 percent of LIHTC units are occupied by low-income households.
I
Detailed information on these housing programs and specific program analyses is provided in Appendix A.

⌂ HUD Section 202 and 811. HUD’s Section 202 and 811 programs provide capital and
operating funds to nonprofit organizations that develop and operate housing for seniors
and disabled persons, respectively. As of 2006, there are approximately 3,871 Section
202-811 properties across the United States. These properties account for nearly 210,000
units of affordable rental housing for seniors and persons with disabilities. The average
annual income of Section 202 residents is just over $10,000.13
⌂ HUD Section 236. Under Section 236 of the National Housing Act, HUD subsidizes interest
payments on mortgages for rental or cooperative housing owned by private nonprofit or
limited-profit landlords and rented to low-income tenants. The program is no longer
funding new properties, but there are approximately 2,700 Section 236 properties
accounting for nearly 330,000 units of affordable housing. The average household
income for Section 236 tenants was $11,200 in 2000.14
What’s Not Included
To provide the most comprehensive picture of subsidized housing in rural communities, the
study includes as many federally subsidized housing properties and units as possible. There
are several notable omissions, however.
One of the largest sources of rental subsidy not included in this analysis is HUD’s Housing
Choice Voucher (HCV) program. Often referred to as tenant-based Section 8, HCVs allow low-
income households to access privately owned units of their choosing. HCVs are currently
utilized by 1.8 million households. In many respects, HCVs and subsidized physical properties
are not directly comparable. Subsidized properties include actual units whereas vouchers
subsidize households who may move from unit to unit or even state to state. Units with
vouchers are also not reserved for long-term occupancy by low-income households, whereas
other subsidy programs require property owners to keep their rentals affordable for 15 or
more years. Additionally, HUD does not report the specific location of units occupied by
voucher holders.
Rental properties developed with HUD’s HOME Investment Partnerships Program, Community
Development Block Grant, or other federal funding sources that are passed through to, and
administered by, states and local governments are also not included in the comparative
analysis.
USDA Rural Development’s Section 514/516 Farm Labor Housing properties are also omitted
from the analysis because only farmworkers are eligible to live there. RD Section 521 Rental
Assistance units are excluded because Section 521 aid is available only in Section 515 and
514/516 properties.
For more information on data and housing programs incorporated in the analysis please consult
Appendix A.

⌂ USDA Section 538 Guaranteed Rental Housing. Under the Section 538 program, USDA RD
guarantees loans made by private lenders for the development of affordable rural rental
housing with at least five units. Tenants in the Section 538 program must have incomes
at or below 115 percent of area median income at the time of initial occupancy. The
current Section 538 portfolio contains approximately 150 rental properties with more
than 8,000 units of affordable rental housing.
Local geography and geographic components are also integral aspects of the analysis. Geographic
patterns are particularly important for rural areas that tend to have smaller and more sparsely
settled populations over a large land area. Extensive use of geographic information systems
(GIS) and mapping technologies are incorporated into the analysis.
Figure 7.
Location Analysis: Research Model
Distance Relationships County Relationships
USDA
USDA
Section 515
Section 515
Properties
Properties
And Units
And Units
Proportion of PHA
PHA Property Location Subsidized Units
Section 8
Section 8 Average Distance Property
Property Population
Located within Decline LIHTC
LIHTC 10 miles
of Urbanization Section
Section Section 515 202-811
202-811 Housing Stress
Section 236
Section 236 Minority Population
Section 538
Coverage
Coverage
and
and
Prepayment
Prepayment
The analysis relies most heavily on HAC tabulations of secondary data sources of federally
assisted housing programs from HUD and USDA RD. One primary source of data for the analysis
is the 2000 Picture of Subsidized Housing produced by HUD. This dataset provides the location
and tenant characteristics of most HUD-assisted housing developments, including public housing.

The “Picture” data was augmented with more recent information on HUD properties from public
use data sets including the Low-Income Housing Tax Credit Database and HUD’s Project Based
Rental Assistance (Section 8) and Section 202-811 properties through the Multifamily Assistance
and Section 8 Contracts Database. In addition, updates of HUD Section 236 data were accessed
on the HUD User website. Data for USDA Section 515 and Section 538 properties were provided
by USDA Rural Development. For more information on data and housing programs incorporated
in the analysis, please consult Appendix A.
A Cautionary Note About Cross-Subsidy
Multiple sources of housing subsidy are usually required to make a single affordable housing project
feasible. For example, Section 515 loans are often used in conjunction with Low Income Housing
Tax Credits. Approximately 21 percent of LIHTC projects (5,542 properties) also include USDA
Section 515 funding. Likewise, approximately 10 percent of HUD Section 8 project-based properties
(1,464) are also Section 515 developments.
The analysis attempts to control for cross-subsidy of differing programs by excluding Section 515
units from the HUD property databases when possible. Similar exclusions were made in other cross-
subsidized housing properties, particularly Section 202-811 properties, which often have HUD
Section 8 project-based rental assistance. In other words, if a property has Section 515 funding it is
counted as a Section 515 property only, not as an LIHTC or Section 8 property.
This procedure of mutual exclusion helps minimize potential double counting of affordable housing
units within the analysis. Cross-subsidies cannot be entirely accounted for, however, and this fact
presents one of the major limitations of the analysis.
Figure 8.

What is Rural?
Numerous definitions of “rural” are available for use in statistical analyses of social
characteristics and trends. In general, rural areas share the common characteristics of
comparatively few people living in an area, limited access to large cities, and considerable
traveling distances to "market areas" for work and everyday living activities. But rurality, like
most other aspects of society, exists along a continuum and varies extensively based on
proximity to a central place, community size, population density, total population, and various
social and economic factors. Over the years, public agencies and researchers have used
combinations of factors to define and designate geographic areas as rural.I
One of the most commonly used definitions, and the one employed for this analysis, is the
Office of Management and Budget’s classification of Metropolitan Statistical Areas.
Metropolitan and Micropolitan Statistical Areas are delineated along county lines, as follows:I
Metropolitan Statistical Areas (used here as a proxy for urban places). Metropolitan Statistical
Areas have at least one urbanized area of 50,000 or more population, plus adjacent counties
that have a high degree of social and economic integration with the core as measured by
commuting ties.
Micropolitan Statistical Areas (used here as a proxy for rural places and small towns).
Micropolitan Statistical Areas – a new set of statistical areas first defined in 2003 using data
from the 2000 census – have at least one urban cluster of at least 10,000 but less than
50,000 population, plus adjacent counties that have a high degree of social and economic
integration with the core as measured by commuting ties.
Outside Core Based Statistical Areas (used here as a proxy for remote rural places). Places
that are Outside Core Based Statistical Areas are those not included in Metropolitan or
Micropolitan Statistical Areas.
It should be noted that these terms do not correspond to the definition of “rural” that
determines where USDA rural housing program funding can be used. Therefore Section 515
and 538 properties may be found in metro, micro, and Outside Core Based Statistical Areas.
County Level Analysis
The first component of the study involves a county-level location analysis of all USDA Section
515 rental properties and units in relation to other federally subsidized housing properties. An
investigation from the county perspective contextualizes Section 515 units based on the social,
economic, demographic, and housing characteristics of the communities in which they are
located and their proximity to other subsidized housing in rural areas. The county was chosen as
the level of geographic analysis because of its significance and importance in rural America. In
many rural areas, the county is often the most identified geographic unit in political, social, and
economic contexts. Additionally, there is a wealth of easily accessible and uniform social,

economic, and political data available at the county level from which to make contextual
comparisons.15
Counties are relatively large geographic entities, and most counties in the U.S. – even rural
counties that are remote from urban centers – contain several different types of subsidized
housing properties. Nationwide there are roughly 63,000 subsidized housing properties
encompassing 3.1 million units of federally subsidized rental housing.
Prior studies and market analyses of Section 515 rural rental properties indicate that the
feasibility of prepayment and the propensity to prepay are influenced greatly by population and
demographic characteristics, in addition to individual property characteristics. A Comprehensive
Property Assessment and Portfolio Analysis (CPA) prepared for USDA divided Section 515
properties into three segments. It estimated that prepayment was “economically viable” for
approximately 10 percent of the Section 515 stock in hot or urbanizing markets, and
recommended that USDA allow those properties to prepay. It also recommended prepayment for
properties in depressed or declining markets, estimated to be another 10 percent. The remaining
80 percent of the stock was deemed to be still viable as subsidized affordable housing, and the
CPA recommended those properties be targeted for revitalization efforts.16
There are several limitations to the CPA’s calculations. First, researchers admitted property
owners seek to prepay for many reasons unrelated to the economics of continuing to operate a
rental property. Second, the CPA did not attempt to identify what locations fit each tier. While
the CPA recommended protecting current tenants by providing vouchers, its authors did not
consider the availability of other units for displaced tenants with vouchers – even if owners who
prepay in order to raise rents in growing markets are required to retain low-income tenants and
accept their vouchers, tenants in communities that are losing population may not have the option
to remain in their homes if a financially unsustainable, perhaps partially unoccupied, property is
closed down. Finally, the CPA researchers were not asked to consider the plight of the millions
of rural renters currently not served by any housing assistance program.
To investigate these elements of potential prepayment further, various contextual factors such as
urbanization, population decline, minority population, and housing characteristics are examined
in relation to geography and proximity to other subsidized rental properties.
Metropolitan Status
Findings
In counties with at least one Section 515 project, Section 515 properties make up over one-third
of all subsidized properties and about 17 percent of all subsidized rental units. The proportions
are much higher in rural places than in metro areas.
⌂ Metropolitan counties. Approximately one-third of all Section 515 properties are located in
metropolitan areas where many other forms of subsidized housing are also concentrated.
There are over 5,600 Section 515 properties in metropolitan counties but they account
for only 9 percent of all subsidized units in those metropolitan areas. In areas outside

metropolitan counties, Section 515 projects comprise approximately one-half of
subsidized properties and over 36 percent of subsidized rental units.
⌂ Micropolitan counties. Section 515 developments comprise 29 percent of subsidized units

in small towns and rural communities (i.e., micropolitan counties).
⌂ Outside Core Based Statistical Areas Counties. The 5,878 Section 515 properties in more
remote counties Outside Core Based Statistical Areas (OCBSA) comprise a much greater
proportion of subsidized housing than in metropolitan or micropolitan counties. Section
515 properties account for 46 percent of the subsidized rental units in these OCBSA
counties.
Figure 9. Section 515 Units as a Percent of

All Subsidized Units by Metropolitan Status
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Metropolitan Micropolitan OCBSA
USDA Section 515 Other Subsidy
In over 900 counties, Section 515 properties comprise more than half of all subsidized units.
These counties with high proportions of Section 515 units tend to be remote from metro areas:
close to two-thirds of them are OCBSA counties and nearly 40 percent are in the Midwest.

Figure 10.
Section 515 Units as a Percent of All Subsidized Rental Units
Legend
states
Counties
Percent Section 515 Units
0.1 - 17.3
17.4 - 36.2
36.3 - 55.6
55.7 - 81.1
81.2 - 100.0
No Section 515 Units

Figure 11.
Counties Where Section 515 Units

Make up More than Half of All Subsidized Rental Units
Legend
states
Counties
County Status
Section 515 Less than 50% of Subsidized Units
Section 515 50% or more of Subsidized Units
Population Decline
While the United States as a whole has been gaining population, some areas have experienced
population stagnation and even decline. Rural areas with the greatest concentrated population
loss are largely located in the Great Plains portion of the Midwest. The Great Plains is loosely
defined as the vast grassland east of the Rocky Mountains that stretches from northern Texas to
Montana and North Dakota. Approximately half of all population loss counties identified by the
USDA Economic Research Service are in the Great Plains. Rural population loss is also occurring
in other economically distressed areas such as Central Appalachia, the Northwestern industrial
rust belt, and the southern “Black Belt.”17
Population loss areas commonly lack economic diversity, particularly in the Plains states where
there is a heavy reliance on transforming agriculture industry. As a result, much of the
population decline is precipitated by outmigration of young working age adults in search of more
viable employment options. This often leaves an older population and a mismatch between the
current residents’ housing needs and the available housing stock. Older residents will often
remain in units that may not meet their immediate needs because of a lack of other options such
as rental housing or assisted living. In addition, homes in this region are older than the national
average and, consequently, may require more rehabilitation.18

The issue of Section 515 prepayment and preservation looms large in communities with
declining populations. The Comprehensive Property Assessment and Portfolio Analysis asserted
that approximately 10 percent of potential prepayment properties in the Section 515 stock are in
declining markets where population outmigration combined with stagnant economies have
resulted in high vacancy rates and depressed housing markets.19
HAC’s analysis used as a population loss indicator the U.S. Department of Agriculture’s Economic
Research Service (ERS) definition of population loss counties: counties where the number of
residents declined both between the 1980 and 1990 censuses and between the 1990 and 2000
censuses.20 There are a total of 601 population loss counties in the United States. Nearly 90
percent of them are nonmetropolitan, illustrating the disproportionate impact depopulation has
on rural America.
Figure 12.
Population Loss Counties
Legend
states
Population Loss County with a Sec. 515
No Section 515 Property

Findings
There are over 2,400 Section 515 properties in population loss counties, comprising slightly more
than 50,000 units of rental housing.
⌂ On average, Section 515 units make up approximately 17 percent of subsidized rental

units in these declining population counties.
⌂ In the population loss counties in the Midwest, the proportion of Section 515 units
increases to 22 percent.
⌂ Prepayment is potentially a significant issue in this region, as nearly 70 percent of the

Section 515 properties in these counties are eligible for prepayment.
Figure 13.
Population Loss Counties
Legend
states
Counties
0.1 - 17.3
17.4 - 36.2
36.3 - 55.6
55.7 - 81.1
81.2 - 100.0
Urbanization
For most of its history the United States has been a predominately rural place. The first census in
1790 revealed that 9 out of 10 Americans resided in rural areas. In the early 20th century
industrialization shifted the balance toward cities and urban centers. From this point until today,
the urbanization/suburbanization trend in the U.S. has been unabated.21

As is the case in population decline regions, prepayment of Section 515 mortgages is a
potentially significant issue in urbanizing and population growth communities. The CPA
reported that roughly 10 percent of properties located in “hot” markets could command rent
increases of 60 percent or more after prepayment, and it seems likely that many such markets are
located in urbanizing counties, defined as those that were classified as nonmetropolitan in 1993
(based on 1990 census data), but were recategorized as metropolitan after the 2000 census.
There are 289 counties, with a population of 9.5 million persons, in this category.22
Figure 14.
Urbanizing Counties
Legend
states
Urbanizing County with a Sec. 515

Findings
The nearly 1,500 Section 515 properties in urbanizing counties contain approximately 40,000
units of subsidized rental housing. They comprise a substantial proportion of the overall
subsidized market in these counties.
⌂ Section 515 properties make up 34 percent of these counties’ subsidized units.
⌂ Approximately 60 percent of Section 515 units in these urbanizing counties – about

24,000 homes – are eligible for prepayment. These units may account for just over half
the CPA’s estimate of 46,000 units likely to prepay by 2009.
Figure 15.
Urbanizing Counties
Legend
states
Counties
0.1 - 17.3
17.4 - 36.2
36.3 - 55.6
55.7 - 81.1
81.2 - 100.0
Minority Populations23
In the past few decades dramatic progress has been made in improving the quality of housing in
rural America. Despite this progress, however, housing problems persist, particularly among
racial and ethnic minorities. Minorities in rural areas are among the poorest and worst housed
groups in the entire nation, experiencing disproportionately high levels of inadequate housing
conditions. Minority and Hispanic rural households are three times more likely to live in

substandard housing than non-Hispanic white rural residents. These housing problems are more
pronounced in rural areas with large concentrations of minorities. While much of the discussion
about housing problems has moved on to other issues, quality of housing is still very much a key
issue for minorities in these areas. Rural minority counties are the last bastion of poor quality
housing conditions in this nation.
Figure 16.
Rural Minority Counties
Legend
states
County Status
Hispanic County
Asian County
Native American County
African American County
No Section 515 property
For this analysis, rural minority counties are defined as those rural counties with a specific racial
or ethnic minority population of one-third or more in 1980, 1990, and 2000. Under this
definition, there are 301 rural minority counties with at least one Section 515 property in their
borders, including:
⌂ 211 African-American counties,

⌂ 4 Asian counties,
⌂ 62 Hispanic counties, and
⌂ 24 Native American counties.

These communities are concentrated in regions that are historically connected to specific racial
and ethnic groups. Hispanic rural minority counties can be found predominantly along the U.S.-
Mexico border. Rural African Americans tend to be clustered in the South in what is known as
the Black Belt, and Native American counties are found in regions where Native American
reservations are located.
Findings
⌂ In the 301 rural minority communities with Section 515 properties, approximately one-
fifth of all subsidized units are in Section 515 properties.
⌂ Section 515 properties are particularly noticeable in counties with substantial and long-
term Native American populations. In Native American rural minority counties, Section
515 units comprise 44 percent of all subsidized rental units.
⌂ In African-American rural minority counties Section 515 units make up 22 percent of

subsidized units.
⌂ Nearly half the Section 515 properties in rural minority counties are eligible for
prepayment.
Figure 17. Section 515 Rental Units

in Rural Minority Counties
50
45
40
35
30
25
20
15
10
5
0
All RMC African Native Asian Hispanic
American American
Rural Minority County
Percent of Subsidized Units that are Section 515 Units
Housing Stress
For much of the 20th century, the poor quality and condition of homes was the primary housing
concern facing rural America.24 Affordability has replaced poor housing conditions as the
greatest problem for low-income rural households. Housing costs have increased drastically and
incomes have not kept pace. Approximately one-third of rural households (6 million) have at

least one major problem of quality, cost, or crowding, and many of those with problems have
more than one problem. Fully 3 million rural renter households (51 percent) have housing
problems.25
Figure 18.
Housing Stress Counties
Legend
states
County Status
Housing Stress County with Sec. 515
To help examine housing quality in relation to the spatial analysis of subsidized housing, the
research incorporates an indicator of “housing stress” formulated by the USDA Economic
Research Service.I Housing stress counties are those where 30 percent or more of all households
had a housing problem in 2000, experiencing one or more of the following: lacked complete
plumbing, lacked complete kitchen, paid 30 percent or more of income for owner costs or rent,
or were overcrowded (had more than one person per room).26 There are 432 housing stress
counties averaging about 73,000 housing units per county. Housing stress counties are heavily
concentrated in the South and West.
I
ERS uses data from the 2000 Census to identify housing stress counties. The decennial census does not collect
data on housing quality measurements such as dilapidation or lack of electricity. Such factors are measured in the
American Housing Survey, but AHS data are not available at the county or state level.

Findings
There are nearly 90,000 Section 515 units in housing stress counties, located in approximately
2,700 Section 515 projects.
⌂ Overall, 11 percent of subsidized units in these housing counties are located in Section
515 properties.
⌂ Approximately one-third of housing stress counties are in metropolitan areas. In
nonmetropolitan housing stress counties, Section 515 units make up 38 percent of
subsidized units.
Figure 19.

Legend
states
Counties
0.1 - 17.3
17.4 - 36.2
36.3 - 55.6
55.7 - 81.1
81.2 - 100.0
Distance AnalysisI
To augment the county level analysis and provide greater geographic specificity, a “distance-
specific” location analysis of all USDA Section 515 properties in proximity to other federally
I
RD Section 538 guaranteed rental properties are not included in the distance-specific analysis due to a lack of specific location
information that precluded quality geocoding.

subsidized rental housing properties was conducted. The distance analysis calculates
approximate distance between Section 515 projects and other federally subsidized properties
using an array of geographic and mapping techniques. USDA Section 515 properties falling
within a range or distance radius of another federally subsidized property are identified and
analyzed based on their proximity.
Figure 20.

How It Works
To illustrate the concept of “distance buffers,” two counties in New Mexico are presented as
an example. As indicated in Figure 21, there are two USDA Section 515 properties in Eddy
County and one in Chaves County. There are also several HUD Section 8 properties and one
LIHTC property in Chaves County. Yet these HUD properties are located outside the 10-mile
radius (buffer) of the county’s lone Section 515 property and would not be considered to be in
close proximity under the distance analysis. In Eddy County there are two Section 515
properties. A public housing property and project-based Section 8 projects are well within 10
miles of one of the Section 515 properties and thus would be considered in close proximity.
Several tax credit and PHA properties are just outside the 10-mile buffer around Eddy
County’s other Section 515 and therefore would not be considered in close proximity.
While the county names are used to identify property locations in this example, county lines
are irrelevant to the distance analysis. In other words, the ten-mile distance buffers may
cross county lines, as illustrated at the far left of Figure 21.
Figure 21. Distance Buffers

On average, the nearest subsidized housing property is located approximately 5.6 miles away
from a Section 515 property.I These distances vary by type of subsidized property, however. For
example, the nearest Section 202-811 property is on average 15.6 miles away from a Section 515
and the nearest project-based Section 8 property is on average 11.1 miles from a Section 515
project.
Among Section 515 properties that are eligible for prepayment, the average distance to the
nearest subsidized property increases slightly to 6.0 miles.
To classify properties based on proximity, a 10-mile distance buffer was selected. Any USDA
Section 515 properties within 10 miles of another federally subsidized property were identified
as “in close proximity” to the other property. Conversely, Section 515 properties more than 10
miles from other subsidized properties were considered “not in close proximity.” In some
respects, this 10-mile buffer is an arbitrary designation. Given the spatial dynamics of rural
communities, however, combined with the structure of subsidized housing programs in general, a
10-mile designation to indicate proximity is justifiable.II
Findings
⌂ Properties within 10-mile radius. Approximately 79 percent of all USDA Section 515
properties are located within 10 miles of another federally subsidized rental property.
They include about 331,000, or 85 percent, of the total Section 515 units.
⌂ Properties outside 10-mile radius. Over one-fifth of Section 515 properties are located
more than 10 miles from another subsidized property. There are just over 3,000 of these
more isolated Section 515 properties, accounting for over 60,000 units of rental housing.
These more isolated Section 515 properties tend to be smaller than the average Section
515 property, consisting of 20 units compared to 27 units for all properties. Nearly half
(45 percent) of these properties are located in the Midwest and nearly the same
proportion are located in OCBSA counties.
I
Average nearest distance was calculated using Hawth’s distance tests. Nearest subsidized property does not include other
Section 515 properties. Average nearest distance was calculated for the continental United States only. Alaska, Hawaii, Puerto
Rico, and Guam are not included.
II
As an example, over 90 percent of the non-USDA subsidized properties utilized in this analysis (public housing, LIHTC,
project based Section 8, Section 202-811, etc.) are within one mile of another subsidized property. Therefore, even factoring in
the low density of rural areas, a 10-mile buffer in any direction appears to be a good threshold for proximity to other properties.
Additionally, other social and economic factors such as commuting patterns and population density characteristics were
consulted in the establishment of this indicator.

Figure 22.
USDA Section 515 Rental Properties

in proximity to other Subsidized Housing Properties
Legend
Subsidized Property
PROGRAM
PHA
LIHTC
Project Based Section 8
Section 202-811
Section 236
Section 515 Property
While more than three-quarters of all Section 515 properties are within 10 miles of another
subsidized property, the findings vary somewhat by specific subsidy program.
⌂ Over half of all Section 515 properties are within 10 miles of a project-based Section 8 or
public housing property.
⌂ Similarly, over 44 percent of Section 515 properties are within 10 miles of a LIHTC
property.
⌂ HUD Section 202-811 and Section 236 properties are less prevalent nationwide, including
in Section 515 communities. Only 30 percent of Section 515 properties are within 10
miles of Section 202-811 properties and just 17 percent are that close to HUD Section
236 properties.

Figure 23. Percent of Section 515 Properties within 10
Miles of Another Subsidized Property
Percent of Section 515 Properties
60
50
40
30
20
10
0
PHA Section 8 LIHTC Section Section
Project 202-811 236
Based
HUD Property
Section 515 properties eligible to prepay are no more or less likely than other Section 515
developments to be close to other subsidized rentals. Approximately 5,791, or nearly 79 percent
of Section 515 properties that are eligible to prepay, are within 10 miles of another subsidized
rental property.

DISCUSSION
The U.S. subsidized rental housing network is a patchwork of differing types and forms of
housing. The Housing Assistance Council’s investigation of the geographic relationship between
the Section 515 housing stock and other forms of subsidized housing shows that Section 515
housing is a significant component of this subsidized network, especially in the small towns and
more remote areas of rural America. A steady trickle of Section 515 property owners seek to
prepay their mortgages and leave the program’s affordability requirements. USDA will, and
should, continue to make prepayment decisions about individual Section 515 properties on an
individual basis. Overarching policy decisions, however, benefit from access to a larger picture.
Like the data analysis, the discussion below focuses on existing housing. It does not address the
need for additional decent, affordable rental homes or rent subsidies for the 3 million rural
renter households with housing problems. Nor does it take into account the existence of units
subsidized solely by state or local sources, or units that are unsubsidized but decent and
affordable.
Findings: Counties with High Proportions of Section 515 Properties
HAC’s analysis demonstrates that Section 515 units comprise particularly high proportions of the
subsidized housing stock in four specific types of counties:
o nonmetropolitan counties, particularly the more remote counties that are Outside Core
Based Statistical Areas;
o urbanizing counties;
o nonmetro housing stress counties; and
o counties with predominantly Native American populations as well as, to a lesser extent,
those with significant concentrations of other minorities.
A closer examination of these counties’ characteristics and the demographics of Section 515
tenants reveals important considerations for discussions of prepayment and preservation policy.
Nonmetro Counties, Particularly OCBSA Counties
In areas outside metropolitan counties, Section 515 properties comprise approximately one-half
of subsidized properties and over 36 percent of subsidized rental units. The 5,878 Section 515
properties in the more remote Outside Core Based Statistical Areas counties account for 46
percent of the subsidized rental units there.
It is not surprising that Section 515 developments comprise a large portion of the subsidized
housing stock in nonmetro counties: while nonmetropolitan status does not determine whether a
place is considered “rural” and therefore eligible for USDA’s Section 515 and other housing
programs, there is a considerable overlap between nonmetro areas and USDA-defined rural
areas.
More interesting, perhaps, is the importance of Section 515 properties in the places farthest away
from cities of 50,000 or more. Section 515 rentals that are located more than 10 miles from
other federally subsidized rental properties (totaling just over 3,000, or about one-fifth of all

Section 515 properties and more than 60,000 units) are disproportionately located in the
Midwest and in counties that are Outside Core Based Statistical Areas. Likewise, the more than
900 counties in which Section 515 units make up over half of all subsidized rental units are
disproportionately likely to be in the Midwest and to be OCBSA counties.
Many of these places are losing population, and also have relatively large and growing elderly
populations.27 While Section 515 properties in such areas may be less than fully occupied and
may struggle to cover operating expenses, prepayment decisions must consider the availability –
or unavailability – of alternative housing for their tenants.
The Section 515 developments that are more than 10 miles from other subsidized properties also
tend to be smaller than other Section 515 properties, averaging 20 units compared to an overall
average of 27. Their size does not indicate that they are unimportant: 20 apartments may be
essential in a small rental market, and 20 potentially displaced tenant families may have no
readily available alternatives.
Urbanizing Counties
Urbanizing counties became parts of metropolitan areas between 1990 and 2000 because of
increasing social and economic ties to sizeable cities. Such growing areas on the metropolitan
edges, often called exurbs, are characterized by “fast-paced, low density growth and
development.”28
The 40,000 Section 515 units in these counties make up 34 percent of the subsidized housing
stock here, far higher than the 9 percent proportion in metropolitan counties overall. This
location pattern probably developed for two reasons. First, the developers who chose the
locations and applied for Section 515 financing would have tended to select markets with steady
or growing demand for housing. Second, USDA regulations require that Section 515 properties
be located near community and commercial facilities. Because these counties’ populations are
growing and their economies are developing, demand for housing there is increasing.
In fact, the search for affordable homes may be precisely what draws some urbanites to these
places.29 Many are looking for homes they can afford to purchase and others seek affordable
rentals, increasing the pressure on rental housing here. Thus rents are rising, giving owners of
Section 515 developments a strong economic incentive to prepay their restricted-use mortgages
in order to charge market-rate rents, while a significant loss of Section 515 units in these
urbanizing areas could leave a substantial void in the subsidized and affordable rental markets.
In nonmetropolitan housing stress counties, where at least one-third of all households experience
housing problems, Section 515 accounts for 38 percent of federally subsidized units. 49 percent
of the 46,137 Section 515 units in these places are eligible for prepayment.

Housing stress counties include a number of urbanizing counties (44, or 10 percent of all
urbanizing counties) as well as a third of all persistent poverty counties (153, or 35 percent).
Unlike urbanizing counties (discussed above), persistent poverty counties – where the decennial
Censuses found poverty rates of 20 percent or more in 1970, 1980, 1990, and 2000 – provide
little positive economic incentive for Section 515 owners to prepay their mortgages in order to
obtain higher rents. They are subject, of course, to all the non-economic reasons owners may
have for prepayment; these could not be quantified and were not included in the CPA’s analysis.
Housing stress counties’ economies may be either booming or stagnant but all of these counties,
by definition, suffer a shortage of decent, affordable housing. Therefore tenants from a Section
515 property in a housing stress county are very unlikely to be able to find alternative rentals
nearby.
Native American and Other Minority Counties
Rural communities with significant populations of racial and ethnic minorities also often rely on
the Section 515 program as a source of quality and affordable housing. Section 515 accounts for
about one in every five subsidized rentals in counties that had a specific racial or ethnic minority
population of one-third or more in 1980, 1990, and 2000. In Native American counties, Section
515 units comprise fully 44 percent of subsidized rentals.
Over two-thirds (69 percent) of rural minority counties are also persistent poverty counties.30 As
noted above, the likelihood of prepayment in these places has not been estimated.
Given the high proportion of Section 515 properties among subsidized rentals in minority
counties, particularly Native American counties, these places deserve special attention.
Findings: Proximity to Other Subsidized Properties
The Section 515 program has an extremely large reach across a vast and varied land mass.
Section 515 projects are geographically dispersed and can be found in nearly 90 percent of U.S.
counties.
Less than half of Section 515 properties are within one mile of other federally subsidized rental
properties. In contrast, over 90 percent of all non-USDA subsidized rental properties are within
one mile of another subsidized property. The majority of Section 515 properties are farther
from, but still not remote from, other properties: about 79 percent of all Section 515 properties –
containing 85 percent (about 331,000) of total Section 515 units – are located within 10 miles of
other federally subsidized rentals.
Section 515 properties are more likely to be close to some types of other subsidized properties
than to others:
⌂ Over half of all Section 515 properties are within 10 miles of a project-based Section 8 or
public housing property.

⌂ Similarly, over 44 percent of Section 515 properties are within 10 miles of a Low Income
Housing Tax Credit property.
⌂ Only 30 percent of Section 515 properties are within 10 miles of Section 202-811
properties, which provide rentals specifically for elderly and disabled people, and just 17
percent are that close to HUD Section 236 properties. Only half of counties with a
Section 515 property also have a Section 202 or 811 development.
These findings are particularly relevant for the approximately 60 percent of Section 515 residents
who are elderly or disabled. Federally subsidized alternative housing is scarce in many of their
communities, so a loss of Section 515 properties could have profound impacts on their housing
choices.
Recommendations: Connecting the Dots
HAC’s analysis demonstrates that geographic proximity and distance are important factors
relating to the supply of subsidized housing in rural areas, and identifies certain types of places
in which, and certain populations for whom, there may be few choices besides Section 515
properties in a search for decent, affordable housing. The analysis cannot support broad
prescriptions for prepayment and preservation policy: one cannot say, for example, that
prepayment should be prohibited for Section 515 properties in remote counties, or that
prepayment should be permitted for Section 515 properties that are close to other federally
subsidized properties. Instead, the need for the units in any given location must be determined
individually.
This analysis does, nevertheless, point to a need for reconsidering some assumptions made about
prepayment and preservation to date.
The Comprehensive Property Assessment conducted for USDA recommended that properties for
which prepayment is economically viable, such as many of those in urbanizing areas, be allowed
to prepay and that their current tenants be protected. Tenant protection provided by Congress
and USDA has been in the form of vouchers through which USDA makes rent payments to
landlords to supplement the amounts paid by tenants. The effectiveness of vouchers for
individual households is not yet known; USDA’s voucher program is relatively new, having begun
operation in fiscal year 2006, and USDA has not released data on the vouchers it has provided or
the characteristics of the tenants affected.
The long-term impact of providing vouchers to specific tenant households is also unknown.
Under USDA’s current voucher program, if a family leaves its community, so does its voucher.
Over time, therefore, if nothing else changes, switching from Section 515 apartments to tenant
vouchers means that the number of assisted households in many communities will decrease,
without regard to changes in the number of remaining households who need subsidies in order
to find decent, affordable places to live.
Too many unknowns remain, and the lives of too many vulnerable rural Americans are affected,
for federal policy to adopt the CPA’s prepayment recommendation as is. HAC’s analysis
demonstrates the importance of USDA’s current determinations regarding alternative housing

availability and impact on minorities, and raise a number of questions on the advisability of
relying on vouchers. The looming question of meeting all housing needs and fulfilling the
nation’s commitment to decent, affordable housing for all Americans31 is also unaddressed.
HAC recommends:
o USDA should continue to take into account the availability of alternate

affordable housing in a community, and the impact of prepayment on
minorities, when deciding whether to accept a requested prepayment.
Information about the analyses conducted for each property should be available to
tenants, their representatives, and the public. Tenants should have a right to appeal
prepayment approvals based on these analyses.
o Analyses of the availability of alternative housing should consider tenant

demographics. For example, when prepayment of a Section 515 loan will affect
elderly tenants with very low incomes, a nearby tax credit project for families with low
incomes probably does not provide suitable alternative housing.
o Research should be conducted to identify and study the actual properties

that would be affected by the Comprehensive Property Assessment’s
recommendation to allow prepayment for certain properties, estimated to comprise
10 percent of the Section 515 portfolio. HAC’s analysis indicates that at least half of
these properties may be in urbanizing counties with “hot” rental markets and few
alternative housing choices for their tenants, and thus points to a need to preserve or
replace these units for future low-income renters, rather than allowing their owners to
prepay and protecting only the current tenants.
o Data should be collected regarding the use of USDA vouchers and the
locations and housing conditions of former voucher holders. Because USDA’s
voucher program is new, too little is known about the long-term efficacy of these
vouchers to be sure that they are a good solution for protecting current tenants. The
existence of other people who need help now or in the future to obtain decent, affordable
housing must be taken into account as well.
o Research should be conducted to determine how prepaid properties and

their tenants fare after prepayment.
o Vouchers should remain available in the communities where they were first
issued if they are needed there, even after the specific tenants to whom they were
first issued no longer need them.
o Tenants in prepaying Section 515 properties should have the same

protections as Section 8 voucher tenants in prepaying HUD-financed
properties.
o Data collected by USDA should be readily available to the public.

o Research should be conducted on the extent and characteristics of
unsubsidized affordable rental properties.

ENDNOTES TO TEXT
1
U.S. Department of Agriculture (USDA) Rural Development (RD), Multi-Family Housing
Occupancy: Statistics Report as of January 2006 (unnumbered letter dated March 22, 2006), 2.
2
Housing Assistance Council tabulations of 2000 Census of Population and Housing.
3
Housing Assistance Council tabulations of 2003 American Housing Survey.
4
Housing Assistance Council (HAC), Since Inception Reports: Section 515 Rural Rental Housing
Program Totals, FY 1963 – 2006 (Washington, D.C.: Housing Assistance Council, 2006),
http://www.ruralhome.org/rhs/06inception/515TOT_06b.pdf.
5
USDA RD, Multi-Family Housing Occupancy.
6
HAC, Since Inception Reports: Section 515.
7
USDA Rural Development, Direct Multi-Family Loans and Grants Regulations, 7 CFR 3560.
8
Russell T. Davis, Administrator, USDA Rural Development Housing and Community Facilities
Programs, Letter to USDA Rural Development State Directors (April 27, 2007), 3,
http://www.rurdev.usda.gov/regs/ul/ulapril07.pdf.
9
USDA RD, Multi-Family Housing Occupancy, 2006.
10
National Low Income Housing Coalition (NLIHC), 2007 Advocates Guide to Housing and
Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007).
U.S. Department of Housing and Urban Development (HUD), A Picture of Subsidized

11
Households – 2000, http://www.huduser.org/picture2000/index.html.
12
NLIHC, 2007 Advocates Guide.
13
NLIHC, 2007 Advocates Guide. (The date for which this income level applies is not stated.)
14
HUD, A Picture of Subsidized Households – 2000.
15
Charles Tolbert and Molly Sizer, U.S. Commuting Zones and Labor Market Areas: A 1990 Update
(Washington, D.C.: U.S. Department of Agriculture, Economic Research Service, September
1996).
16
ICF Consulting, Rural Rental Housing – Comprehensive Property Assessment and Portfolio
Analysis (Fairfax, Virginia: ICF Consulting, November 2004); Laurence Anderson, USDA Section
515 Revitalization: A New Commitment to Preserve the Section 515 Portfolio, presentation at
Housing Assistance Council training conference in 2007 (available from HAC upon request).

17
Housing Assistance Council, Turning Challenges into Opportunities: Housing and Community
Development Strategies in Rural Population Loss Counties (Washington, D.C.: Housing Assistance
Council, 2007).
18
Ibid.
19
ICF Consulting, Comprehensive Property Assessment.
20
U.S. Department of Agriculture Economic Research Service, Population Loss Counties,
http://www.ers.usda.gov/Briefing/Rurality/Typology/maps/Population.htm.
Frank Hobbs and Nicole Stoops, Demographic Trends in the 20th Century (Washington, DC: U.S.
21
Government Printing Office, 2002), 7.
22
Housing Assistance Council, What is Rural?: Working Towards a Better Programmatic Definition
(Washington, D.C.: Housing Assistance Council, forthcoming).
23
Much of the information in this subsection was drawn from Housing Assistance Council, Race,
Place, and Housing: Housing Conditions in Rural Minority Counties (Washington, D.C.: Housing
Assistance Council, 2004).
24
Housing Assistance Council, Taking Stock: Rural People, Poverty and Housing at the Turn of the
21st Century (Washington, D.C.: Housing Assistance Council, 2002).
25
HAC tabulations of 2005 American Housing Survey.
26
U.S. Department of Agriculture Economic Research Service, Housing Stress Counties,
http://www.ers.usda.gov/Briefing/Rurality/Typology/maps/Housing.htm.
27
HAC, Turning Challenges into Opportunities.
28
Alan Berube, Audrey Singer, Jill H. Wilson, and William H. Frey, Finding Exurbia: America’s
Fast-Growing Communities at the Metropolitan Fringe (Washington, D.C.: Brookings Institution,
2006), 2. http://www.brookings.edu/~/media/Files/rc/reports/2006/10metropolitanpolicy
_berube/20061017_exurbia.pdf. It should be noted that Berube et al. develop a definition of
“exurbs” that is not the same as, though it overlaps with, the definition of “urbanizing counties”
used here by HAC.
29
Berube et al., 28.
30
HAC, Race, Place, and Housing. The Race, Place, and Housing study analyzed the 304 total rural
minority counties in the United States; 301 of these counties contain at least one Section 515
property and are included in the current report.

31
42 U.S. Code 1441 (Housing Act of 1949, Section 2); 42 U.S. Code 1441a (Housing and Urban
Development Act of 1968, Section 2); 42 U.S. Code 5301 note (Housing and Community
Development Act of 1987, Section 2(b)).

APPENDIX A
SECTION 515 RENTAL HOUSING PROPERTIES IN PROXIMITY TO SELECTED

FEDERALLY SUBSIDIZED HOUSING PROPERTIES

Public HousingI
The public housing program of the Department of Housing and Urban Development (HUD) is
one of the nation’s oldest and largest subsidized rental options. Created by the 1937 Housing
Act, public housing is a hallmark of the New Deal. Public housing is owned and operated by
public housing authorities (PHAs). PHAs are operated and governed by locally appointed or
elected boards of commissioners. There are over 14,000 public housing developments around
the United States operated by 3,050 PHAs and containing more than 1.2 million units.1
Public housing is home to several million residents. Children live in over 40 percent of these
units. Approximately 19 percent of PHA residents are elderly. More than half the households
are headed by racial and ethnic minorities and nearly 40 percent are headed by women. The
demand for public housing far exceeds the supply. In many large cities, waiting list times can be
up to 10 years.2
Public housing is available for low-income households or those who make less than 80 percent of
the area median income. Like residents in many other federal housing assistance programs,
public housing occupants pay the highest of: (1) 30 percent of their monthly adjusted income;
(2) 10 percent of their monthly gross income; (3) their welfare shelter allowance; or (4) a PHA-
established minimum rent of up to $50.3
The Geography of HUD Public Housing and RD Section 515 Units
County Level Relationships
Among the 2,789 counties with a USDA Section 515 property, just over 1,811 (65 percent) also
have at least one HUD public housing authority property. Over 70 percent of metropolitan and
micropolitan counties with a Section 515 property also had at least one public housing property.
Approximately 56 percent of Section 515 counties outside core based statistical areas also had a
public housing property. On average, there are two public housing units to every Section 515
unit in these counties.
Distance Relationships
Among USDA Section 515 properties, 7,022 or 49.7 percent are within 10 miles of a public
housing property. These Section 515 properties near public housing developments include
214,924 (54.9 percent) of the Section 515 units.
I
The analysis includes approximately 96 percent of public housing properties – 13,819 properties encompassing
1,244,985 rental units – which were successfully geocoded.

Counties with USDA Section 515 Properties
and HUD Public Housing Properties
Legend
Counties
County Status
No Section 515 and PHA Property
Section 515 and PHA Property

in proximity to HUD Public Housing Properties
Legend
HUD Public Housing

Section 515 Produced by the Housing Assistance Council
Washington, DC
Source:

HUD Project Based Section 8 Rental AssistanceI
HUD’s Project Based Rental Assistance – often referred to as project-based Section 8 – program
provides for privately owned multifamily housing for low-income family households through a
federal subsidy of the mortgage, rental assistance, or a combination of the two. Over 1 million
households live in homes with project-based assistance; two-thirds of these include elderly or
disabled family members. Original Section 8 project-based assistance contracts were between
the HUD and project owners for up to 40 years.4
Residents in units receiving project-based Section 8 assistance must have low incomes (less than
80 percent of area median income). Forty percent of new admissions are required to have very
low incomes (at or below 30 percent of area median income).5
The Geography of HUD Project Based Rental Assistance and RD Section 515 UnitsII
Among the 2,789 counties with a USDA Section 515 property, just over 1,766 or 63 percent also
have at least one project based Section 8 property. In these counties there are 8,482 project-
based Section 8 properties with 613,874 units. On average, there are 1.4 project based Section 8
units to every Section 515 unit in these counties.
On average, the nearest project-based Section 8 property is located 11.1 miles from a Section
515 property. Among USDA Section 515 properties, 7,590 or 53.7 percent are within 10 miles of
a project-based Section 8 property.
I
The analysis includes approximately 87 percent of project based Section 8 properties – 11,002 properties
encompassing 887,102 rental units – which were successfully geocoded.
II
Approximately 10 percent (1,464) of HUD project based Section 8 properties also have Section 515
funding and are included in the analysis as Section 515 properties. Project based Section 8 properties that
also have Section 202-811 funding were included in the analysis as Section 202-811 properties.

and Section 8 Project Based Properties
Legend
Counties
County Status
No Sec. 515 and Sec. 8 Project Based Property
Sec. 515 and Sec. 8 Project Based Property

in proximity to Section 8 Project Based Properties
Legend
Section 8 Project Based

Section 515 Produced by the Housing Assistance Coun cil
Washington, DC
Source:

Low Income Housing Tax CreditI
The Low Income Housing Tax Credit (LIHTC), adopted by Congress in the 1986 Tax Reform Act,
is a reduction in the dollar amount of federal taxes owed by an individual or corporation in
exchange for its investment in low-income rental housing. The amount of tax reduction is tied
directly to the proportion of low-income persons among the residents of the housing produced.
To obtain the tax reduction, an investor provides the capital that is used to help develop the
project. The investor has no role in the development process or the management of the project
after it is rented up. A for-profit or nonprofit developer undertakes those tasks. The investor
receives a tax credit paid annually over a 10-year period and cannot withdraw its investment for
15 years.6
The tax credit program provides funding for two types of rental housing development:
construction of new buildings or substantial rehabilitation of existing buildings. New
construction can produce single-family houses, apartment buildings, duplexes, rowhouses or
townhouses. Rehabilitation can be performed on these same types of buildings, and conversion
of structures like warehouses, schools, and motels is also possible.7
As of 2004, there were approximately 25,000 LIHTC properties located across the United States
and Puerto Rico providing about 1.4 million units of housing. Approximately 90 percent of these
LIHTC units are occupied by low-income households.8
The Geography of Low Income Housing Tax Credit and RD Section 515 UnitsII
Among the 2,789 counties with a USDA Section 515 property, over 1,600 or 57.4 percent also
have at least one LIHTC property. More than seven out of ten metropolitan and micropolitan
counties with a Section 515 property also had at least one tax credit property. Outside core
based statistical areas, however, only 36 percent of Section 515 counties also had any Tax Credit
units. On average, in the counties that have both Section 515 and LIHTC properties, there are
three Section 515 properties to every one LIHTC property and four Section 515 units to every
one LIHTC unit.
On average, the nearest LIHTC property is located 14.1 miles from a Section 515 property.
Among USDA Section 515 properties with no LIHTC cross subsidy, 6,461 or 43.5 percent were
within 10 miles of an LIHTC project. These Section 515 properties within close proximity of a
tax credit development include about 206,000 units or 53 percent of the Section 515 units.
I
The analysis includes approximately 84 percent of LIHTC properties, which were successfully geocoded.
II
Approximately 21 percent (5,542) of LIHTC properties also have Section 515 funding and are included in
the analysis as Section 515 properties.

and Low Income Housing Tax Credit Properties
Legend
Counties
County Status
No Section 515 and LIHTC Property
Section 515 and LIHTC Property

in proximity to Low Income Housing Tax Credit Properties
Legend
LIHTC
Section 515

HUD Section 202–811 Elderly and Supportive HousingI
Section 202 Supportive Housing for the Elderly. HUD’s Section 202 program provides capital and
operating funds to nonprofit organizations that develop and operate senior housing. Section 202
has two components. The first provides capital advances to nonprofit organizations for the
construction, rehabilitation, or acquisition of supportive housing for seniors. Additionally,
Section 202 provides rental assistance in the form of Project Rental Assistance Contracts (PRACs)
to subsidize the operating expenses of the developments.9
Residents of Section 202 housing must generally be at least 62 years old and have very low
incomes. The average Section 202 resident is 79 years old, and nearly 39 percent of this
program’s residents are over the age of 80. The average annual income of a resident is little
more than $10,000. According to HUD, elderly households with very low incomes are the
likeliest to pay more than they can afford for their housing.10
Section 811 Supportive Housing for Persons with Disabilities. HUD’s Section 811 program provides
funding to developers of housing for disabled, low-income households. Section 811 was created
through the National Affordable Housing Act of 1990, which separated housing for people with
disabilities from the Section 202 program.11
Section 811 provides capital advances in the form of forgivable no-interest loans to construct or
rehabilitate supportive housing for persons with disabilities. Additionally, Section 811 provides
for project rental assistance to cover the difference between the HUD-approved operating cost
per unit and 30 percent of a resident's adjusted income.12
There are approximately 7,924 Section 202-811 properties across the United States, accounting
for nearly 312,000 units of affordable rental housing for seniors and persons with disabilities.
The Geography of HUD Section 202-811 and RD Section 515 Units
Among the 2,789 counties with a USDA Section 515 property, just over 1,400 or 51 percent also
have at least one HUD Section 202-811 property. In these Section 515 counties, there are 5,676
Section 202-811 properties encompassing 195,676 units of rental housing for seniors or disabled
persons.
On average, the nearest Section 202-811 property is located 15.6 miles from a Section 515
property. Among USDA Section 515 properties, 29.5 percent are within 10 miles of a Section
202-811 property.
I
The analysis includes approximately 92 percent of Section 202-811 properties, which were successfully
geocoded.

and Section 202-811 Properties
Legend
states
Counties
County Status
No Sec 515 and Sec 202-811
Sec 515 and Sec 202-811

in proximity of HUD Section 202-811 Properties
Legend
Section 202-811
Section 515

HUD Section 236 LoansI
Under Section 236 of the National Housing Act, HUD subsidized the interest payments on
mortgages for rental or cooperative housing owned by private nonprofit or limited-profit
landlords and rented to low-income tenants.13 Section 236 replaced the Section 221(d) below
market interest rate (BMIR) program in 1968 and was itself discontinued in 1973.14
There are approximately 2,700 Section 236 properties accounting for nearly 330,000 units of
affordable housing.
The Geography of HUD Section 236 and RHS Section 515 Units
Only 620 of the 2,789 counties with a USDA Section 515 property also have at least one HUD
Section 236 property. Approximately one-third of metropolitan counties with a Section 515
property also have at least one Section 236 property, as well as 28 percent of micropolitan
counties. Only 5 percent of Section 515 counties outside core based statistical areas also have a
Section 236 property, however. On average, there is one Section 515 property to every one
Section 236 property and two Section 515 units to every one Section 236 unit in these counties.
On average, the nearest Section 236 property is located 28.1 miles from a Section 515 property.
Among USDA Section 515 properties, 1,984 or 14.0 percent are within 10 miles of a Section 236
property. These Section 515 properties within close proximity to Section 236 developments
include about 68,392 units or 17.4 percent of the Section 515 units.
I
The analysis includes approximately 95 percent of Section 236 properties, excluding 114 (approximately 5 percent)
that could not be successfully geocoded.

and HUD Section 236 Properties
Legend
Counties
County Status
No Section 515 and Section 236 Properties
Section 515 and Section 236 Properties

in proximity to HUD Section 236 Properties
Legend
Section 236
Section 515

Section 538 Guaranteed Rural Rental Housing Program
Under the Section 538 program, USDA RD guarantees loans made by private lenders, generally
banks and savings and loans institutions, for the development of affordable rural rental housing
with at least five units. The program is used to guarantee permanent financing, or a combination
construction and permanent loan. A Section 538 guaranteed loan is often combined with other
financing sources such as Low Income Housing Tax Credits, a HOME grant or loan, state or local
assistance (including tax-exempt bond financing), or a second bank loan. Eligible borrowers
include individuals, nonprofit or for-profit corporations, partnerships, state or local public
agencies, limited liability companies, trusts, or Indian tribes. Tenants in the Section 538
program must have incomes at or under 115 percent of area median income at the time of initial
occupancy.15
Section 538, which was created by Congress in 1996, differs in some important ways from the
Section 515 program. Section 538 focuses on partnerships between USDA and qualified lenders,
whereas Section 515 makes loans directly to nonprofit or for-profit rural housing developers.
Section 538 is intended to provide decent, affordable rental housing for low- and moderate-
income rural with incomes that are generally higher than those served by Section 515. Income
calculations for Section 538 tenants do not take into account the deductions permitted under
Section 515. Units developed with Section 538 loans can be larger than those financed by
Section 515.16
The current Section 538 portfolio contains just under 150 properties, encompassing a little over
8,000 units of affordable rental housing. Section 538 properties are located in 115 counties
across the United States and almost all of these counties also have Section 515 properties.
The Geography of RD Section 538 and RD Section 515 Units
Only 113 of the 2,789 counties with a USDA Section 515 Property also have at least one RD
Section 538 property in the same county.
Distance relationships were not determined for Section 538 properties due to a lack of street
level data for geocoding purposes.

Counties with USDA Section 515
and Section 538 Properties
Legend
states
Counties
County Status
No Secs 515 and Sec. 538
Sec. 515 and 538

APPENDIX A: ENDNOTES
1
National Low Income Housing Coalition, “Public Housing,” 2007 Advocates’ Guide to Housing
and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007).
2
Ibid.
3
Ibid.
4
National Low Income Housing Coalition, “Project Based Rental Assistance,” 2007 Advocates’
Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing
Coalition, 2007).
5
Ibid.
6
National Low Income Housing Coalition, “Low Income Housing Tax Credit,” 2007 Advocates’
Coalition, 2007).
7
Ibid.
8
Ibid.
9
National Low Income Housing Coalition, “Section 202 Supportive Housing for the Elderly,”
2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.: National Low
Income Housing Coalition, 2007).
10
Ibid.
11
National Low Income Housing Coalition, “Section 811 Supportive Housing for Persons with
Disabilities,” 2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.:
National Low Income Housing Coalition, 2007).
12
Ibid.
13
National Housing Law Project. Section 236 Program.
http://www.nhlp.org/html/hud/sec236.htm.
14
National Low Income Housing Coalition, “Project-Based Rental Assistance,” 2007 Advocates’
Coalition, 2007).
15
Housing Assistance Council, Information Sheet: Guaranteed Rural Rental Housing Program
(Section 538), http://www.ruralhome.org/infoSheets.php?id=197.
16
Ibid.

APPENDIX B
SELECTED DATA TABLES

Table 1. Section 515 Properties and Units by State
Section 515 Rental Progam
State Properties Units
Alabama 488 15,986

Alaska 41 906
Arizona 111 3,469
Arkansas 358 10,088
California 416 18,710
Colorado 133 3,426
Connecticut 65 2,482
Delaware 51 1,598
District of Columbia 0 0
Florida 433 16,626
Georgia 465 16,255
Guam 1 49
Hawaii 23 955
Idaho 190 4,316
Illinois 645 10,922
Indiana 559 14,154
Iowa 611 11,026
Kansas 388 6,655
Kentucky 453 12,256
Louisiana 389 12,643
Maine 342 8,090
Maryland 168 5,326
Massachusetts 62 1,984
Michigan 613 18,548
Minnesota 648 11,726
Mississippi 495 15,322
Missouri 873 19,625
Montana 166 2,665
Nebraska 266 3,773
Nevada 77 2,141
New Hampshire 81 2,486
New Jersey 81 3,311
New Mexico 111 3,966
New York 449 13,215
North Carolina 626 22,419
North Dakota 241 3,245
Ohio 389 14,496
Oklahoma 296 8,101
Oregon 189 5,573
Pennsylvania 309 9,816
Puerto Rico 100 6,173
Rhode Island 12 421
South Carolina 333 12,284
South Dakota 478 6,713
Tennessee 378 12,879
Texas 758 24,519
Utah 91 2,105
Vermont 62 1,517
Virgin Islands 21 476
Virginia 261 10,220
Washington 300 8,762
West Virginia 246 7,115
Wisconsin 525 10,333
Wyoming 58 1,579
Table 2. Section 515 Rental Housing Program and Prepayment Status
Prepayment Eligible
State Section 515 Properties Units
Properties Units Number % Number %
Alabama 488 15,986 280 57.4 9,775 57.4

Alaska 41 906 22 53.7 470 53.7
Arizona 111 3,469 45 40.5 1,585 40.5
Arkansas 358 10,088 184 51.4 5,469 51.4
California 416 18,710 242 58.2 10,693 58.2
Colorado 133 3,426 73 54.9 1,891 54.9
Connecticut 65 2,482 37 56.9 1,512 56.9
Delaware 51 1,598 19 37.3 657 37.3
District of Columbia 0 0 0 0.0 0 0.0
Florida 433 16,626 240 55.4 9,469 55.4
Georgia 465 16,255 287 61.7 10,234 61.7
Guam 1 49 1 100.0 49 100.0
Hawaii 23 955 15 65.2 621 65.2
Idaho 190 4,316 102 53.7 1,983 53.7
Illinois 645 10,922 336 52.1 5,127 52.1
Indiana 559 14,154 375 67.1 9,099 67.1
Iowa 611 11,026 448 73.3 7,846 73.3
Kansas 388 6,655 264 68.0 4,091 68.0
Kentucky 453 12,256 281 62.0 8,179 62.0
Louisiana 389 12,643 223 57.3 7,238 57.3
Maine 342 8,090 229 67.0 5,538 67.0
Maryland 168 5,326 85 50.6 2,682 50.6
Massachusetts 62 1,984 34 54.8 1,192 54.8
Michigan 613 18,548 354 57.7 10,667 57.7
Minnesota 648 11,726 504 77.8 9,103 77.8
Mississippi 495 15,322 273 55.2 8,735 55.2
Missouri 873 19,625 607 69.5 13,914 69.5
Montana 166 2,665 95 57.2 1,480 57.2
Nebraska 266 3,773 143 53.8 1,823 53.8
Nevada 77 2,141 46 59.7 1,232 59.7
New Hampshire 81 2,486 56 69.1 1,815 69.1
New Jersey 81 3,311 46 56.8 1,600 56.8
New Mexico 111 3,966 60 54.1 2,218 54.1
New York 449 13,215 252 56.1 7,514 56.1
North Carolina 626 22,419 353 56.4 12,851 56.4
North Dakota 241 3,245 203 84.2 2,583 84.2
Ohio 389 14,496 215 55.3 7,911 55.3
Oklahoma 296 8,101 107 36.1 2,799 36.1
Oregon 189 5,573 117 61.9 3,064 61.9
Pennsylvania 309 9,816 155 50.2 4,867 50.2
Puerto Rico 100 6,173 21 21.0 1,310 21.0
Rhode Island 12 421 6 50.0 239 50.0
South Carolina 333 12,284 188 56.5 7,332 56.5
South Dakota 478 6,713 260 54.4 3,429 54.4
Tennessee 378 12,879 222 58.7 7,530 58.7
Texas 758 24,519 407 53.7 12,830 53.7
Utah 91 2,105 44 48.4 907 48.4
Vermont 62 1,517 21 33.9 564 33.9
Virgin Islands 21 476 3 14.3 96 14.3
Virginia 261 10,220 118 45.2 4,698 45.2
Washington 300 8,762 155 51.7 4,350 51.7
West Virginia 246 7,115 142 57.7 4,016 57.7
Wisconsin 525 10,333 309 58.9 6,074 58.9
Wyoming 58 1,579 37 63.8 874 63.8
APPENDIX C
SELECTED STATE LEVEL MAPS

USDA Section 515 Properties and Units by State
Washington
301 properties
8,794 units
Maine
Montana North Dakota 342 properti es
166 properties 241 properties 8,090 units
2,665 units 3,245 units Minnesota
650 properties
Oregon 11,786 units Ver mont New Hampshire
190 properties 63 properties
Idaho Wisconsin 81 properties
5,597 units 1,541 units
191 properties 529 properties 2,486 units
South Dakota New York Massachusetts
4,328 units 10,453 units
483 proper ties Michigan 450 properties 63 properties
Wyoming 6,753 units 615 properties 13,239 units 1,996 units
58 properties 18,612 units Connecticut
1,579 units 65 properties
Iowa Pennsylvania 2,482 units
611 properties New Jersey
Nebraska 315 properties
266 proper ties 10,307 units
Ohio 3,311 units
Nevada Maryland Delaware
Utah Illinois 14,689 units
76 properties 168 properties 51 properties
91 properties 646 properties Indiana
2,129 units W est Virgini a 5,326 units 1,598 units
California 2,105 units Colorado 10,966 units 561 properties
416 properti es 14,202 units
Kansas 7,115 units Virginia
18,710 units 3,426 units Missouri
875 properties Kentucky
6,655 units 19,653 uni ts 454 properties 10,252 units
12,280 units
North Carolina
Tennessee 626 properties
380 properties 22,419 units
Oklahoma
Arizona 296 properties 12,934 units
New Mexico Ark ansas South Carolina
110 properti es 358 properties 333 properties
3,639 units
3,946 units 10,088 units 12,284 units
Mississippi
496 properties Georgia
Alabama 465 properties
15,334 units
Texas 15,958 units
774 properties Louisiana
12,671 units
Florida
434 properties Guam
16,646 units 1 property
Legend 49 units
Alaska states Puerto Rico

906 units Section 515 Properties 6173 units
Hawaii
12 - 91
U.S. Virgin Islands
23 properties 92 - 191 21 properties
955 units 476 units
192 - 358
359 - 561
562 - 875
Section 515 Prepayment Eligibility Status by State
ME
WA
MT ND MN
VT
NH
OR ID
SD
WI NY
WY
MI NJ
IA PA
NE
NV
CA IN WV MD
UT
IL OH
CO
KS
KY VA
MO
NC
AR TN
SC
OK
AZ
NM
MS AL
GA
LA
TX
FL Guam
100%
Properties
Prepayment Eligible
AK PR
21%
Properties
Legend Prepayment Eligible
VI
14%
Properties
Prepayment Eligible
HI
Section 515 properties eligible for prepayment
Section 515 properties not eligible for prepayment
Section 515 Rental Housing Loan Prepayments
2001 - 2006
Washington
2 proper ties
56 units
Maine
Montana North Dakota 3 prope rtie s
7 properties 37 propertie s 32 units
84 units 337 units
Minnesota
Ore gon 55 properties Ver mont
New Ha mpshire
1 property Idaho 721 units 3 propertie s
Wisconsin 10 properties
20 units 8 properties 107 units
26 properties 434 units
157 units South Dakota
413 units New York Massachusetts
54 properties 9 properties 11 properties
Wyoming 384 units 416 units 402 units
M ichigan
1 property Connecticut
2 properties
28 units 3 properties
66 units
Iowa Pennsylvania 53 units
New Jersey
Nebraska 456 prope rtie s 12 properties
1 property
21 properties 2120 323 units
Ohio 48 units
240 units
Ne va da 13 properties Maryla nd Delaware
Uta h Illinois
3 prope rtie s 404 units 0 properties0 properties
4 properties 25 properties Indiana
136 units West Virginia 0 units 0 units
California 34 units Colorado 316 units 11 properties 12 properties
4 propertie s 1 property
276 units 242 units Virginia
59 units 20 units Kansas Missouri
6 properties Ke ntucky 1 property
31 properties
47 units 4 units
460 units 1 property
12 units
North Carolina
Tennesse e 8 properties
Oklahoma
Arizona 4 properti es 280 units
Ne w M exico Ark ansas South Carolina
1 prope rty 2 properties 14 prope rtie s
186 units
12 units 48 units 509 units
Alaba ma Georgia
Mississippi
13 properties 22 proper ties
3 prope rtie s
348 units 568 units
71 units
Texas
7 properties Louisiana
146 units 1 property
4 units
Florida
7 properties
289 units
Alaska
1 property Legend
12 units
states
Prepaid Section 515 Loans, 2001-2006
0.00 - 4.00
4.01 - 14.00
Hawaii 14.01 - 37.00
1 p rop erty
58 unit s 37.01 - 55.00
55.01 - 456.00
Subsidized Rental Units by Program and State
ME
WA
MT ND MN
VT
NH
OR ID
SD
WI NY
WY
MI NJ
IA PA
NE IN
NV
CA WV MD
UT
IL OH
CO
KS
KY VA
MO
NC
AR TN
OK
AZ
NM
MS AL
GA SC
Legend
LA
TX
FL
PHA
LIHTC
Project Based Section 8
AK
Section 202-811
Section 236
Section 538
Section 515
HI
BOARD OF DIRECTORS
HOUSING ASSISTANCE COUNCIL
Gideon Anders Galveston, Texas

National Housing Law Project Polly Nichol, HAC Secretary
Oakland, California Vermont Housing and Conservation Board
Montpelier, Vermont
Robert Calvillo
Affordable Homes of South Texas, Inc. William Picotte
McAllen, Texas Eagle Thunder Consulting
Rapid City, South Dakota
Peter N. Carey
Self-Help Enterprises William Powers
Visalia, California Rural California Housing Corporation
Sacramento, California
Joseph Debro
Trans Bay Engineering & Builders Pedro Rodriguez, Jr.
Oakland, California Waukesha, Wisconsin
Sandra Ferniza Irene E. Sikelianos

Arizona State University Delphi, Inc.
Tempe, Arizona Cedar Creek, New Mexico
Ninfa R. Gutierrez Debra D. Singletary, HAC President

Diocese of Yakima Housing Services Delmarva Rural Ministries, Inc.
Yakima, Washington Dover, Delaware
Lenin Juarez Hon. Bennie G. Thompson

Action Gypsum Supply Company U.S. House of Representatives
Houston, Texas Bolton, Mississippi
David Lollis Rebecca Torres-Swanson

Appalbanc / FAHE Retired Tucson, Arizona
Berea, Kentucky
Jose Trevino
Arturo Lopez Lansing, Illinois
Coalition of Florida Farmworker Organizations
Florida City, Florida Richard Tucker, HAC Treasurer
Washington, D.C.
Moises Loza, HAC Second Vice President
Housing Assistance Council Lauriette West-Hoff, HAC Chair
Washington, D.C. Southern Real Estate Management &
Consultants, Inc.
Twila Martin-Kekahbah, HAC Vice President Durham, North Carolina
Turtle Mountain Band of Chippewa
Bismarck, North Dakota Peggy R. Wright
Arkansas State University – Delta Studies Center
Maria Luisa Mercado Jonesboro, Arkansas
Lone Star Legal Aid
The U.S. Department of Agriculture’s Section 515
program provides more than 400,000 decent,
affordable rental homes for rural Americans with
low incomes, but many of these rentals are now at
risk. Seeking to inform the debate on preservation of
these units, this Housing Assistance Council report
examines where Section 515 developments are
located with respect to other federally subsidized
rentals and reviews their role in their rural
communities’ rental housing networks. It discusses
the policy implications of HAC’s research findings
and makes recommendations.
ISBN 978-1-58064-158-6

HAC: Connecting The Dots - Full Report

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Housing Assistance Council

CONNECTING THE DOTS:

Housing Assistance Council

Executive Summary ....................................................................................................................... 1

Rental Housing in Rural America: A Backdrop .............................................................................. 6

USDA’s Section 515 Rental Housing Program ............................................................................... 8

Endnotes to Text ......................................................................................................................... 40

Appendix A: Section 515 Rental Housing Properties in Proximity to Selected Federally

Appendix B: Selected Data Tables ............................................................................................... 57

Appendix C: Selected State Level Maps ....................................................................................... 60

Findings: Counties with High Proportions of Section 515 Properties

Housing Assistance Council 1

Findings: Proximity to Other Subsidized Properties

2 Connecting the Dots

Recommendations: Connecting the Dots

o USDA should continue to take into account the availability of alternate

Housing Assistance Council 3

o Analyses of the availability of alternative housing should consider tenant

o Research should be conducted to identify and study the actual properties

o Research should be conducted to determine how prepaid properties and

o Tenants in prepaying Section 515 properties should have the same

o Data collected by USDA should be readily available to the public.

o Research should be conducted on the extent and characteristics of

4 Connecting the Dots

Housing Assistance Council 5

Rural Rental Housing Characteristics

Figure 1. Housing Tenure by Residence

6 Connecting the Dots

Housing Problems among Rural Renters

Figure 2. Housing Affordability by Tenure

Housing Assistance Council 7

Figure 3. Section 515 Rural Rental Housing Program,

8 Connecting the Dots

Figure 4. USDA Section 515 Prepayment Status,

Post 1989 Loan -

Pre 1989 Loan -

Housing Assistance Council 9

USDA Section 515 Rental Housing Units

10 Connecting the Dots

Section 515 Property

Section 515 Prepayment and Minorities

It is possible, therefore, for a prepayment to occur despite a negative impact on minorities. In

Housing Assistance Council 11

12 Connecting the Dots

What’s Not Included

Housing Assistance Council 13

Location Analysis: Research Model

Distance Relationships County Relationships

14 Connecting the Dots

A Cautionary Note About Cross-Subsidy

Housing Assistance Council 15

County Level Analysis

16 Connecting the Dots

Housing Assistance Council 17

⌂ Micropolitan counties. Section 515 developments comprise 29 percent of subsidized units

Figure 9. Section 515 Units as a Percent of

USDA Section 515 Other Subsidy

18 Connecting the Dots

Section 515 Units as a Percent of All Subsidized Rental Units

Housing Assistance Council 19

Counties Where Section 515 Units

20 Connecting the Dots

Population Loss Counties