HB-1-3550 

APPENDIX 5

RURAL HOUSING DEMONSTRATION PROGRAM 

I. PURPOSE 

Section 506 (b) of title V of the Housing Act of 1949 authorizes the Secretary of Agriculture to 

permit demonstrations involving innovative housing units and systems that do not meet existing 

published standards, rules, regulations, or policies. Under this law, Rural Housing Service is 

authorized to provide the Rural Housing Demonstration program which tests new approaches to 

construction of housing under the statutory authority granted to the Secretary of Agriculture. 

Section 506 (b) imposes two conditions: (1) that the health and safety of the population of the 

areas in which the demonstrations are carried out will not be adversely affected, and (2) that the 

aggregate expenditures for such demonstrations may not exceed $10 million in any fiscal year. 

II. OBJECTIVES 

The intended effect is to increase the availability of affordable rural housing low-income families 

through innovative designs and systems. The Agency solicits proposals for a Rural Housing 

Demonstration Program under section 506(b) of title V of the Housing Act of 1949, which 

provides loans to low income borrowers to purchase innovative housing units and systems that 

do not meet existing regulations. However, any program requirements that are statutory will 

remain in effect. 

III. STATE OFFICE ROLES AND RESPONSIBILITIES 

A. Have demonstration application packages available for interested parties. 

1. Maintain list of persons given a demonstration package. 

2. Designate housing state member as coordinator. 

3. Develop a plan to coordinate review by program and technical staff. 

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B. Field office staff should be instructed to refer questions or interested parties to 

designated person in the State Office. 

C. Review proposals for completeness within 15 days of receipt. 

1. Completed proposals must be reviewed and evaluated based on the

evaluation criteria. Submit proposals determined to be acceptable to the 

National Office with recommendations within 20 days. 

2. Incomplete packages must be returned to the submitter within 15 days of 

receipt with an explanation of what is missing. 

D. Upon request, be able to provide the National Office with a list of package 

requesters as well as status of submissions. 

E. The State Office will track such approved proposals including any conditional 

commitments and Section 502 loans approved. 

IV. PROPOSAL CONTENT AND EVALUATION CRITERIA 

The innovative housing units and systems must be creative, affordable, durable, energy efficient, 

and include a diversity of housing types. The proposal must be beyond the “idea” state. The 

proposed organization or individual must have the experience and “know-how” to implement 

construction of the housing unit concept in relation to the requirements of RHS’s housing 

programs. The proposed cost and price analysis should be in comparison with other proposals 

and be considered realistic for the efforts planned. Examples of eligible proposals include, but 

are not limited to: new or improved energy savings houses, roofing that cools and building 

techniques that cut costs and improve the quality of rural housing. These innovative housing 

units should reduce costs, raise living standards, and improve rural area living environments. 

RHS, in its analysis of the proposals received, will consider whether the proposals will carry out 

the objectives of this demonstration effort in accordance with the following proposed content 

and evaluation criteria: 

A. Technical Management. A proposal providing for the design, development, and 

application of a complete housing unit, including effective use of land, to be 

considered responsive shall address each of the items listed below. These items 

have been selected and arranged to provide a basis for the rapid and impartial 

evaluation of the proposal. Proposal development and design of innovative 

housing units and systems shall address those items under a housing unit concept 

which are applicable to the particular situation. For example, appropriate 

 

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statements are to be made with respect to the housing unit description 

adaptability, state of development, resolution of potential code problems, cost 

projections, and reassurance of health and safety. 

The proposer is requested to keep the proposal as concise as possible and 

consistent with providing the requested information. Elaborate brochures and 

presentation methods are not desired. 

B. Housing Unit Concept. A description of the housing unit concept shall include 

the items listed below (the term “housing unit concept” is considered to include 

the construction method and process, the effective innovative use of land for 

single or multiple units, and the interrelations with utilities and other services): 

 

1. Housing Unit Description. Provide written and graphic details of the total 

housing unit including floor plan and conceptual arrangement drawings 

and outline specifications. Highlight innovative and unique features. 

Indicate the relationship between subsystems. Elements to be addressed 

include rationale for selection of the housing unit concepts including 

factors of economy, productivity, performance, anticipated benefits, 

market acceptance, and consumer preference as they relate to the 

following: 

a. Architectural: Floor plan at 1/4” per 10’; arrangements of housing 

units; finishes and aesthetic treatment; comparison with the 

requirements of national model codes; ability to incorporate 

varying appearance elements to provide architectural diversity. 

b. Structural: Structural system (including engineering calculations) 

and total weather envelope (RHS present “Thermal Performance 

Construction Standards” used as a minimum) and acoustical 

treatment and exterior finishes. 

c. Foundations: Foundation requirements peculiar to the proposed 

housing unit if separate from the structural system noted above. 

d. Interior Work: Partitions, floor, wall and ceiling, finishes, 

cabinetry, trim, built-in furniture, and stair treatment, if any. 

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e. Mechanical: Heating, ventilating and, if applicable, air 

conditioning; unit air changes; plumbing and fuel supply system

piping or conduits; waste disposal. 

f. Electrical: Power supply and distribution system; lighting system. 

g. Appliance and Equipment: Describe items which are included, and 

any special features, interface requirements. 

h. Ancillary Structure and Facilities: Describe any features provided 

separate from the basic housing unit that are normally part of a total 

housing complex, such as central laundry facilities and communal 

areas. 

i. Land Use Concepts: Outline plans for innovative use of land to

permit effective rural communities and small town planning, and

effective utility systems. 

2. Housing Unit Adaptability. Address the methods planned for adapting the 

proposed housing units to a variety of housing types and site 

considerations. Describe in narrative form and by concept drawings, 

modifications, or variations required to adapt the housing units to these 

varying situations. 

a. Housing Types: Describe the type of housing for which the unit

may be used, and indicate adjustments that may be required. 

Provide sketches. 

b. Climatic Area: Designate the climatic area where the housing unit 

should be placed, and describe design changes required to adapt the 

unit to each area for which the unit is suitable. Particular reference 

to the changes to be made to the unit for adaptability to resist severe 

weather conditions such as hurricane and extreme snow 

accumulation. 

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c. Geology and Soils: Provide conceptual foundation design for those 

geologic soil conditions considered as appropriate for the proposed 

system. Conversely, list the geologic and soil conditions which 

would preclude the use of the proposed units. 

d. Site Topography: Provide drawings or sketches which indicate 

adjustments or modifications required to adapt the units to various 

topographies. 

e. Site Size: Discuss the ability of the proposed units and its mix of 

housing types to adapt to various site sizes. 

f. Site Situations: Designate the types of sites for which the unit is 

considered appropriate and describe conceptually the unit treatment 

for each type. Describe the effects on unit design and production 

due to labor and material availability or similar factors related to 

site situation. 

g. “Self-Help” Completion: Describe any work that can be done by 

the prospective occupant and the degree to which this might be 

practical. Note any skill or special training required. 

h. Changes: Discuss the flexibility of the unit with regard to 

modifications in the unit after construction, including expansion and 

rearrangements. 

i. Regional Applications: Discuss the States, regions, or areas of the 

country where the proposer is willing or interested in construction 

of this housing unit. 

3. State of Housing Unit Development. Describe the present state of 

development of the housing unit and the subsystem components. 

Highlight any previous or current experience utilizing the proposed 

housing unit with particular emphasis on cost, acceptability, construction 

experience, and health and safety. 

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4. Constraints. Discuss and list restrictive provisions in the model 

and local codes that the proposer has resolved and that will not 

cause conflict with or inhibit the demonstration of the innovative 

housing unit concept in the selected areas of the country. 

5. Housing Unit Cost Projections. Furnish cost projections for each 

of the following situations (“housing unit in place cost” is defined 

as including all construction, utility, and land cost): 

a. Housing Unit Construction: Construction of the housing 

unit on sites proposed in the climatic regions noted above. 

b. Ownership and Operating Cost Projections: Annual cost of 

ownership and operation of a housing unit, including 

estimates for utility expenses, insurance, and similar items. 

State assumptions. 

c. Maintenance Projections: Annual rate of expense averaged 

over a 5-year cycle for property maintenance including 

painting, repairs, and prorated replacement of equipment. 

d. Useful Life Projections: The probable useful life of the 

housing unit using separate projections for the structural 

systems, interior work, and mechanical and electrical 

system, if appropriate. State any conditions pertinent to the 

estimate. If housing units are constructed based on settled 

proposals, the proposer will be required to certify the actual 

construction cost. 

C. Organization and Staffing. Describe the plan for organizing the total 

effort required to implement housing unit design and construction. This 

plan must include the following elements: 

1. Management. An outline of the proposed management framework, 

including lines of responsibility and illustrating the varied 

disciplines required. Discuss the organizational and contractual 

requirements among the parties and their separate and mutual 

responsibilities, including plans for subcontracting portions of the 

work where applicable. 

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2. Key Individuals. A list of key individuals who will be assigned 

major management and professional responsibilities. Indicate the 

responsibilities to be assigned and indicate the persons’ 

qualifications for the proposed assignment. 

3. Data Collection. Describe the types, how, and by whom housing 

unit evaluation data will be collected and analyzed. 

4. Time Schedule. Prepare a time schedule for development that sets 

start dates, completion dates, and relationships between different 

activities. 

D. Evaluation Criteria. The Rural Housing Service, in its analysis of the 

proposals received, will give primary consideration to those proposals 

which demonstrate the greatest potential for carrying out the objectives of 

this demonstration effort in accordance with the following general criteria. 

1. Housing Unit Concept. 

a. A proposal must be well beyond the “idea” stage. 

Sufficient testing must have been completed to demonstrate 

its feasibility. The proposal must be judged ready for full 

scale field testing in a rural setting. 

b. Ability of the housing unit to provide for the protection of 

life, property, and for the safety and welfare of the 

consumer, general public, and occupants through the 

design, construction, qualify of materials, use and 

maintenance of the housing unit. 

c. Flexibility of the housing unit in relation to varying types 

of housing and varying site considerations. 

d. Flexibility of the housing concept, insofar as it provides the 

ability to adjust or modify unit size and arrangements, 

either during design or after construction. 

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e. Efficiency in the use of materials and labor, with respect to 

cost in place, the conservation of materials, and the 

effective use of labor skills. Potential for Self-Help 

Housing Program will also be considered. 

f. Selection of materials for durability and ease of 

maintenance. 

g. Concepts for the effective use of land and environment. 

2. Organizational Capabilities. 

a. The experience and “know-how” of the proposed 

organization or individual to implement construction of the 

housing unit concept in relation to the requirements of 

RHS’ housing programs. The interests of low- and very 

low-income rural residents in the proposed housing will be 

considered. 

b. The management structure and organization of the 

proposer. 

c. The quality and diversity of management and professional 

talent proposed as “key individuals.” 

d. The management plan of how this effort will be conducted. 

3. Cost and Price Analysis. 

 

a. The level of costs which are proposed, as they may 

compare with other proposals and be considered realistic 

for the efforts planned. Also, the quantity and level of 

detail in the information supplied. 

Projected cost of “housing in place,” with particular reference to housing for very low 

and low-income families. 

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V. SUBMITTING AND REVIEWING PROPOSALS 

 

All interested parties must make a written request for a proposal package. The request 

must be made to the State Director in the State in which the proposal will be submitted. 

RHS will not be liable for any expenses incurred by respondents in the development and 

submission of applications. 

Completed applications that have been determined to carry out the objectives of the 

program will be considered on a first come, first served basis based on the date a 

completed application was submitted. An application is considered complete only if the 

“Application for Approval of Housing Innovation” (included at the end of this Appendix) 

is complete in content, contains information related to the criteria, and all applicable 

additional information required by the application form has been provided. Applicants 

submitting an incomplete application will be advised in writing of additional information 

needed for continued processing. Rural Development will review each application for 

completeness and accuracy. 

 

All application packages received by the State Director are evaluated and all acceptable 

application packages are submitted to the National Office for concurrence. The package 

is reviewed by the Program Support Staff and determined whether acceptable or 

unacceptable under the Demonstration Program. Each acceptable package must include a 

proposed allocation for the dwellings to be built. 

 

VI. NATIONAL OFFICE APPROVAL OF PROPOSALS 

 

After the National Office concurrence by the RHS Administrator, the State Director is 

notified and the Community Development Manager is made aware of the approval and 

prepares to issue conditional commitments for proposed dwellings. If the proposal is not 

selected, the State Director will so notify the applicant in writing, giving specific reasons 

why the proposal was not selected. Any decisions made by the Agency for the Section 

502 Rural Housing Demonstration program cannot be appealed. Each borrower’s file 

should be marked as a demonstration dwelling. 

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VII. FUNDING OF APPROVED PROPOSALS 

 

State Directors are authorized to use funds for the section 502 Direct Rural Housing 

Demonstration Program on a project-by-project basis. Funds are subject to the 

requirements of RD Instruction 1940-L and are based on the availability of funds prior to 

the National Office year-end pooling date. Funds cannot be reserved or guaranteed under 

the demonstration-housing concept. There is no guarantee that a market exists for 

demonstration dwellings, and this does not ensure that an eligible loan applicant will be 

available for such a section 502 Rural Housing dwelling. 

VIII. PROJECT REQUIREMENTS 

 

All RHS eligible loan applicants must meet the applicable requirements of 7 CFR part 

3550. 

A. When the proposer has an applicant, the next step will be the development 

of drawings and specifications that detail the requirements for construction 

of a demonstration dwelling unit on a specific site. The floor plans and 

elevations must be satisfactory to the applicant. 

B. The State Engineer must review and determine acceptability of the 

individual unit and site designs for specific locations prior to construction. 

Adequate inspections per RD Instruction 1924-A should be made to 

protect the security interest of the Agency. 

C. The proposer will be responsible for the drawings and specifications that 

detail the requirements for construction of demonstration dwelling units 

on specific sites. 

D. All plans and specifications must meet the certification requirements of 

RD Instruction 1924-A. 

E. The necessary permits should be obtained for local authorities prior to any 

site, building, plumbing, mechanical or electrical work being started. 

When applying the demonstration concepts, requirements of RD Instruction 1970 series 

“Environmental” must be met. 

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F. Executive Order 12898 requires the Agency to conduct a Civil Rights 

Impact Analysis on each project prior to loan approval. Also, the 

requirements of Executive Order 11246 are applicable regarding equal 

employment opportunity when the proposed contract exceeds $10,000. 

If there is no available RHS eligible loan applicant, the Rural Housing Demonstration 

Program applicant will have to advance funds to complete the construction of the 

demonstration housing with the risk that there may be no RHS applicant or other 

purchaser from which the builder will recover his or her development and construction 

costs. 

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Paperwork Reduction Act 

 

The information collection requirements contained in this appendix have been approved 

by the Office of Management and Budget (OMB) and have been assigned OMB control 

number 0575-0114. Public reporting burden for this collection of information is 

estimated to be 80 hours per response including time for reviewing instructions, 

searching existing data sources, gathering and maintaining the data needed, and 

completing and reviewing the collection of information. 

 

The following contain the “Application for Approval of Housing Innovation” which 

should be completed by the applicant and the “State Office Technical Evaluation Sheet” 

is an analysis of the Housing Demonstration concept in relation to the specific criteria 

contained in the Proposed Content and Evaluation Criteria. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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FORM APPROVED 

 OMB No. 0575-0114 

 

APPLICATION FOR APPROVAL OF HOUSING INNOVATION 

(To be Completed by Applicant) 

 

Name of Company:________________________________________________________ 

 

Address: _______________________________________________________________ 

________________________________________________________________________ 

Executive Officer:_________________________________________________________ 

 

Contact Person:____________________________ Phone Number:_________________ 

 

1. Describe the proposed housing unit innovation. 

________________________________________________________________________ 

________________________________________________________________________ 

________________________________________________________________________ 

2. How does the innovation differ from comparable, conventional housing units? 

________________________________________________________________________ 

________________________________________________________________________ 

________________________________________________________________________ 

3. How does the innovation deviate from present RHS housing standards for this type of 

housing unit? 

________________________________________________________________________ 

________________________________________________________________________ 

________________________________________________________________________ 

According to the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to respond to a 

collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 

0575-0114. The time required to complete this information collection is estimated to average 80 hours per response, including the time for 

reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection 

of information. 

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4. Describe the intended buyer occupants of the housing unit (income levels, age groups, 

family composition). 

________________________________________________________________________ 

________________________________________________________________________ 

________________________________________________________________________ 

5. Does the innovation comply with local building codes? Yes _____ No _____ If no, 

has variance from those codes been approved by local housing authorities? 

 Yes ___________ No __________ 

 Attach documentation of compliance or approval of variance. 

6. What impact, if any, will the innovation have on the health or safety of the: 

a. housing unit occupants 

b. local population 

7. What impact, if any, will the innovation have on the physical environment? 

8. What are your qualifications for implementing the proposed innovation? 

a. Training 

b. Experience 

 

 

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9. Will the innovation increase, or decrease, the initial cost of construction? 

 Increase _______ Decrease _______ Neither increase nor decrease ________ 

 If increase or decrease, by what amount? _____________________________________ 

 Explain 

 Attach documentation 

10. Will the innovation increase, or decrease, the cost of maintenance, repairs, or 

replacements? 

 Increase _____ Decrease _____ Neither increase nor decrease _____ 

 If increase or decrease, explain, including time frames in your estimations of additional 

costs or savings. 

 Attach documentation. 

11. Will the innovation make it more feasible for the housing owners to do part of the 

initial construction or finishing work? 

 Yes __________ No __________ 

 If yes, describe. 

 

12. Will the innovation make it more feasible for the housing owners to do their own 

repairs, replacements, or maintenance? 

 Yes __________ No __________ 

 If yes, describe. 

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FOR INNOVATIONS INVOLVING BASIC ARCHITECTURE OR CONSTRUCTION 

13. What impact will the innovation have on the life expectancy of the housing unit? 

 _____ shorten life expectancy _____ extend life expectancy 

 _____ no impact on life expectancy 

 If shorten or extend life expectancy, explain. 

___________________________________________________________________________ 

FOR INNOVATIONS INVOLVING A COMPONENT OF THE HOUSING UNIT 

14. Compared to comparable, conventional components, will the innovation have a 

 longer, shorter, or the same life expectancy? 

 shorter _______ longer ________ the same ________ 

 Explain. 

15. What impact, if any, will the innovation component have on other parts of the 

 housing unit? 

 ___________________________________________________________________________ 

16. Has this innovation been successfully used before? 

a. in similar types of housing units. Yes _______ No _______ 

b. in different types of housing units. Yes _______ No _______ 

 If yes, what types of units? 

c. in similar climates. Yes _______ No _______ 

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d. in different types of climates. Yes _______ No _______ 

 If yes, what types of units? 

___________________________________________________________________________ 

e. in similar geological areas. Yes _______ No _______ 

f. in different types of geological areas. Yes _______ No _______ 

 If yes, what types of units? 

If you answered yes to any part of question 16, attach documentation. 

17. Will the innovation make future remodeling or expansion of the unit more feasible? 

 Yes ____________ No ___________ 

 If yes, explain 

18. Address the issues in the technical management section of the proposal contract section 

and evaluation criteria to the extent these issues were not fully discussed in the 

responses to the preceding questions. 

 

 

Rural Housing Service is an Equal Opportunity Lender. Complaints of discrimination should be sent to: 

Secretary of Agriculture, Washington, DC 20250. 

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Rural Housing Service 

State Office Technical Evaluation Sheet 

Rural Housing Demonstration Program 

 

Instruction: 

 

Evaluation of Rural Housing Demonstration Program technical proposal concepts will be 

based upon analysis of the proposer’s concept in relation to the specific criteria contained 

in the Proposal Content and Evaluation Criteria. Reviewers should record their evaluation 

of each proposal in terms of its strengths and weaknesses, i.e., the degree to which the 

proposal concept possesses or lacks the attributes set forth in the Proposal Content and 

Evaluation Criteria paragraphs of this Appendix. 

 

Reviewer’s comments should be provided in the space below to indicate the basis for the State 

Office recommendations and any other pertinent observations. 

 

Prior to evaluating the proposer’s concepts, it should be screened to determine if it is fully 

responsive in accordance with the requirements of the Proposal Content and Evaluation 

Criteria paragraphs of this Appendix. Proposals found to be non-responsive will be 

removed from further consideration. The State Office will return the submission to the 

proposer with a list of the non-responsive areas identified. 

 

State: _____________________ Reviewer: ____________________ Date: __________ 

 

Name of Proposer: _______________________________________________________ 

 

Address: _______________________________________________________________ 

_______________________________________________________________________ 

 

Executive Officer: _______________________________________________________ 

 

Contact Person: ____________________________ Phone Number: _______________ 

 

Proposal Description: _____________________________________________________ 

________________________________________________________________________ 

________________________________________________________________________ 

 

___________________________________________________________________________________________

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The proposal is (check one): 

 

___ Responsive - complete the technical evaluation sheet 

___ Nonresponsive - return to proposer with explanation 

 

I. Proposal Evaluation (Specific strengths and weaknesses. Use additional 

sheets if more space is needed.) 

A. Housing Unit Concept 

 

1. State of Development - is the housing unit ready for full scale field testing in a rural setting: 

Strengths Weaknesses 

 

 

2. Ability of Housing Concept to provide for the protection of life, property, and for the safety and 

welfare of occupants: 

Strengths Weaknesses 

 

3. Flexibility of Housing Concepts: 

a. Site Consideration 

Strengths Weaknesses 

 

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b. Dwelling Unit Concept

Strengths Weaknesses 

4. Efficiency in the use of material and labor. 

Strengths Weaknesses 

5. Materials durability and ease of maintenance. 

Strengths Weaknesses 

6. Concepts effect on land use and the environment. 

Strengths Weaknesses 

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B. Organization Capabilities 

1. Experience of organizations or proposer to implement construction of the Housing Unit 

Concept: Is there evidence of a potential applicant? 

Strengths Weaknesses 

 

2. Evaluation of effectiveness of Management structure and organization of proposer. 

Strengths Weaknesses 

3. Qualifications of key individuals. 

Strengths Weaknesses 

4. The management plan of how construction will be conducted. 

Strengths Weaknesses 

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5. Is the proposed time schedule realistic?

Strengths Weaknesses 

C. Cost and Price Analysis: 

1. The quality, quantity, and level of detail supporting the cost of constructing the property 

concept. 

Strengths Weaknesses 

2. How does this compare with present housing costs in your State?

Strengths Weaknesses 

 

3. Projected housing cost for low- and very low-income individuals. 

Strengths Weaknesses 

 

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II. State Office Summary Review Comments and Recommendations. 

A. Recommendations/Comments (Proposal’s overall strengths and weaknesses) 

1. Housing Unit Concept: 

 

2. Organizational Capabilities: 

 

3. Cost and Price Analysis: 

 

 

4. Other: 

B. Recommendation/Rating based on the proposal and objective of the 

demonstration. 

 (Check one): ________ Excellent _______ Very Good ________ Good 

________ Fair _______ Poor 

 

 

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