United States

Report indicates critical investment needed for rural rental housing

INSIGHT ARTICLE  | 

A report funded by the United States Department of Agriculture (USDA) Rural Development (RD), and conducted independently by consultants in RSM US LLP’s federal government, real estate and valuation practices and CoreLogic, indicates $5.6 billion in additional investments are needed to preserve affordable multi-family housing (MFH) in rural America for future generations.

The report The Comprehensive Property Assessment of the USDA Rural Development Multi-Family Housing Portfolio, summarizes the additional capital investment that is needed above current funding levels in order to maintain the functional utility of properties within this portfolio. Field work and subsequent analysis focused on the costs and timeline for the replacement of long-lived capital items such as roofs, parking lots, HVAC systems, kitchen and bathroom cabinets, windows, exterior facades, and electrical and plumbing systems over the next 20 years.

Along with key forecasting scenarios and data insights, the report, which was released in August 2016, also provides a framework and conversation starter going forward for how the USDA RD can more effectively work with its stakeholders, policymakers, partners and lawmakers to maintain affordable MFH for rural residents who rely on the USDA RD to meet their housing needs.

Data for the report was obtained via a comprehensive capital needs assessment and focused on:

  • Current conditions of the Section 515 Rural Rental Housing Program
  • First-time review of Section 514 Off-farm Labor Housing and 538 Guaranteed Rural Rental Housing programs
  • Impact of the Multi-family Housing Preservation and Revitalization program (MPR)

Field assessments, conducted October through December in 2015, were completed on 394 sample properties using year-end 2015 as the base year. The data from this sample were then expanded to the overall RD MFH housing portfolio population that includes 14,650 properties representing 454,048 total units. Capital needs projections were calculated assuming a 3 percent inflation rate over a 20-year period and discounted back to a net present value using a 5 percent discount rate.

Key findings of the report included:

  • The net present value of the estimated reserves deficit for the MFH portfolio is $5.6 billion.
  • Section 515 portfolio reserves deficit has increased since 2004.
  • The MPR program has improved the financial and physical conditions for properties that have participated in this program.

For more information, download the entire report.

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