USDA offers guaranteed rental housing loans to rural landlords

The United States Department of Agriculture’s (USDA) Rural Development initiative helps to create affordable rental housing for lower income tenants that live in rural communities.

USDA Rural Development is a major funding source for the financing of rental properties for the benefit of lower-income households. The Guaranteed Rural Rental Housing Program provides the funding necessary for landlords who promise to maintain competitive pricing for the rental property within the community.

Low and moderate income households who normally have difficulties finding rental properties that they can afford can now find a greater selection of rental homes with affordable rental rates. The goal of the program is to provide more options for tenants who live in rural areas that may otherwise have little choice but to pay higher rent when few vacancies exist.

These guaranteed rental housing loans are not for tenants to pay their rent. Tenants would need to go to other nonprofit organizations or traditional lenders if they are actually looking for a loan to help make their rent payments.

The loans are actually designed to go towards property developers and potential landlords to offer more affordable rental housing options to those who cannot afford to pay higher rental rates. The end result is that lower income tenants are more likely to find an affordable rental house even though they live in a rural area.

Lower Income Tenant Requirements

Households who earn less than 115% of the adjusted gross median income level for their region would be the only occupants allowed to lease properties that were financed through the Guaranteed Rural Rental Housing Program. Additionally, tenants would pay no more than 30% of the 115% threshold for just a gross median income.

Landlords that would like to provide affordable housing solutions for lower-income households may apply for funding for their project through USDA’s Rural Development. Sole proprietors and for-profit developers could borrow up to 90% of the value of the property. Nonprofit organizations have a maximum loan-to-value ratio of 97%.

Funding for the Guaranteed Rural Rental Housing Program depends on support from the federal government and therefore may vary from one year to the next. For more information contact the local Rural Development center nearest you.