S 1260119th CongressIn Committee

Rural Housing Service Reform Act of 2025

Introduced: Apr 2, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Rural Housing Service Reform Act of 2025 is a broad package of reforms aimed at modernizing, expanding, and preserving rural housing programs run by the USDA’s Rural Housing Service (RHS). It seeks to streamline foreclosure procedures for multifamily RHS mortgages, bolster loan preservation and rental assistance through a new permanent preservation and revitalization program, expand access to capital for Native communities via a Native CDFI relending program, and broaden lending tools (including Section 502 and 504 programs) with higher loan caps, longer terms, and new uses such as accessory dwelling units. The bill also creates new grants for rural community development, requires more reporting and oversight (annual RHS reporting and GAO evaluation of technology), and adjusts the Rural Housing Voucher program to better reflect tenant need and project maturities. In short, it aims to protect and expand affordable rural housing, increase funding and flexibility for lending and preservation, and improve governance and accountability.

Key Points

1Strengthening preservation and continuity of affordable housing: Creates streamlined, lender-friendly foreclosure procedures for RHS multifamily mortgages and ensures rental assistance payments stay in place during foreclosure, with the option to continue using rental assistance on existing projects under 514/515/516.
2Permanent housing preservation and revitalization program (Title II): Establishes a formal program to preserve and revitalize 514/515/516 projects, including annual notices to owners and tenants about maturities, loan restructuring tools (reducing interest, deferring payments, reamortizing debt, etc.), renewal of rental assistance for up to 20 years with the restructured loan term, decoupling of rental assistance if needed, restrictive use agreements to lock in affordability, and an automatic 1-year approval if a renewal plan isn’t acted on within 30 days. Also allows technical assistance and imposes reporting requirements.
3Native CDFI relending program (Title III): Creates a set-aside to channel up to $50 million per year in direct loans to Native Community Development Financial Institutions (Native CDFIs) to increase homeownership opportunities for Indian Tribes, Alaska Native, and Native Hawaiian communities in rural areas. Includes 20% non-federal cost share, priority on priority Tribal land, annual reporting to Congress, program evaluation within 3 years, and grants to support operational capacity (with a cap and 3% admin costs).
4Expanded loan tools and ADUs (Titles IX and X): Extends or restructures loan terms under Section 502 to allow refinancing/modification with a total loan term not to exceed 40 years; allows the release of liability for original guaranteed borrowers upon assumption; updates to include accessory dwelling units (ADUs) in 502 loan guarantees, including a definitional framework and a rule confirming that leasing ADUs or using rental income to qualify for the loan is permissible after enactment.
5Increased funding and capacity-building (Titles IV, V, VI): Increases 504 loan scope for minor farm housing improvements, with at least 60% reserved for very-low-income borrowers and a higher loan cap ($15,000). Creates the Rural Community Development Initiative to fund intermediaries (grants up to $250,000) to build organizational capacity and support rural housing and community development projects, with mandatory matching funds and a possible waiver for persistently poor rural regions.
6Vouchers and transfers (Titles VII and VIII): Reforms the Rural Housing Voucher program to adjust voucher amounts through a formal process, allow interim and annual income/family composition recertifications, and expand eligibility for households in 514/515/516-financed projects that faced maturities, foreclosures, prepayments, or loans matured after 2005. In transfers of multifamily projects, authorizes nonprofit or public bodies to purchase with long-term use restrictions and increases a previously low threshold (changing a provision from 9% to 50%).
7Accountability and transparency (Title VI): Requires an annual RHS report detailing program health, loan performance, property turnover, and risk ratings, with data aggregation to protect privacy; mandates a GAO review of RHS technology within a year to assess modernization needs and staffing requirements.

Impact Areas

Primary groups/areas affected- Rural households and renters in RHS-assisted projects (514/515/516) through preserved rental assistance, revised voucher mechanisms, and expanded eligibility.- Owners and operators of rural rental housing, including property managers and landlords, who may benefit from loan restructurings, extended loan terms, and decoupled rental assistance.- Native communities (American Indian Tribes, Alaska Native, Native Hawaiian) via a dedicated Native CDFI relending program to increase access to mortgage financing.Secondary groups/areas affected- Native CDFIs and intermediary organizations that provide housing finance or capacity-building support in rural areas.- Nonprofit organizations and public housing agencies involved in property transfers, preservation efforts, or technical assistance.- Rural communities seeking development funding through the Rural Community Development Initiative.Additional impacts- USDA/RHS administrative and IT modernization: funding authorized for staffing, IT upgrades, and technical improvements, with a timeline (5-year window) and annual reporting requirements.- Budgetary and policy implications: new or expanded authorities and programs will require appropriations (e.g., preservation program funding, Native CDFI set-aside, voucher updates, and capacity grants) and ongoing oversight.- Program administration: enhanced reporting, rulemaking timelines (advance notice and interim final rule), and accountability measures to track performance, affordability, and program health.RHS: Rural Housing Service, a USDA program delivering rental assistance, direct loans, and guarantees for rural housing.514/515/516: Sections of the Housing Act and related RHS programs that fund and regulate rural multifamily housing and rental assistance.Section 502/504: Statutory authorities within the Housing Act for direct loans/guarantees (502) and grants/loans for minor improvements (504).Priority Tribal land: Land trust concepts and land held in trust or under tribal jurisdiction, where priority for certain programs is given.Decoupling: Separating the rental assistance contract from the project’s loan terms, allowing different durations and terms for each.

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