Industry News

Section 515 Comprehensive Property Assessment Study Released

In November, a formal meeting at the United States Department of Agriculture (USDA) headquarters office in Washington, D.C.,

the ICF Consulting Team formally presented the results of their study on the Rural Housing Service's (RHS) Section 515 Portfolio,

entitled Rural Rental Housing- Comprehensive Property Assessment and Portfolio Analysis.

 

In 2002, the Senate Appropriations Committee formally requested that the Rural Housing Service (RHS) analyze the Section 515 portfolio and make recommendations for future portfolio management.  The RHS then contracted with ICF Consulting to study and report on the portfolio. 

 

The following is a summary of the facts revealed from the study:

  • 40% of the loans have been made on age-restricted properties; overall the existing tenant base is 58% elderly, handicapped and disabled, or both; the average property age is 23 years; the average annual adjusted household income is $9,075.
  •   Based on the data that was reviewed and reasonable economic assumptions, a large majority of the owners do not have an economically attractive alternative to continuing in the program, and therefore ICF Consulting thinks prepayment is unlikely to occur at the rates previously assumed.
  • The location, physical condition and tenant profile of the properties suggest that the public interest is best-served by revitalizing most of this housing as affordable housing for the long-term.

Anticipated Budget Impact: After Office of Budget and Programs Analysis (OBPA) reviewed detailed assumptions provided by the consultants, the initial determination was that the budget impact of debt relief, tenant protection, capital advances and administrative costs over the seven years would be approximately $1.0 billion above the baseline. However, to accomplish the same result of preserving affordable housing for 20 years using Rental Assistance (currently the only real tool available) ICF estimates the cost to be as high as $2.9 billion above current funding levels. ICF proposes a staged approach with periodic check-points and accountability for the Multifamily Revitalization Strategy.

 

Conclusion: The Multi-Family Section 515 portfolio at USDA, representing a federal investment of nearly $12 billion, was created over 30 years and serves some of the poorest and most underserved in rural communities. The essence of the Multifamily Revitalization Proposal is to comprehensively address all the issues facing the program and to provide all stakeholders with an equitable deal:

  • Owners get a reasonable return for providing capital and good management
  • Congress and the Administration know they are getting results for the dollars spent
  • RD is perceived as providing leadership and focused management
  • Local communities have an affordable housing asset in which they have pride and
  • Above all, tenants are protected while Department's portfolio is revitalized"

 

New Tax Credit Compliance Requirements?  

The Internal Revenue Service issued Revenue Procedure 2004-82 answering 12 questions about Low-Income Housing Credit.  Click here to read.