Whether you want to start that rustic rural utopia for other marginalized people, or at least find a cheaper place to live in the meantime, here’s what you need to know about how USDA loans, and how RDMH funding and housing works.
It’s been an ongoing Twitter meme, and a real true desire for a significant amount of people, to basically do what Tenacious Unicorn Ranch in Colorado did: live the Stardew Valley dream of farm life where marginalized people can find safe shelter along with meaningful work and a community.
As we discuss rebuilding a post-COVID world, don’t you dare laugh it off. 20% of Americans didn’t pay rent shortly after the pandemic was declared, and eviction proceedings are picking up in many states at the time of writing while joblessness rates soar. Finding stable shelter is no laughing matter, especially if you’re in a marginalized group. But as half of our government lets the dumpster fire burn and the other half is making lousy incremental attempts to put it out with raw sewage hurled by private prison labor? Well, I found you a silver lining courtesy of an obscure government program that just might make what feels like a dream into reality and be more doable than you might think.
Forget the Silicon Valley dystopia we’ve been sold of grown-ass adults earning professional sector salaries having to cram into glorified tenements.What if I told you there was a way you could do this without onerous monthly payments shouldered alone?
Don’t want to start a queer communist game developer ranch in the middle of nowhere? You might be able to rent a small home or apartment at a favorable rate, and in some cases actually not be terribly far from a major city!
It’s all thanks to the Rural Development Multi-Family Housing, or RDMH, program that is administered through the Department of Agriculture rather than Housing and Urban Development. You’d be surprised at how much the Department of Agriculture has played a role in our day to day lives throughout history and the present day.
And if you ever wanted to get a place in the middle of nowhere and just grow fruit trees and shitpost? YOU COULD DO IT WITH A $0 DOWN PAYMENT.
So whether you want to start that rustic rural utopia for other marginalized people, or at least find a cheaper place to live in the meantime? Here’s what you need to know about how USDA loans, and how RDMH funding and housing works.
The Six RDMH Programs and What Constitutes USDA-Approved Rural Property
There’s six programs the Department of Agriculture runs specifically as RDMH:
- Farm Labor Direct Loans & Grants
- Housing Preservation & Revitalization Demonstration Loans & Grants
- Housing Preservation Grants
- Multi-Family Housing Direct Loans
- Multi-Family Housing Loan Guarantees
- Multi-Family Housing Rental Assistance
As the name implies, these loans are meant for rural areas. Or if not strictly rural areas, for farm workers and/or low and middle income earners, the elderly, and disabled people who are renting or mortgaging out a qualifying property. We’re going to be mostly focusing on that second item on the list, housing preservation loans.
You read that right. USDA loans are specifically meant for low and middle income earners.
While these loans are income-restricted, you won’t get turned away for having poor or fair credit that a conventional lender would look down upon. This makes USDA loans more accessible to people than your traditional 30-year home mortgage, so put down the Zillow porn for a second: if your world just ended because of COVID or the demonic forces of American capitalism long before the pandemic was declared and are seriously contemplating the whole Stardew Valley rural-burbia thing, a USDA loan just might be for you.
And if medium to large commune living isn’t really for you, but you just want to bring your spouse, polycule, or a friend or two? Even just YOURSELF? You actually might be able to do it with a USDA loan!
But first things first: before we dive into the basics of these programs and loan types, you have to find a place in a USDA-eligible region and property to begin with. And believe it or not, what the USDA considers to be rural is shockingly loosely defined. The rural vs. urban boundary is based on US Census and Office of Management and Budget (OMB) specifications and data rather than how much it resembles Harvest Moon.
Per the USDA’s Economic Research Service, they base eligibility on population and land use before other characteristics. The easiest way for an area to qualify as rural for USDA loan purposes is if the population of the area doesn’t exceed 10,000 people. However, you can also live in a more populous region of up to 20,000 people provided that it’s not in what the Census and OMB call a metropolitan statistical area (MSA) and the area lacks lenders who will give a mortgage to low and moderate income families. You’ll get leeway for a population of up to 35,000 people with a similar lack of mortgage lenders and is “rural in character”, so that’s where the Stardew Valley references come in.
So believe it or not, you could ostensibly find a suburb or exurb right outside of a MSA and provided that the area isn’t super populous, get a USDA loan. You can even use these loans on townhouse and condo purchases, short sales, and freestanding houses so long as the home will be used as your primary residence. You can’t rent it out. You can find out which areas qualify as rural zones by going around this map.
Next, the property has to meet USDA appraisal criteria which is a little different from normal home inspections. Everything is scoped out from the shape the roof is in to plumbing, heating and cooling, and how easy it is to access. If it’s been torn asunder from the elements or just botched DIY jobs to the point that it looks like the aftermath of Midsommar, the USDA isn’t going to be too keen on helping you get a mortgage for this place.
There’s also income limits, which you can learn more about here. If you’re thinking about moving your entire polycule to a farm somewhere, you’re in luck: there’s only two tiers of income limits, and they’re based on household sizes of 1-4 and 5-8. So if you want to buy an old farm in Pennsylvania Dutch Country (and do Urglaawe witchcraft involving chickens) and you got a triad plus two friends along for the ride who just want a house to live in, the total annual income of your group is can’t exceed $120,700 in Lancaster County. Which if you have four people who make about $30,000 a year and a person with no income, it just might be doable. The income limits vary by county as they’re based on the area median income and scaled based on the number of inhabitants.
Because RDMH programs are also meant to provide low-cost and dignified housing for the elderly and disabled, the income of paid caregivers is NOT considered part of the household income figure.
But if you got more than 8 people who want to join your commune? There needs to be one main applicant, preferably the person who has the best credit and overall personal finances (even though your credit does not need to be perfect to get a USDA loan, though it does affect how much you can borrow). The main applicant tacks on 8% of the 1-4 household member tier for that country per additional household member. For instance, Huntsville County in Alabama is at the top of that list and the 8-member limit is $129,500 so let’s say your Stardew Valley dream kicks off there. But if you get a ninth member who wants to join your queer communist game developer hut, 8% of the 1-4 member limit gets tacked on. 8% of $98,100 is $7,848 which means that your collective’s annual income must be under $137,348 if it’s nine people.
Remember, they don’t all have to be signed on the loan. But their income will be considered regardless even if you’re the only applicant.
Farms Can’t Be Commercial
But there is one catch in living out this Farmville dream.
You can buy a farm property that has land and buildings meant for that purpose but unless you’re going for a Farm Labor Direct loan, which has different repayment and income terms separate from the more common housing preservation and multi-family programs, you can’t actually make money from it. No putting things in bins for Lewis to go pick up and sell in the town fairs, no hatching dinosaur eggs to make dinosaur mayonnaise for sale.
Sounds totally wild and counterintuitive, right?
But just like how the postal service isn’t supposed to make money, the same is true of getting a heavily subsidized USDA loan through the RDMH programs. You can freely grow produce, raise animals, and whatever else you’d like to do with the place (cane toad ranch, anyone?!) provided that it’s for personal use and no income is generated from it. Read: you always wanted to do a homesteading collective kind of thing, rather than becoming a farm employer of some type like Tenacious Unicorn. If you want to go that route, a Farm Labor Direct loan is what you need to pursue rather than a standard USDA/RDMH loan.
Provided that you still have sufficient income, credit, and debt to income ratio, it doesn’t hurt to try applying for a USDA loan to find a new home if you’re over the whole living in a city center thing. But if you really want farming collective life without actually turning it into a business, this loan just might be your dream come true.
Failing that, you can find one for rent that has a ceiling on how much the landlord can charge.
Finding and Renting RDMH Property and Who is Eligible
Well, renting sucks. We all know that. Rent is so damn high in the whole nation that most people making minimum wage or even a few dollars above it literally can’t afford to rent a 2-bedroom apartment anywhere in the country.
Depending on where you live, the majority of people could be renters as is the case for New York. But according to Statista, 43 million renters comprised the entire American populace, or about 13% of the whole population, a major upswing from 1975. This makes sense as it was the age of deregulation that began of this time which kicked off the bleeding out of the middle class, and massive upwards transfer of wealth. And damn, are we feeling it now.
But if USDA loans or home ownership in and of itself aren’t for you, and you’d prefer to live somewhere quieter, you might be able to get a subsidized rental if your income is low enough. This is where the RDMH multi-family programs come into play, as they’re designed to be subsidized rentals called Section 515 property. There’s about 15,000 of these units throughout the United States and territories, and 1,000 Section 514 properties designed solely for farm labor.
Like their mortgage counterpart, these rentals are income-restricted if a “family” rental, while others are designated for the elderly or disabled. You can find these subsidized rentals in your state by checking out this map provided by the USDA. I got curious and decided to see if anything was near-ish to me, and since most of the NYC MSA is not allowed for rural housing subsidies, figured I wouldn’t see much. But once you click your state, you click the county you’re interested in, and it turns out there’s two such places on Long Island, out in Suffolk. I decided to check out the one in Greenport, which is the north shore right above Shelter Island and parallel to the Hamptons, which is basically summer camp for hedge fund managers and home to some of the most expensive real estate in the country.
So it’s not shocking at all that if you make $70,000 a year or less, you’re considered poor out there and can get a rental that is no more than 30% of your monthly income, or about $1,750 max. Family of 4? Your household has to make just under six figures and you’re Brokey McPoverty out there. You’ll also need to recertify your income with the property manager every year, and this process can be brutal.
Disability income counts for RDMH rental purposes, and you must disclose all of your assets, income, and household members of risk eviction. If your income changes by more than $100 per month, and/or your household composition changes in any way at all, you also need to report it to the USDA immediately so don’t get too excited if you’re a freelancer. But if you’ve had the same job forever and don’t anticipate huge raises or changes in your life, you might be able to get one of these subsidized rentals if the whole Green Acres thing isn’t your bag.
Homeownership is really hard to attain in this hell world. But there’s still a couple tricks up the government’s sleeve that they don’t want you to know about, and the RDMH programs and USDA loans are one of them that just might actually get you some stability and living the whole cottagecore dream. You just can’t sell that homemade jam on Etsy unless you get a Farm Labor Direct loan.