The Department of Agriculture is working on a program to rehabilitate nearly 17,000 small, rural apartment properties throughout the country that are in need of repair.

Though they are 22 years old on average, the properties are not in danger of falling down, according to Russell Davis, the administrator-designate of DoA's Rural Housing Service. But if numerous deficiencies are not seen to, they could deteriorate rapidly.

It could cost up to $10 billion to save the projects, Mr. Davis said at the National Association of Home Builders convention in Orlando yesterday. But the alternative is even more costly.

"Yes, rehabilitation is expensive, except when you compare it to new construction," he said. "It's cheaper for us to fix what we have."

A study for the Rural Housing Service by a group of consultants in November identified nearly 500,000 rural apartment units nationwide that are in various stages of decline.

"While there are few immediate life and safety issues," the report said, "no property has adequate reserves or sufficient cash flow to do needed repairs and for adequate maintenance over time."

The units were built under the RHS Sec. 515 program, which lends developers the money to build rural rental housing at a rate of 1 percent.

Representing a federal investment of nearly $12 billion, the Sec. 515 portfolio was built over a 30-year period. While the properties are located "pretty much in every town you can hit," Davis said, many serve some of the poorest and most underserved in rural communities.

The study found 40 percent of the Sec. 515 loans have been made to age-restricted properties. But overall, the tenant base is 58 percent elderly, handicapped or disabled. And on average, the annual adjusted household income of the occupants is $9,075.

According to the report, the majority of the property owners do not have an "economically attractive alternative" to fix up their properties.

The consultants said in many cases, the owners lack motivation to maintain, upgrade or even sell their properties because of adverse tax consequences, a lack of equity or the inability to secure an acceptable return on their investments.

While Davis didn't reveal any details, he said RHS is now working on a proposal that would "get them the capital" they need to repair roofs, paint walls and replace balky HVAC systems, among other things.

The portfolio analysis and property assessment made by the consultants included several recommendations that would allow owners to address both the financial and physical deterioration issues.

Among other things, they said owners should be relieved of their current debt in exchange for accepting a regulatory and enforcement regime that would assure affordability for their tenants and accountability for enforcement.

Owners also would be given financial incentives for good ownership and good management.

In addition, current tenants would be protected from higher rents for a set period.

Davis gave no timetable for RHS's plans.

Published: January 13, 2005

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.