Section 521 Stand-Alone Rental Assistance

What is Stand-Alone Rental Assistance?

Decoupling Rental Assistance allows eligible USDA Rural Development Multifamily Housing (MFH) direct loan borrowers to continue receiving long-term rental assistance in exchange for agreeing to preserve and operate their multifamily property as affordable rural housing.

Eligible MFH direct loan borrowers whose loans are reaching natural mortgage maturity can enter into Section 521 Stand-Alone Rental Assistance (SARA) contracts after they have made the final payment on their direct loan.

Before this policy change, once an owner of a USDA-financed property paid off their Multifamily Housing direct loan, the property could no longer receive Rental Assistance (RA).

Why are SARA contracts necessary?

SARA is an important strategy in preserving affordable housing for tenants while also supporting the preservation and rehabilitation of the USDA Rural Development MFH portfolio.

Rural communities benefit by retaining properties with project-based RA to continue helping current and future tenants. With access to RA as a steady source of project revenue, owners can leverage other public and private financing sources for project rehabilitation.

With more than 400,000 apartment units nationwide, the MFH program is a crucial source of affordable housing for rural communities. More than 80 percent of the tenants living in USDA-funded multifamily units rely on USDA RD rental assistance to keep their housing affordable.

The MFH program is facing an accelerated loss of affordable housing projects in its portfolio. Between now and 2034, roughly 27 percent of the units in the current MFH portfolio could exit the program as their mortgages mature. More than 94 percent will be eligible to pay off their loans by 2050, reflecting the potential loss of about 333,000 multifamily apartments.

In July 2023, we conducted Congressionally mandated listening sessions for input regarding the necessary resources, tools and policies to successfully implement decoupling. Participating stakeholders were overwhelmingly supportive of decoupling.

Who is eligible to apply for a SARA contract during Fiscal Year 2024?

The 2024 Consolidated Appropriations Act, amended (Public Law 118-42, available at this link: tinyurl.com/PubLaw11842 ) authorizes USDA Rural Development to contract up to 1,000 RA units from maturing mortgage properties during Fiscal Year 2024.

We have already notified eligible borrowers with MFH direct loans maturing between March 9, 2024, and September 30, 2024. These borrowers can apply for a SARA contract with minimum and maximum terms of 10 and 20 years, respectively. If the borrower has more than one loan on the property, all associated USDA Rural Development MFH loans must have maturity dates earlier than September 30, 2024.

The decoupling authority is not available to owners or borrowers who submitted a final loan payment that already has been processed by USDA Rural Development. Additionally, SARA contracts are not available to borrowers through a prepayment process, nor in conjunction with other servicing actions.

What is the status of the SARA decoupling authority for future years?

The current decoupling authority ends September 30, 2024. We are actively seeking decoupling authority for future years.

What if I do not want to enter into a SARA contract?

Participation in SARA is voluntary. Even if you choose not to participate, you can still pay your maturing mortgage loan in full, with the understanding that RA will end once we process your final loan payment.

Existing tenants will be offered USDA RD vouchers, which can be used to supplement rental payments (information available at this link: tinyurl.com/MFHVoucher).

How do we get started?

For additional information and help, please email SM.RD.Decoupling@usda.gov.

When can we expect more information?

Those eligible to apply for a SARA contract in FY24 received direct notice in August 2024.

If authority is granted for Fiscal Year 2025, we will publish a notice in the Federal Register.