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Rural Housing


Low Income Housing Tax Credits are used extensively in rural areas to subsidize the cost of creating multifamily rental housing. Under the Low Income Housing Tax Credit Program, taxpayers may take a credit against federal income taxes for qualified rental housing development expenditures. The OCC's Tax Credit Resource Directory page includes a Community Developments Fact Sheet on Low Income Housing Tax Credits (PDF). The OCC's Community Developments insights paper, Low-Income Housing Tax Credits: Affordable Housing Investment Opportunities for Banks (March 2014) describes how LIHTCs are used to develop affordable rental housing and how banks and thrifts can benefit from investing in LIHTC-financed projects. It describes the two approaches for investing in LIHTCs - direct investments in individual affordable housing projects and fund investments that have multiple projects managed by third parties. The report outlines risks and regulatory considerations of LIHTC investments and describes how these investments would be considered under the Community Reinvestment Act (CRA).

U.S. Department of Agriculture

Multi-Family Housing Loan Guarantees: The program works with qualified private-sector lenders to provide financing to qualified borrowers to increase the supply of affordable rental housing for low- and moderate-income individuals and families in eligible rural areas and towns.

USDA & Federal Home Loan Bank's Mortgage Partnership Finance (MPF) Program
The Mortgage Partnership Finance program of the Federal Home Loan Banks (FHLBs) has a partnership with the U.S. Department of Agriculture's Rural Development Program. Under the arrangement, approved FHLBs participating in the MPF program can purchase RHS Section 502 government-guaranteed loans from qualified members, including commercial banks, thrifts, credit unions, and insurance companies. USDA Rural Development Guaranteed Loans are offered to qualifying low- and moderate-income families to purchase or refinance homes in rural areas with a population of less than 10,000 and non-metropolitan communities with populations of 10,000-25,000, the MPF reported. The partnership enables the FHLB of Chicago, which pioneered the MPF program, and the FHLB of Pittsburgh to buy such loans from their members as "a competitive alternative to the secondary mortgage market." 

USDA Guaranteed Rural Rental Housing Program (Sec. 538) provides up to a 90 percent guarantee (for permanent financing or permanent & construction combined) to banks and thrifts that finance affordable rural rental housing. The program is described in the OCC fact sheet on USDA Rural Housing Finance Programs. Following up on a demonstration program, the Rural Housing Service (RHS), an agency within the Rural Development mission area, is amending its regulations (as of January 3, 2011) to add an additional form of guarantee that is now available under its Guaranteed Rural Rental Housing Program. A single, continuous guarantee during the construction phase for construction advances and the permanent financing phase of the project (for loans that meet certain criteria) will now be provided in addition to the two existing forms of guarantees under the program.

USDA Guaranteed Rural Rental Housing - Rural Rental Housing Guaranteed Loans are loans that are funded by conventional lenders (banks, thrifts, mortgage companies, etc.). USDA protects the lender by limiting the loss in the event of default. Qualified lenders are authorized to originate, underwrite, and close loans to eligible borrowers to construct new multi-family housing projects. Lenders may also make loans for the purchase of an existing property where rehabilitation of at least $15,000 per unit is needed. Rural Housing Services will guarantee the lender's loan up to 90% of total development cost. Eligible borrowers include non-profit corporations, public bodies, and for-profit organizations. The program targets small communities with populations of no more than 20,000, located in non metropolitan areas. This program is intended to fund construction, acquisition, or rehabilitation of rural multifamily housing for low-income occupants. See the USDA Fact Sheet.

USDA Preservation Information Exchange (PIX) is a Website for those interested in preserving affordable multifamily rental properties.

U.S. Department of Housing and Urban Development

HUD 203(k) Purchase/Rehabilitation Program - FHA 203(k) is a mortgage insurance program that enables homebuyers and homeowners throughout the country to finance the purchase or refinancing of a house and the cost of its rehabilitation through a single mortgage. Risk to lenders is reduced because the loan is insured at closing, prior to completion of the rehabilitation work. FHA-approved lenders make these insured loans and supervise the rehabilitation. OCC has written an Insights report on this topic: OCC’s FHA 203(k) Mortgage Insurance Program: Helping Banks and Borrowers Revitalize Homes and Neighborhoods (May 2013) that describes the Federal Housing Administration's (FHA) 203(k) Rehabilitation Mortgage Insurance, an important financial tool that enables borrowers to purchase and rehabilitate properties.

Other Resources

Council for Affordable and Rural Housing (CARH) is a national non-profit trade organization. CARH serves as an association for participants in the affordable rural housing profession, including: Builders, Owners, Developers, Managers, Non-profits, Housing Authorities, Syndicators, Accountants, Architects, Attorneys, Bankers, and companies that supply goods and services to the industry.

Federal Home Loan Banks
The Federal Home Loan Banks, through their affordable housing and community development programs, are serving lower income households. This fact sheet describes how the FHLB, in partnership with their communities, have a long history of using their programs to leverage private and public financing for housing and community development.

Housing Assistance Council (HAC) provides loans at below-market interest rates to rural housing developers as well as technical assistance, research, and training to public and private organizations. HAC publishes Taking Stock: Rural People, Poverty, and Housing in the 21st Century, which includes a chapter on Housing in Rural America and Rural Voices, a newsletter that provides ideas on funding, planning, and building affordable housing and livable rural communities; HAC News, a biweekly newsletter with brief updates on topics related to rural housing and community development; and dozens of research reports and technical manuals, most of which are available on HAC's Website.

NeighborWorks® in Rural America Initiative (NRI)
NeighborWorks® America administers the NeighborWorks Rural Initiative which provides funding to community development corporations and local non-profit organizations in over 75 rural communities across the country. These organizations provide homeownership education counseling, develop and renovate single- and multi-family housing, and promote economic development in rural areas across the country.

Opening Doors to Rural Homeownership: Opportunities to Expand Homeownership, Build Wealth, and Strengthen Communities, National Rural Housing Coalition, (2014). This publication explains how two USDA programs (Section 502 Direct Loan program and Section 523 Mutual Self-help Housing program) have expanded homeownership opportunities to some of the nation’s poorest rural families.