Throughout Rural America, low income tenants depend on Rural Development (RD) Section 515 apartment buildings, often as the only affordable apartment buildings in many small towns. Minnesota was aggressive in the early years of the program in building Section 515 projects, and has quite a few of them. For years the main threat to this affordable resource has been where private owners have sought to remove the buildings from the low income program by prepaying the mortgage and converting the projects to market rate housing. Recently, however, a much bigger threat has surfaced. The earliest Section 515 projects are now reaching the end of their mortgage, or mortgage maturity date. That means not only the end of all program rent limits and tenant protections, but also the end of the Rental Assistance subsidy that so many tenants depend upon. That in turn could mean owners face a choice between huge rent increases to fill the lost RA gap, which will likely displace many residents unable to pay those increases, or a major loss of operating income which will threaten the project’s financial viability.

Because Minnesota built some of the earliest Section 515 buildings, we are now experiencing the beginning of this problem first. The first Minnesota mortgage matured in 2015. By 2019, 64 projects totaling 979 units will reach maturity, and numbers will continue to escalate after that. In order to better understand the nature of the problem and how Section 515 project owners were dealing with this, HJC and HOME Line obtained information from RD on early maturing projects in Minnesota, and then conducted a phone survey of affected owners.

You can read the report resulting from that survey here. Other rural advocates around the country have found this report helpful and are attempting to duplicate it in their states.

Fortunately, some recent initiatives at the federal level hold out some hope of minimizing the damage. RD has announced new administrative changes that should provide many owners options to extend program involvement and continue RA past the original maturity date. In the case of owners with maturing mortgages who do not want to extend program involvement, however, it will be essential for Congress to add language to the next appropriations act to make RD vouchers available to tenants in maturing mortgage buildings.