USDA Section 515 Rural Rental Housing

How It Works

The Section 515 program lets the U.S. Department of Agriculture lend money directly to owners of modest rental housing in rural areas. It is run by the Rural Housing Service, part of USDA Rural Development. Eligible borrowers include nonprofit and for-profit organizations, state and local government entities, and Indian tribes.

The loan terms are what make the restricted rents possible:

• Interest credit subsidizes the loan down to an effective payment rate of 1%.
• Loans are amortized over up to 50 years (or the building’s economic life, if shorter). They are repaid over a 30-year term, with the remaining balance due at the end.
• Limited-profit owners may earn a return of no more than 8% of their required initial investment.

In exchange, owners must rent to income-eligible households and operate under a USDA-approved budget. That budget sets a basic rent (enough to cover operating costs and the 1% loan payment) and a higher note rent (what the rent would be at the loan’s full interest rate).

Tenants pay the highest of 30% of monthly adjusted income, 10% of gross monthly income, the housing portion of any welfare payment, or the basic rent, but never more than the note rent. Many properties also receive Section 521 Rental Assistance. For tenants in assisted units, the basic-rent floor drops away, so they generally pay 30% of adjusted income.

Who It Serves

Tenants must qualify as very low-income (at or below 50% of area median income), low-income (at or below 80%), or moderate-income. For USDA’s rental programs, moderate income means no more than $5,500 above the low-income limit. Some properties are reserved for elderly households.

In practice, residents have very low incomes. NLIHC’s 2025 Advocates’ Guide reports that 93% of Section 515 tenants earn less than 50% of area median income. More than two-thirds of assisted households are headed by older adults or people with disabilities. The same source counts about 360,300 households living in Section 515 housing.

How to Access It

• Renters apply to individual properties, not to USDA. USDA’s online multifamily rental search lists properties by state, and most keep a waiting list.
• Owners and buyers work with their USDA Rural Development state office. Section 515 funds are now offered mainly through preservation notices, such as subsequent loans to rehabilitate properties or finance transfers to new owners.

History

Congress added Section 515 to the Housing Act of 1949 in 1962, initially for rental housing for older rural residents. A 1966 amendment opened it to other low-income families and to cooperative housing. For decades it financed new rural apartments.

As early owners began paying off loans and leaving the program, Congress restricted prepayment. Loans made on or after December 15, 1989, cannot be prepaid. Since FY2012, USDA has used all new Section 515 loan authority for preservation rather than new construction. Congress provided $50 million in Section 515 loans for FY2026, compared with about $115 million a year in the early 2000s.

Limitations

The program’s biggest challenge is an aging portfolio:

• Maturing mortgages. When a Section 515 loan matures, its use restrictions end. A 2018 GAO report estimated that more than 90% of USDA-assisted multifamily properties could leave the program between 2028 and 2050.
• Capital needs. A 2016 USDA assessment estimated that Section 515 and farm labor housing properties would need $5.6 billion beyond existing reserves over 20 years.
• Little new supply. With no new construction since FY2011, developers in rural areas rely on other tools, especially the Low-Income Housing Tax Credit, which is also used alongside Section 515 loans in preservation deals.

Recent changes aim at preservation. The 21st Century ROAD to Housing Act (Public Law 119-101), enacted July 11, 2026, permanently authorizes USDA’s preservation and revitalization program. It also lets a nonprofit or public buyer purchase a Section 515 property before rehabilitation, if the buyer accepts long-term use restrictions and commits to make the repairs. In September 2026, USDA announced a pilot running from October 9, 2026, to September 25, 2028, to speed up Section 515 ownership transfers, including those that use tax credits.