USDA Rural Multi-Family Housing Programs

For rural communities where private markets don't produce affordable rental housing, USDA Rural Housing Service operates two direct-loan programs under 7 CFR Part 3560. The Section 515 Rural Rental Housing program provides below-market direct loans to developers and nonprofits to build and preserve affordable apartments for very-low, low, and moderate-income households. The Section 514/516 Farm Labor Housing program provides separate loans and grants specifically to house domestic farmworkers. Both programs set tenant rents at the highest of 30% of adjusted monthly income, 10% of gross monthly income, or the welfare rent — making these among the most income-responsive rural housing programs available.

Current Rule (2026)

What This Rule Does

For rural communities where the private market does not produce affordable rental housing — and where farmworkers need housing near the fields where they work — the USDA Rural Housing Service operates two distinct multi-family housing programs under 7 CFR Part 3560. The Section 515 Rural Rental Housing program provides direct loans to developers and nonprofits to build and preserve affordable apartments for very-low, low, and moderate-income households in rural areas. The Section 514/516 Farm Labor Housing program provides separate loans and grants specifically to house domestic farmworkers, with properties that can be located in any area where agricultural work occurs — not only rural areas.

These are not voucher programs: RHS lends to the property owner or nonprofit developer, who must then make the units available to eligible tenants at rents capped by the program's rent-setting formula. Tenants pay the highest of 30% of their adjusted monthly income, 10% of their gross monthly income, or their welfare rent — the same income-based rent formula used in HUD Section 8 programs. RHS administers these programs directly through its national network of rural development offices, without the local public housing authority intermediary that HUD programs use.

The program's housing stock — roughly 400,000 Section 515 units at approximately 14,000 properties — is aging, and program preservation has become the dominant policy challenge. When a Section 515 loan matures or an owner prepays, the affordable use restriction ends and tenants may lose their housing or face unaffordable rents. Recent regulations and appropriations have focused on preventing prepayments and preserving existing units rather than building new stock.

Key Provisions

• § 3560.1 — Applicability: Part 3560 governs all RHS direct multi-family housing programs; covered borrowers include individuals, partnerships, nonprofits, public bodies, and certain limited partnerships; eligible tenants must have very-low, low, or moderate income as defined by HUD area median income data
• § 3560.55 — Applicant eligibility for new loans: applicants must demonstrate legal authority, organizational capacity, and technical ability to develop and manage affordable housing; ownership structure (individual, limited partnership, nonprofit, cooperative) affects required documentation
• § 3560.56 — Section 515 Notice of Funding Availability (NOFA) process: RHS publishes NOFAs when funding is available; applications compete based on need, readiness, and leveraging of other funds; RHS does not accept unsolicited applications outside the NOFA cycle
• § 3560.58 — Site requirements: sites must be in eligible rural areas (population under 35,000 or designated rural under the Act); must have adequate water, sewer, roads, and services; not in a special flood hazard area unless flood insurance is obtained
• § 3560.151 — Tenant eligibility: applicants must be U.S. citizens, non-citizen nationals, or qualified aliens; income must be at or below the applicable limit (very-low: 50% of AMI; low: 80% of AMI; moderate: higher limit set by program); tenants certified annually
• § 3560.202 — Rent-setting formula: approved rents must cover all project operating expenses, management fees, maintenance reserves, and scheduled loan payments; rents cannot exceed comparable market rates for the area
• § 3560.203 — Tenant contribution: each eligible tenant pays the highest of (1) 30% of adjusted monthly income, (2) 10% of gross monthly income, or (3) welfare housing allowance; difference between tenant contribution and approved rent is covered by RHS Rental Assistance if the unit has an RA contract
• § 3560.551–3560.559 — Off-farm labor housing: properties housing domestic farmworkers not employed by the owner (off-farm, also called "migrant") follow a distinct NOFA-based application track; no rural area requirement applies; eligible farmworkers include seasonal, migrant, and year-round agricultural laborers and their families

How It Affects You

If you are a low-income renter in a rural area: Section 515 properties are not publicly advertised the way HUD-assisted properties are — they are owned by private developers and nonprofits who manage their own waiting lists. Contact your USDA Rural Development state office or use the RHS Multi-Family Housing property locator to find Section 515 properties near you. Rent is capped at 30% of your adjusted income if the property has a Rental Assistance contract; otherwise you pay the full approved rent, which may still be below market. Income is verified at move-in and recertified annually.

If you are a farmworker: Section 514 (loans) and Section 516 (grants) fund housing specifically for domestic agricultural workers. On-farm housing (owned by the farm operator, housing farm employees) and off-farm housing (owned by a nonprofit or cooperative, housing farmworkers from multiple employers) are both eligible but follow different rules. Off-farm labor housing funded through Section 514/516 can be located anywhere agricultural work occurs — not just in rural areas — and RHS uses a competitive NOFA process to award funds.

If you are a nonprofit housing developer or agricultural employer: Applying for Section 515 or Section 514/516 funds requires waiting for an RHS NOFA announcement. Applications are competitive. Projects must demonstrate site control, community need, leveraging of additional funds, and organizational capacity to manage affordable housing long-term. Ownership through a limited partnership with a tax credit investor (combining Section 515 with Low-Income Housing Tax Credits) is the most common financing structure for new construction — RHS has developed guidance for Section 515 / LIHTC layered deals.

If you own or manage an existing Section 515 property: Prepayment of a Section 515 loan requires RHS approval and triggers tenant notification requirements. RHS has authority to offer incentives (debt restructuring, equity loans, grant funds) to prevent prepayment and preserve affordability. If a property reaches the end of its loan term, existing tenants have the right to organize and offer to purchase the property before the owner can exit the program.

Statutory Authority

This rule implements:

• 42 U.S.C. § 1480 (Housing Act of 1949, Title V) — Core authority for all USDA rural housing programs, including authority to make direct loans for rural rental housing (Section 515) and to establish income and rent standards for tenant eligibility
• 42 U.S.C. § 1484 (Section 514) — Farm labor housing loan authority: RHS may make direct loans to eligible borrowers to build, improve, or repair housing for domestic farm laborers
• 42 U.S.C. § 1486 (Section 516) — Farm labor housing grant authority: RHS may make grants to nonprofit organizations and public bodies for farm labor housing that cannot be fully financed with Section 514 loans alone

Implementing Regulations

In addition to 7 CFR Part 3560 (the core Section 515/514/516 program rules), USDA's guaranteed multifamily program and grant programs are governed by 7 CFR Part 3565 and 7 CFR Part 1944:

7 CFR Part 3565 — Guaranteed Rural Rental Housing Program (96 sections across 11 subparts — the regulatory framework for Section 538 loan guarantees, through which USDA backs private lender loans for affordable rural rental housing rather than making direct loans):

• Subpart A — General Provisions (§§ 3565.1–3565.17): Part 3565 implements Section 538 of the Housing Act of 1949; guarantees are issued by USDA Rural Housing Service to approved private lenders; all guaranteed properties must be in rural areas with at least five rental dwelling units; the Agency may run demonstration programs to test new guarantee structures (§ 3565.17); exception authority allows the Administrator to waive individual provisions when conditions warrant (§ 3565.13)
• Subpart C — Lender Requirements (§§ 3565.101–3565.111): approved lenders must be licensed in the state where they operate, be in good standing, and provide annual audited financial statements to remain on the Agency's approved lender list; construction-to-permanent lenders must demonstrate capacity to originate and service construction loans; lenders take full responsibility for the actions of their agents and mortgage brokers; minimum loan amounts cannot be imposed on borrowers (§ 3565.109); insolvency triggers mandatory transfer of guaranteed loans to another approved lender
• Subpart D — Borrower Eligibility (§§ 3565.151–3565.156): eligible borrowers include individuals, corporations, state and local governments, tribes, and nonprofits with the skills and experience to build or rehabilitate rural multifamily housing; borrowers must control the land at application (through option, lease, or deed); anyone delinquent on any federal debt is ineligible; state or local loan defaults require Agency finding that the default was beyond the borrower's control; lenders must certify compliance with fair housing laws (Title VIII of the Civil Rights Act) and disclose any identity-of-interest relationships with the Agency or borrower
• Subpart E — Loan Requirements (§§ 3565.201–3565.215): tenant eligibility is capped at 115% of area median income at move-in (income may rise after occupancy); rent is capped so no unit's rent (including utilities) exceeds 30% of 115% of AMI for the applicable household size, and the project's average rent may not exceed 30% of 100% of AMI; maximum loan term is 40 years (but not beyond the property's remaining economic life); minimum term is 25 years; interest rates are fixed for the loan life and capped at Agency-published maximums; the Agency must provide interest credit on at least 20% of guaranteed loans each fiscal year, reducing the rate to the applicable federal rate; maximum loan amounts follow Section 207(c) of the National Housing Act per-unit limits, with higher caps for nonprofits and government entities
• Subpart F — Property Requirements (§§ 3565.251–3565.257): eligible housing types include new construction, substantial rehabilitation, and conversion of existing structures; manufactured homes are eligible if they meet HUD and Agency specifications; all properties must meet state and local building codes and applicable federal standards; NEPA environmental review is required; construction procurement must use open competitive bidding
• Subpart H — Project Management (§§ 3565.351–3565.354): at closing, borrowers must sign a regulatory agreement binding the property to affordable-housing use for the life of the loan guarantee; during the guarantee period the property cannot be converted to other uses; affirmative fair housing marketing plans must be reviewed annually
• Subpart K — Ginnie Mae Securities (§§ 3565.500–3565.505): Agency-guaranteed Section 538 loans may be pooled to back Ginnie Mae (GNMA) guaranteed mortgage-backed securities, providing access to capital markets liquidity; lenders who participate in the Ginnie Mae program must comply with both Part 3565 and Ginnie Mae's Mortgage-Backed Securities Guide

The Section 538 guarantee program reaches a market segment that Section 515 direct loans cannot: projects large enough to support private financing but requiring the Agency guarantee to attract lender participation at affordable interest rates. Unlike Section 515 (very-low and low income focus), Section 538 serves low-to-moderate income households (up to 115% of AMI). The two programs are complementary — many affordable rural rental projects use both a Section 538 guaranteed senior loan and a Section 515 loan as a subordinate layer, with rental assistance layered on top to bring rents within reach of the lowest-income tenants.

In addition, related USDA Rural Housing Service grant programs are governed by 7 CFR Part 1944:

• Part 1944, Subpart N — Housing Preservation Grants (HPG): competitive grants to local governments and nonprofits to help very-low and low-income homeowners and renters in rural areas repair or rehabilitate their housing; funds flow through state RHS offices via NOFA competitions; grantees manage the repair assistance locally and may provide grants, loans, or interest subsidies to eligible homeowners; eligible repairs include structural, health-safety, accessibility modifications, and energy efficiency improvements
• Part 1944, Subpart I — Self-Help Technical Assistance Grants: grants to nonprofits (often Habitat for Humanity affiliates and Community Development Corporations) to provide technical and supervisory assistance to groups of very-low income families who build their own homes through the Section 502 Mutual Self-Help Housing program; the TA grantee provides construction supervision and organization; participating families contribute "sweat equity" labor in lieu of down payments, reducing the needed loan amount
• Part 1944, Subpart K — Technical and Supervisory Assistance Grants: grants to eligible organizations to assist low-income rural residents in buying and rehabilitating housing, and to develop or maintain affordable rural rental housing; grantees provide technical assistance to residents navigating RHS loan programs
• Part 1944, Subpart F — Congregate Housing Services Program (CHSP): supportive services (meals, transportation, housekeeping, personal care) for elderly and disabled residents of Section 515 properties; RHS provides grants to Section 515 property owners/managers to coordinate these services on-site; designed to help elderly rural residents "age in place" rather than moving to nursing facilities

HUD Section 8 / Section 515 Layered Projects — 24 CFR Part 884

Many Section 515 properties receive a second layer of federal subsidy through HUD's Housing Assistance Payments program under 24 CFR Part 884 — the Section 8 New Construction Set-Aside for Section 515 Rural Rental Housing Projects. This layered structure makes the projects affordable for the lowest-income tenants who couldn't afford even the income-based rent formula that Section 515 alone provides:

• § 884.101 — Applicability: Part 884 applies to Housing Assistance Payments for eligible families in Section 515 projects; the "new construction set-aside" reflects that these HAP contracts were historically reserved for newly constructed Section 515 properties, distinct from Section 8 contracts for existing private housing
• § 884.114 — Financing requirement: eligible projects must be financed under USDA Section 515 — private-sector projects without a Section 515 loan are not eligible; the joint HUD-USDA structure is the defining characteristic and requires owners to satisfy both agencies' requirements simultaneously
• § 884.106 — HAP payments: HUD makes Housing Assistance Payments directly to property owners for occupied eligible units; the payment equals the difference between the HUD-approved Contract Rent and the Gross Family Contribution (what the family can afford at 30% of income)
• § 884.108 — Contract term: HAP contracts may run for an initial term up to 40 years — significantly longer than most Section 8 contracts, aligned with the amortization schedule of the underlying Section 515 loan
• § 884.108a — 90-day notice before contract expiration: owners must notify assisted families at least 90 days before the HAP contract expires — giving families time to find alternative housing or apply for tenant-based vouchers
• § 884.116 — Income targeting: at least 30% of units must be occupied by very-low-income families (at or below 50% of area median income); the occupancy floor ensures the deepest subsidy reaches the lowest-income rural renters

The legacy portfolio of Part 884 / Section 515 layered projects (largely originated 1970s–1990s) faces compounding preservation pressure: when both the HAP contract and the Section 515 loan mature, the dual affordability restriction ends simultaneously. These are the most deeply subsidized units in the rural affordable housing stock — their loss is harder to replace than single-subsidy Section 515 properties. Preserving this inventory requires coordinated RHS and HUD action, including use of Rental Assistance (RA) and HAP contract renewals.

Recent Rulemakings

• 87 FR 11283 (2022) — Most recent significant amendment; updated provisions governing tenant eligibility verification and Rental Assistance administration; addressed issues identified in OIG audits of tenant income certification accuracy
• 81 FR 11049 (2016) — Comprehensive update affecting multiple subparts; addressed the Section 515 preservation framework, transfer and assumption procedures for ownership changes, and conditions under which RHS will accept prepayment of loans

Recent Developments

• Section 515 prepayment and portfolio loss: RHS's Section 515 direct loan portfolio has been declining as early-use period restrictions expire and owners prepay or transfer properties out of the program. Prepayment removes affordable housing from the program and often results in loss of rent-restricted units. RHS and Congress have struggled to develop effective preservation tools — the 2016 rule update addressed transfer and assumption procedures, but the economic incentives for prepayment remain strong as rural real estate values have increased in many areas.
• Rental Assistance budget pressure: RHS Rental Assistance (administered under 7 CFR Part 3560) is the subsidy mechanism that makes Section 515 rents affordable for very-low-income tenants. RA is a discretionary appropriation that must be renewed annually. Without sufficient RA funding, properties cannot maintain affordable rents for the lowest-income tenants. Shortfalls in RA funding have led to displacement in some RHS rural housing properties. The RA budget has been a recurring issue in USDA appropriations negotiations.
• DOGE and RHS staffing (2025): USDA's Rural Housing Service experienced workforce reductions in 2025 under the Trump administration's DOGE initiative. RHS state and field office staff process loan servicing, tenant certification reviews, and property inspections for the Section 515 portfolio. Staffing reductions slowed processing of tenant eligibility re-certifications and property physical assessments.
• Rural housing and remote work migration: Post-COVID remote work has driven increased housing demand in small towns and rural communities that are attractive to remote workers from expensive urban areas. This has increased competition for housing in some rural areas where RHS Section 515 properties are located, potentially affecting affordability for very-low-income rural residents who compete with higher-income remote workers for limited housing stock.

Pending Action

RHS Rental Assistance funding is the most critical near-term pending action — watch the FY2026 and FY2027 Agriculture appropriations bills for RA appropriations levels, which determine whether existing Section 515 tenants maintain affordable rents. Shortfalls in RA appropriations directly displace very-low-income rural tenants. Separately, RHS is working on a proposed rulemaking to update Section 515 portfolio preservation tools, including strengthened tenant notification requirements and right-of-first-refusal for nonprofit affordable housing organizations when owners seek to prepay or transfer properties. Property owners in the Section 515 portfolio should engage their RHS State Rural Development office before pursuing prepayment or transfer transactions to understand current policy and whether preservation alternatives are available.