A new federal law protects some of the nation's poorest renters from eviction and provides poor homeowners a grace period on mortgage payments, but the support may not be enough for tenants, homeowners and landlords and could reduce housing supply in rural areas.
The March legislation to rescue the economy from the COVID-19 pandemic addresses, among others, two housing programs run by the Agriculture Department: the Rural Housing Service's Section 515 program that provides low-interest direct loans to build rental and cooperative housing in rural areas and the service's Section 502 program that directly lends to low-to moderate income borrowers and guarantees against default.
Supporters of the two programs say they help people who are vulnerable to the many pandemic-related business shutdowns. They also want lawmakers to address some of the shortcomings as they work on what is expected to be a fourth economic rescue package.
"These are really the poorest people in the federal system with regard to home ownership," said Bob Rapoza, executive secretary for the National Rural Housing Coalition. "These are low-income families, and their prospects might not be very good if this continues."
Section 515The Section 515 program provides direct loans to build rental and cooperative housing in rural areas. The loans are repayable over 50 years and apply to 13,500 properties with about 417,000 units nationwide. Landlords agree to USDA-set rental rates for a mostly white, elderly or disabled renter population with an average household income of $14,014. The federal government pays most of the rent although tenants who can meet the full rent are eligible.
The rescue package allows the landlords to defer loan payments and get 90 days of foreclosure protection. It also prohibits evictions for non-payment for 120 days.
But Rapoza said the 120 days may not be enough and noted that tenants still eventually have to make the missed payments. The impact won't be just on the tenants, but also on the projects themselves.
"If those families can't pay rent because they don't have jobs, what happens to those projects?" he asked. "What has been the case in recent years is that there is a shortage of housing in rural communities just generally."
A recent USDA rural housing report noted the loss of 214 multi-family rental properties between 2017 and 2019, a 1.6 percent decline.
Rapoza and Colleen M. Fisher, executive director of the Council for Affordable and Rural Housing, said landlords could find themselves in financial trouble and hard pressed to resume payments on their USDA loans if rent collections fall during the moratorium.