USDA’s Rural Development (RD) published a notice last week in the Federal Register calling for applications for loan guarantees under the Section 538 Guaranteed Rural Rental Housing Program (538 Program) for FY 2016.
The 538 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.
Though much of northern Delaware does not qualify as rural by Rural Developments standards, most of the rest of the state – roughly the area south of the C&D Canal – is considered rural for the purposes of this program. (One sizeable area that is clearly not eligible is immediately around Dover. For a good map that can search eligibility based on street address, click here.)
Eligible borrowers include most state and local governmental entities, nonprofit organizations and for-profit organizations, including LLCs.
In order to qualify, the project must meet certain minimum requirements:
- Rent for individual units is capped at 30% of 115% of the area’s median income.
- Average rent for an entire project (including tenant-paid utilities) cannot exceed 30% of 100% of the area’s medium income, adjusted for family size.
- Complexes must consist of at least five units, which may be detached, semi-detached, row houses or multi-family structures.
The 538 Program has been a critical component of multiple affordable housing transactions we have closed in the past, and it’s worth considering if you qualify.