Section 515 of the Housing Act of 1949 provides RHS with the authority to make direct loans to developers to build affordable multifamily rental housing in rural areas for very low-income families, elderly people, and persons with disabilities. Owners of projects financed through section 515 must maintain rents at affordable levels, usually for a minimum of 20 years.

According to RHS and housing industry experts, construction of new section 515 properties has slowed in recent years, existing units are deteriorating, and an increasing number of project owners want to prepay their mortgages. Such prepayments would probably displace tenants who cannot afford housing in projects that are not subsidized.

Under H.R. 5039, RHS would provide financial incentives, such as loan forgiveness and direct loans, to owners of section 515 housing who agree not to prepay their mortgages. H.R. 5039 would authorize the appropriation of such sums as may be necessary each year to implement those financial incentives.

H.R. 5039 also would authorize RHS to provide vouchers to those families residing in projects where the owners choose not to participate in the new program and to prepay their mortgages on section 515 properties. Such vouchers could be used by the affected tenants to stay in the same project or to rent or purchase housing elsewhere. This legislation would authorize the appropriation of such amounts as necessary to provide vouchers over the 2008-2011 period.