Many rural residents face the dual problem of limited income and a chronic lack of affordable housing. Section 515 Rural Rental Housing is managed by the U.S. Department of Agriculture (USDA)1 . The Rural Housing Service (RHS) is authorized to make loans to provide rental housing for low- and moderate-income families in rural areas. Section 515 multifamily properties may have two types of units: “subsidized” and “unsubsidized.” Tenants in “unsubsidized” units pay a “basic rent” that is below market or 30% of their adjusted income, whichever is greater2 . The property may also have “subsidized” units that have a deeper subsidy either through RHS or a different source. The tenants in these units pay 30% of their income on rent3 . Tenants also receive a utility allowance4 . Though rarely used for this purpose, Section 515 loans may also be used for congregate housing for the elderly and people with disabilities.

• 142 U.S.C. § 1485.
• 27 C.F.R. § 3560.203.
• 3Id.
• 47 C.F.R. § 3560.202.

In order to be eligible for occupancy, the tenant must be a United States citizen or qualified non-citizen and qualify as a very-low, low, or moderate-income household, or, if a tenant receives other housing benefits such as Section 8 assistance, be eligible under the requirements of those programs1 . Applicants to Rural Rental Housing are entitled to appeal an admission denial through a grievance process2 .

• 17 C.F.R. § 3560.152.
• 27 C.F.R. § 3560.160(d)(6).

Borrowers must use a lease approved by USDA and that complies with 7 C.F.R. § 3560.156 and state law. Some lease requirements are:

• Lease must be in writing.
• Initial lease must be for a 1-year term.
• If the tenant is not subject to occupancy termination, a renewal lease or lease extension must be for a 1-year period.
• Lease must contain procedures that the borrower and the tenant must follow in giving notice required under terms of the lease including lease violation notices.
• Lease must contain procedures for resolution of tenant grievances consistent with the requirements of 7 C.F.R. § 3560.160.
• Lease must have terms under which a tenant may, prior to lease expiration, terminate the lease for good cause with 30 days’ notice.

The only grounds for termination or non-renewal of the lease are material noncompliance or other good cause.1  Section 515 tenants have a right to cure any violation before eviction.2  A tenant may not be evicted when the lease expires unless there has been a lease violation or the tenant is no longer eligible.3  Borrowers may evict a tenant for criminal activity or alcohol abuse by household members in accordance with provisions of 24 C.F.R. §§ 5.858–5.861.4

A borrower who proposes to take an adverse action against a tenant must notify the tenant in writing by certified mail or hand delivery and give the specific reasons for the proposed action.5  The notice must state a specific date by which lease termination will occur; state the basis for the lease termination with specific reference to the provisions of the lease or occupancy rules that have been allegedly violated; explain the conditions under which the borrower may initiate judicial action to redress the lease violation;6  and state that the tenant has an opportunity to correct the violation.

Subsequently, termination may only occur when the incidences related to the termination are documented and there is documentation that the tenant was given notice prior to the initiation of the termination action that their activities would result in occupancy termination.7

Note that a grievance is not available for “lease violations by the tenant that would result in the termination of tenancy and eviction.”8

• 17 C.F.R. § 3560.159.
• 27 C.F.R. § 3560.159(a).
• 3See 7 C.F.R. § 3560.158.
• 47 C.F.R. § 3560.159(d).
• 57 C.F.R. § 3560.160(e).
• 624 C.F.R. § 3560.159(b).
• 724 C.F.R. § 3560.159(a).
• 824 C.F.R. § 3560.160(b)(2).

An applicant or tenant who wants to contest an adverse action must make a written request for a meeting within 10 calendar days. If the grievance is not resolved to the tenant’s satisfaction, the borrower has 10 calendar days to prepare a written summary of the meeting including the borrower’s position, the tenant’s position, and results of the meeting.1

The tenant then has 10 days calendar days from receipt of this summary to request a hearing from the owner. A hearing panel is then selected, and a hearing is scheduled within 15 calendar days after receipt of the tenant’s request. A tenant has a right to examine and copy records and regulations.2  At the hearing, the tenant has the right to be represented by a lawyer or another representative, to present written and oral evidence, to present witnesses or refute and cross-examine witnesses, and to a decision based solely upon the facts presented at the hearing.3  A written decision from the formal hearing must be prepared within 10 calendar days. The decision must be sent to the RHS for review to ensure compliance with USDA regulations. Upon receipt of the decision, the owner and the tenant must take the actions (or refrain from taking the actions) specified in the decision.4

There are some exceptions to the grievance and appeals procedure, including RHS-authorized rent or rule changes, discrimination complaints, disputes between tenants, and some evictions.5

• 124 C.F.R. § 3560.160(f).
• 224 C.F.R. § 3560.160(g).
• 324 C.F.R. § 3560.160(h).
• 424 C.F.R. § 3560.160(i).
• 57 C.F.R. § 3560.160(b)(2).