Rural New Yorkers At Risk

Most of the state relies on units developed through the USDA Section 515 program to provide affordable rental housing for low income rural New Yorkers. The following maps and charts provide a statewide overview of where these properties are located. In the appendix, you can find district profiles broken down by Senate, Assembly, and Economic Development Regions.

Mirroring national trends, 85% of all counties across New York State house tenants benefiting from USDA Section 515 properties. In total, there are close to 400 properties supporting over 15,000 households.

Nearly 49% of New York’s USDA 515 tenants are elderly, more than half of the heads of households are women, and more than one in four tenants have disabilities (26%). Additionally, nearly 2,000 minors rely on these properties for stable housing. Tenants tend to be lower-income compared to other households, with an average income of $18,061 compared to the state average of $47,173. Across all counties, Section 515 tenants have substantially lower incomes when compared to their respective counties.

Most rural tenants identify as white, but trends across the country indicate that lower-income non-white households are increasingly moving to rural areas. These households are more likely to live in substandard housing, which includes homes without adequate infrastructure, overcrowding, and other quality and affordability challenges.

In the coming years, we will start to see an even greater increase in the number of households losing affordability and protections granted under the USDA Section 515 and related rental assistance programs. As shown in the chart below, while only a few dozen households are at risk of losing their affordability protections over the next 2-3 years, the number of households impacted increases substantially beginning in 2027 - after which we will start to see hundreds of tenants each year subject to potential displacement with limited access to housing and support if these programs are allowed to lapse.

The tenants occupying these homes rely largely on fixed incomes and will not have many options should their properties exit the requirements established through the Section 515 program. Nearly 60% of units are for elderly New Yorkers, and hundreds are vacant. With the right program and funding, these vacant units could be renovated and added back into the program to benefit these vulnerable groups.

Within the counties that include USDA Section 515 properties, it is crucial to note that most of the housing stock - almost three out of every four units - is owner-occupied. We need to enact policies to make it easier to build more affordable housing, especially rental housing, in many of these communities. Until we do, this reality means a loss of USDA Section 515 rental units adds even more urgency to an already precarious situation, which could lead to negative outcomes such as overcrowding, use of low-quality dilapidated housing, or homelessness.

USDA 515 properties can continue to provide quality affordable housing to some of the most vulnerable rural New Yorkers if we act quickly to help rehabilitate, preserve and create permanent affordability. Existing programs already being implemented by the state can be adapted to address the challenges with Section 515 properties to prevent displacement of vulnerable tenants.

In New York, the Mitchell-Lama Housing Program is a state-sponsored initiative to provide affordable housing to middle-income residents. It was established in 1955 to encourage the development and management of affordable rental and cooperative housing. Participants are able to take advantage of financial incentives and regulatory benefits to reduce costs. The essential functions of the program are:

• Provide developers financial incentives to build affordable housing in return for keeping rents and prices below market rate for a period of time (usually 20-40 years).

• Ensure tenants are meeting qualifying income restrictions to ensure housing is going to individuals and families in need.

• Protect tenants from excessive rent increases and arbitrary evictions.

• Ensure the state provides oversight - New York State Homes and Community Renewal (HCR) helps to regulate the program.

The program is not just meant to incentivize for-profit developers. There is a strong history of nonprofits sponsoring projects, helping with rehabilitation and managing properties.

Over 100,000 units of affordable middle-income housing have been developed through the program. However, these units face similar challenges to USDA Section 515 properties, namely:

• When the affordability period ends after 20-40 years, units not covered by the Rent Stabilization Law or Emergency Tenant Protection Act are deregulated and may see increases in rents.

• Limited supply means long waiting lists for existing units.

• An aging housing stock and expensive upkeep mean units may end up in disrepair, leading to unsafe living conditions for tenants.

• Participation due to its 35-year affordability restrictions was limited, resulting in reduced affordability timelines to increase participation.

• Markets that are appreciating make it difficult to incentivize greater affordability without requisite deeper subsidies to make it worthwhile to owners.

The state has been implementing the Mitchell-Lama Rehabilitation and Preservation (RAP) program to address cases where existing properties are in need of serious investment and capital repairs. Through RAP, property owners are incentivized to make necessary repairs in exchange for extending the period of affordability and tenant protections (up to 40 years) $50 million was appropriated to support such programs to help preserve Mitchell-Lama units in the state’s FY2023 budget. There is an opportunity to create a program that mirrors this focused on the USDA Section 515 properties. The program would need to similarly offer terms that give property owners an incentive to stay in the program and continue affordability regulations.

In the aftermath of the foreclosure crisis, the State of New York Mortgage Agency Community Restoration Fund was established to help homeowners have a fresh start. As part of that initiative, a loan fund was established to support community land trusts (CLT). This option could be expanded to support USDA Section 515 properties, especially as CLT models have grown beyond homeownership and increasingly support the preservation of affordable rental housing.

The Restore New York Communities Initiative, implemented by Empire State Development, is another program that, among other goals, is intended to help revitalize rural areas. The program can be used to fund the rehabilitation of properties and could be another State tool for preserving USDA Section 515 properties. Governor Hochul has proposed another $50 million in the budget to continue the program. One challenge is it requires municipalities to initiate an application. Given experiences from other parts of the country, it is clear that pooled-transactions that cut across counties are critical to achieving success at scale.

There are a variety of reasons why a property owner may choose to leave Section 515, but one of the requirements is to ensure non-profits are given an opportunity to learn about the opportunity to buy and operate a project. The State could do more to ensure that non-profit, mission-driven organizations that are qualified to develop and/or manage properties are able to better engage with USDA 515 properties in the event an existing property owner wants to prepay their loan or is otherwise seeking to sell a given property.

Whatever options we can implement to fund the rehabilitation and preservation of USDA Section 515 properties across the state, there is a framework for implementation that should be adhered to:

1. Adequate funding is critical. There must be an Initial investment by the state to prioritize units exiting the program by 2030 upfront. This should be followed by more significant investment as the number of units impacted continues to increase in the coming years.” The capital needs and risk for expiring mortgages is too real to start with a low amount of funding that serves only a handful of properties.

2. Coordinate with the USDA, property owners, tenants, and trusted non-profit organizations to streamline the transfer process, reduce costs, and incentivize engagement in the program.

3. Ensure quality oversight and continue and expand upon technical assistance and capacity-building support to inform tenants, property owners, and interested nonprofits on program guidelines.

4. Ensure adequate financing incentives and stable and predictable revenue for developers and property managers to address market and tenant volatility concerns.

5. Work to extend affordability periods as long as possible and identify strategies that could support the case for permanent affordability.

6. Pool properties into a larger portfolio to help address financing challenges that small properties inherently face.

A combination of financial incentives, regulatory streamlining, and an opportunity to contribute to community development can provide an attractive option for developers interested in creating affordable housing.

Advocates for increasing and preserving quality affordable housing in rural communities continue to call for the federal government to do more to preserve and expand affordable rural housing. There is a need for significant expansion of Section 515 funding as well as an expansion of the National Housing Trust Fund. Further, The Strategy and Investment in Rural Housing Preservation Act – a bill re-introduced by Senators Tina Smith (D-MN) and Jeanne Shaheen (D-NH) in May 2023 – would ensure that low-income tenants can still receive rental assistance to afford their rental home even after the mortgage expires. It would also allocate increased congressional spending to preserve affordable homes in rural parts of the country.

However, relying solely on the Federal government to address the issue will not be enough, and the consequences would be too great. Our federal government is divided and national solutions are not guaranteed. Meanwhile, thousands of residents across New York are at risk of losing a critical supply of affordable housing at a time when we are not meeting our housing needs, especially for our most vulnerable neighbors. Governor Hochul has an ambitious goal of creating 100,000 affordable homes over the next decade. But we cannot allow existing affordable housing to be lost. State leadership must act now to implement practical solutions to preserve the USDA Section 515 rental homes and ensure continued affordability for the thousands of New Yorkers who rely on these units for stable housing.