[Federal Register Volume 88, Number 235 (Friday, December 8, 2023)]
[Rules and Regulations]
[Pages 85470-85472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26654]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3550

[Docket No. RHS-23-SFH-0026]


Single Family Housing Section 502 Direct Loan Program--Community 
Land Trust Pilot

AGENCY: Rural Housing Service, USDA.

ACTION: Notification of waivers.

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SUMMARY: The Rural Housing Service (RHS or the Agency), a Rural 
Development (RD) agency of the United States Department of Agriculture 
(USDA), is announcing a pilot for the Section 502 Direct Home Loan 
program to test alternative eligibility criteria related to community 
representation for Community Land Trust (CLT) organizations. The Agency 
intends to evaluate the impact of allowing eligibility criteria other 
than membership open to all residents of the geographic area which 
could meet the intent of the statutory requirements for CLTs to have 
specific community representation. This notification outlines the pilot 
parameters and provides contact information for additional details 
about the pilot.

DATES: The effective date of this pilot is December 8, 2023. The 
duration of the pilot is anticipated to continue until December 8, 
2025, at which time the RHS may extend the pilot program (with or 
without modifications) or terminate it depending on the workload and 
resources needed to administer the program, feedback from the public, 
and the effectiveness of the program. If the pilot program is extended 
or terminated early, the RHS will notify the public.

FOR FURTHER INFORMATION CONTACT: Jeremy Anderson, Finance and Loan 
Analyst, Direct Loan Origination Branch, Single Family Housing Direct 
Loan Division, Rural Development, U.S. Department of Agriculture, 
Email: [email protected]; Phone: (202) 302-3092.

SUPPLEMENTARY INFORMATION: 

Authority

    The RHS Single Family Housing Direct Division administers the Sec. 
502 Direct Loan Program under the authority of Section 502 of the 
Housing Act of 1949, as amended; and operates under 7 CFR 3550, subpart 
B. Section 506(b) of Title V of the Housing Act of 1949, as amended (42 
U.S.C. 1476(b)), permits the Secretary to conduct demonstrations 
relating to national housing goals. All statutory or regulatory program

[[Page 85471]]

requirements that are not waived in this document will remain in 
effect.

Overview

    The RHS offers a variety of programs to build or improve housing 
and essential community facilities in rural areas. The Agency offers 
loans, grants, and loan guarantees for single- and multifamily housing, 
child-care centers, fire and police stations, hospitals, libraries, 
nursing homes, schools, first responder vehicles and equipment, housing 
for farm laborers, and much more. RHS also provides technical 
assistance loans and grants in partnership with non-profit 
organizations, Indian Tribes, State and Federal government agencies, 
and local communities.
    The RHS administers the Section 502 Direct Loan Program to assist 
low- and very low-income applicants who currently do not own adequate 
housing and cannot obtain other credit the opportunity to acquire, 
build, rehabilitate, improve, or relocate dwellings in rural areas. 
Homes financed through the Section 502 Direct loan program can be 
located on land owned by a Community Land Trust (CLT). CLTs are a 
growing land management tool used by affordable housing providers 
nationwide and are recognized for their use of ground leases and/or 
long-term deed restrictions as mechanisms to achieve lasting 
affordability. CLTs were traditionally organized as member nonprofits 
but are increasingly organized as entities without members and/or 
without strict representation on governing boards, because they meet 
community accountability standards through other means. Similarly, 
mission-driven affordable housing developers other than CLTs use ground 
leases or deed restrictions to maintain lasting affordability of the 
housing units developed and initially sold to income-eligible 
homebuyers to ensure the units remain affordable after the initial 
sale.
    To receive agency supported financing, eligible dwellings located 
on land owned by a CLT must comply with 7 CFR 3550.72. Additional 
requirements for a community housing development organization 
identifying as a CLT are found at 42 U.S.C. 1472(a)(3)(B), which also 
incorporates definitions provided at 42 U.S.C. 12704 as described. 
These requirements include, in part, that a CLT's governing board 
maintains representation of low-income community residents and, to the 
extent practicable, low-income beneficiaries. 42 U.S.C. 1472(a)(3)(B); 
42 U.S.C. 12704(6)(B). The Act also requires the CLT to have its 
corporate membership open to any adult resident of a particular 
geographic area specified in its bylaws. 42 U.S.C. 1472(a)(3)(B)(iv). 
As written, the community representation requirements are prohibitive 
for some affordable housing providers also acting as a CLT.
    As land prices increase and availability decreases, many affordable 
housing providers are exploring various model to achieve lasting 
affordability in the housing stock they contribute to their community, 
including CLTs, ground leases and long-term deed restrictions. Some 
affordable housing providers that utilize ground leases do not meet the 
governing board membership requirements and/or requirement of open 
corporate membership required of CLTs in the Housing Act of 1949 and 
are therefore unable to access the Section 502 program for their low to 
very low-income clients in rural communities when using a land trust 
ownership model.
    To ensure applicants working with affordable housing providers have 
access to the Section 502 program when using a land trust ownership 
model, RHS will approve affordable housing providers, under this pilot, 
that meet the eligibility criteria described in this document. The goal 
of this pilot is to test the viability of aligning the Section 502 
program CLT requirements with affordable housing providers' current 
strategies to provide lasting affordability in homeownership.

Discussion of the New Section 502 CLT Pilot Regulatory Waivers

    RHS has determined that the following two waivers are to be tested 
under the new pilot (demonstration) program for the Single-Family 
Housing Section 502 Direct Loan Program under the demonstration program 
authority provided in Section 506(b) of Title V of the Housing Act of 
1949, as amended (42 U.S.C. 1476(b)) and at 7 CFR 3550.7):
    1. The first waiver approved for this pilot is for affordable 
housing providers to be exempt from the requirement that a CLT maintain 
accountability to low-income community residents with regard to 
decisions on the design, siting, development, and management of 
affordable housing through significant representation on the 
organization's governing board. (42 U.S.C. 1472(a)(3)(B); 42 U.S.C. 
12704(6)(B)).
    Instead, organizations may propose to the Agency through this 
pilot, other methods by which the organization will maintain this 
accountability and ensure low-income community residents are included 
in these decisions. This could be demonstrated through community 
meetings, public notice for comment, a community advisory board, etc. 
Organizations should include detailed information related to the 
activities it will undertake to ensure community involvement is 
comparable to the input afforded the organizations board members. The 
Agency will evaluate these proposals and determine whether they are 
sufficient to maintain accountability.
    2. The second waiver approved for this pilot is for affordable 
housing providers to be exempt from the requirements that a CLT be a 
membership organization with its corporate membership open to any adult 
resident of a particular geographic area specified in the by-laws of 
the organization (1472(a)(3)(B)(iv))).
    Affordable housing providers who meet the eligibility criteria 
described in this document may request approval to take part in this 
pilot by providing information sufficient to determine their 
eligibility as described in this document to the applicable state 
office. State office information can be found online at--https://www.rd.usda.gov/browse-state.

Eligibility Requirements

    To be eligible to participate in this pilot, organizations must be 
a private nonprofit entity, state or local government, Indian tribe or 
Tribal corporation; that meets all other requirements provided at 7 CFR 
3550.72, and at 42 U.S.C. 1472(a)(3)(B), except item (iv), and 
satisfactorly demonstrates to the Agency the steps they will take to be 
accountable to low income residences with regard to decisions on the 
design, siting, development, and management of affordable housing.
    Except as specified in this document, affordable housing providers 
seeking approval as a CLT must abide by all applicable statutory and 
regulatory requirements. Eligible participants in the Section 502 
Direct program must otherwise abide by all statutory requirements and 
by the regulatory requirements outlined in 7 CFR 3550.

Paperwork Reduction Act

    The regulatory waivers for this pilot contain no new reporting or 
recordkeeping burdens under OMB control number 0575-0179 that would 
require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35).

Non-Discrimination Statement

    In accordance with Federal civil rights laws and USDA civil rights 
regulations and policies, the USDA, its

[[Page 85472]]

Mission Areas, agencies, staff offices, employees, and institutions 
participating in or administering USDA programs are prohibited from 
discriminating based on race, color, national origin, religion, sex, 
gender identity (including gender expression), sexual orientation, 
disability, age, marital status, family/parental status, income derived 
from a public assistance program, political beliefs, or reprisal or 
retaliation for prior civil rights activity, in any program or activity 
conducted or funded by USDA (not all bases apply to all programs). 
Remedies and complaint filing deadlines vary by program or incident.
    Program information may be made available in languages other than 
English. Persons with disabilities who require alternative means of 
communication to obtain program information (e.g., Braille, large 
print, audiotape, American Sign Language) should contact the 
responsible Mission Area, agency, staff office; or the Federal Relay 
Service at (800) 877-8339.
    To file a program discrimination complaint, a complainant should 
complete a Form AD-3027, USDA Program Discrimination Complaint Form, 
which can be obtained online at https://www.usda.gov/sites/default/files/documents/ad-3027.pdf, from any USDA office, by calling (866) 
632-9992, or by writing a letter addressed to USDA. The letter must 
contain the complainant's name, address, telephone number, and a 
written description of the alleged discriminatory action in sufficient 
detail to inform the Assistant Secretary for Civil Rights (ASCR) about 
the nature and date of an alleged civil rights violation. The completed 
AD-3027 form or letter must be submitted to USDA by:
    (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    (2) Fax: (833) 256-1665 or (202) 690-7442; or
    (3) Email: [email protected].
    USDA is an equal opportunity provider, employer, and lender.

Yvonne Hsu,
Acting Administrator, Rural Housing Service.
[FR Doc. 2023-26654 Filed 12-7-23; 8:45 am]
BILLING CODE 3410-XV-P