Breaking Ground

Much of the coverage in this publication focuses on programs administered by the Department of Housing and Urban Development or U.S. Treasury. Still, the Department of Agriculture, through its Rural Housing Service (RHS), has provided financial support to distressed rural communities for over 70 years.

The current Administrator of RHS is Joaquin Altoro, whom TCA interviewed three years ago for this column when he was overseeing the Wisconsin Housing and Economic Development Authority (WHEDA).

For nearly three decades, Altoro has worked to understand and advance underserved communities, applying his banking and housing finance expertise to help drive economic opportunities at the local, state and national levels.

While at WHEDA, Altoro strategically positioned the agency to adopt a holistic approach to leverage affordable housing to grow economic prosperity for historically marginalized communities by encouraging diversity among participating developers and providing greater consideration of the unique needs of rural communities.

Tax Credit Advisor sat down with Altoro this time to learn more about RHS, its mission, its programs and its challenges.

Tax Credit Advisor: Many people don’t think of the U.S. Department of Agriculture (USDA) as inherently housing-focused. How do you describe the role and the work of RHS to the uninitiated?

Joaquin Altoro: If you think about it, rural communities are a place that everyone can and should be proud to call home. We promote rural prosperity by investing in everything a community needs to thrive from high-speed Internet, to clean water, to good-paying jobs, to quality healthcare, and of course, affordable homes. In my current role, I have the privilege of being responsible for a large portion of those resources that I just spoke about. RHS offers a variety of programs to build or improve housing and essential community facilities, like schools and hospitals. When it comes to housing, we work to ensure that all Americans have an affordable place that they can call home and opportunities to build generational wealth through home ownership. Everyone benefits when our neighbors and coworkers have quality, affordable places to live.

TCA: What advantages does USDA provide versus HUD’s multifamily programs?

JA: I wouldn’t characterize it as a “versus” situation. Both USDA and HUD provide essential services to help people no matter where they live. The two agencies complement each other. Together, we reach every type of community from big cities to small towns. At USDA, our focus is on people who live in rural areas and on tribal lands. We have a network of field offices and local offices that allow us to reach the most remote areas. We see the challenges that residents face and come to understand their needs firsthand. We can work with them to find the right opportunities. Having that local, face-to-face presence is important. When you’re living in the communities that you serve, you see how everything is connected from housing to infrastructure to schools. All of that informs our holistic approach to serving rural communities. We make direct loans to borrowers and offer programs that are uniquely designed to meet the needs of rural areas, such as providing housing for farm workers.

TCA: Who do you typically partner with? I imagine developers, but who else?

JA: When I first started in this position, one of the first trips I took was to Northern California. My mind was blown when we reached this one community and they began to point out everything that USDA was involved with from the streets to the water, the lights, the housing and the firehouse. If you look at all of our tools and understand the spectrum of building a community, we engage with municipal leaders, nonprofits and developers. I can go right down the line and so to answer your question, yes, we do work with developers, and so much more.

TCA: How did your role leading WHEDA prepare you to become the administrator for RHS?

JA: Nearly half of Wisconsin counties are rural. My tenure as CEO of WHEDA occurred during COVID-19. I remember there weren’t enough resources to address all of the needs that we saw in rural communities. As a result of that frustration, even as I work from a national level now, I know that we have made significant investments in rural America, but I know that there is still so much to do and that we still see challenges getting resources for and to rural communities to meet their economic and housing needs. Now, working from a national level, I understand how important it is that state and federal resources align. What do our states have? What do they lack? Why are we not working together, but, more importantly, where are we working together? Where can we get that broader support from the national level to help fill in the gaps? It truly takes a village of resources to build resilience in our communities. The voices from rural America are getting louder and louder about exactly what they need to thrive. I’m hearing that again on a state level. It’s diverse what we’re seeing. And so, paying my deference and respect to the people and the work that’s being done at the state level, and making sure that we align better, is something that is a priority to me.

TCA: What do you see as the top issues facing affordable housing in rural America?

JA: Much like the larger cities and towns, the big issue in rural America is the lack of affordable housing and working hard to preserve what we have. If you lived in Washington, DC and I took you to the top of any large building, maybe one out of three structures would be a multifamily property. In rural America, one out of 25 buildings, or 30 or 50, may be multifamily. The lack of affordable housing and a strong concentration and priority to preserve the affordable housing that we do have are paramount. We also need to have a collective, national focus on homelessness in rural America. People don’t think about it. It may look and feel different compared to what we see in larger cities, where it can be right in your face sometimes, but in rural America, many families share a single unit. It may not be as visible, but if you ask anyone in a rural community, they will tell you that it’s a very prevalent issue. President Biden has taken action and proposed investments to lower costs for renters and home buyers to address the housing shortage, prevent homelessness and strengthen the economy for working families. The homeownership rate is higher now than before the pandemic. There are more housing units under construction across the nation than at any time in the last 50 years. Still, I know that we can do more and so at USDA, we stand ready to do our part to increase the number of affordable homes in rural areas.

TCA: You and your team secured a major legislative achievement in the 1,000-unit pilot program to decouple Section 515 loans from Section 521 rental assistance. Can you tell our readers who maybe aren’t as familiar with the programs how this came about and what it means for rural preservation?

JA: Section 515 refers to our multifamily housing portfolio. It allows us to provide direct loans to eligible borrowers to secure rental housing for very low-, low- and moderate-income households. Section 521 provides rental assistance to the individual residents of USDA-financed multifamily properties so that they don’t have to pay more than 30 percent of their adjusted income toward rent. A property must have a Section 515 loan with USDA to receive Section 521 rental assistance. Our team is developing a decoupling program, which would allow households to maintain rental assistance when a USDA mortgage exits the agency housing portfolio. USDA finances 13,000 rental properties that provide 400,000 affordable homes to families and individuals. Many of these properties will reach mortgage maturity in the next ten to 20 years. We’re taking a thoughtful approach to preserve the critical housing resources and not fall off that cliff. We just don’t have enough resources to preserve all of the units that are coming to a mortgage maturity. If we can decouple a Section 515 mortgage from the Section 521 rental assistance, it would allow us to attract external investment and private investment to keep these properties affordable.

TCA: Where are you in this process? 

JA: If we’re going to do it, we want to do it right. These decisions will impact the lives of our most vulnerable community members, including low-income families and elderly and disabled people on fixed incomes. That means everyone has a stake in this process to find a solution, not just USDA. We need private lenders, property owners, tenants, and even state and local governments and nonprofit organizations, to offer funding for affordable housing. We’ve been gathering feedback on how decoupling would benefit and impact all of these stakeholders and designing the processes and procedures to implement the decoupling authority. We’re assessing human capital needs and looking for external stakeholders to be involved in this process. A significant amount of my day, and my staff’s day, is concentrated on the design and implementation.

TCA: According to the FY 2023 Multifamily Housing Occupancy Report, the Section 515 program has not produced new units in over a decade and has lost more than 150,000 of its original units to reach its current size of fewer than 390,000 units. Are there efforts to reverse this trend, or do you anticipate Section 515 being phased out over time? 

JA: I’m very concerned about the loss of any of our multifamily units, even if it’s just one. The word “unit” is an industry term but each one of them is occupied by a vulnerable family or individual. The people who live in these 400,000 units across the country have an average annual household income of $15,500, 65 percent are elderly or disabled, and over 70 percent are headed by women. Last year, RHS provided $70 million in Section 515 funds to address the health, safety and accessibility needs of over 2,000 multifamily units. We also cleared a backlog of 300 multifamily preservation and revitalization applications, also known as MPR applications, that had been in the pipeline since 2017 and allocated about $28.5 million to preserve 1,615 units. We have a lot to celebrate and be proud of, but we have some serious challenges ahead of us. Due to a lack of funding, no new Section 515 program units have been built since 2011. In the past 20 years, 59,000 units have left the program due to loan prepayments, mortgage maturities and foreclosures. The program faces an accelerated loss of properties as projects with 50-year loans originated in the 1970s and 1980s reach their natural loan maturity dates. Between now and 2034, we may lose approximately 30 percent of USDA’s multifamily portfolio and 80 percent over the next 25 years. The cost of preserving the Section 515 portfolio is nearly $31 billion over the next 30 years and yet our annual appropriation is about $60 million for preservation activities. To slow down this dramatic loss of our portfolio, we are diligently working on risk-based strategies and new policies and authorities, such as decoupling.

TCA: If the decoupling pilot program works and can be expanded, I must assume it would help minimize these portfolio losses.

JA: Yes, decoupling can help, but also modernization of RHS itself. That means modernization of our IT systems and investing in our operations. We’ve seen a significant number of people retire since COVID-19. We need to invest in our human and technical infrastructure to effectively address these issues.

TCA: You’ve been with RHS for over two-and-a-half years. What do you see as your biggest accomplishment and what do you hope to achieve with the time that you have left?

JA: One of my proudest accomplishments has been raising awareness about the housing needs in rural communities and that RHS exists as a resource to help. We need more stakeholders to support us, who can tell the person next to them how important RHS is and, even more importantly, for people to understand the critical housing needs of rural America. I’ve worked hard to provide important context and stories around the challenges we see and the opportunities we face when it comes to rural housing. I mentioned earlier that people don’t always put homelessness together with rural communities but think about a family in a rural area where houses are being rented for $2,500 a month. Even in DC, where I live, that is a pretty hefty number, and so if they can’t afford that, what happens to that family? I think we’ve done a good job of telling these stories around the country and expanding the coalition of people and organizations that can work together to ensure that these stories end happily for the families and individuals we’re here to support. Through this process, we will continue to reach new constituencies and partners who didn’t even realize that they had a role to play and could be a part of the solution.