USDA rural housing loan changes could limit California buyers

"With no warning or stakeholder input, USDA has closed access to a federal program that has been a vital gateway to homeownership for thousands of low-income families in California and beyond. Rural housing organizations say the program has been especially important in regions recovering from disasters or facing severe housing shortages."

"Given median home values throughout California, most rural communities will now struggle to access this vital resource for preserving homeownership access, especially for low-and very low-income buyers. In many of California's rural markets, 60% of HUD's 203(b) limit falls well below modest home prices."

"The coalition's release also quoted Seana O'Shaughnessy, president and CEO of the Community Housing Improvement Program, who said the organization has helped create homeownership opportunities for more than 250 families through the USDA program since the 2018 Camp Fire. The new rules, she said, mean the nonprofit can no longer build homes that meet the community's needs."

The USDA has implemented handbook changes affecting rural mortgage programs that serve low- and very low-income first-time homebuyers in eligible rural areas. California, historically the largest user of this program, faces significant impacts as updated guidelines lower property value limits and eliminate exception authority for higher-cost markets. The changes also modify how sweat equity is treated in Mutual Self-Help housing programs. Rural housing organizations report that 60% of HUD's 203(b) limit now falls below modest home prices in many California rural communities, effectively disqualifying homes from financing. Nonprofits that previously helped hundreds of families achieve homeownership through this program can no longer build homes meeting community needs. The changes occurred without stakeholder consultation.

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