Rural Housing in
(Bullet version for
presentation)
Pat Kennealy
Graduate Research
Assistant, Rural Sociology
Comer Hall
334.844.5628
kennepj@auburn.edu
History
Ø
Since
the early 1950’s, the
Ø
The
Housing Act of 1949 brought about the Farmers Home Administration (FmHA), a
division of the United States Department of Agriculture (USDA).
§
Oversaw
and funded public rural housing assistance programs.
§
The
primary focus of the FmHA was on farm housing while the U.S. Department of
Housing and Urban Development (HUD) attempted to address and fund other
low-income rural housing needs.
§
Role
of FmHA was to finance modest housing and housing repairs for farming families
that lacked their own resources or could not obtain other credit at affordable
rates and terms.
§
HUD
had the same task for non-farming rural families. However, as a result of USDA
reorganization, HUD was technically relieved of its rural housing focus, while
FmHA was eliminated altogether in 1994 (Belden and Wiener 1999). Both programs
were replaced by the current USDA Rural Housing Service (RHS). HUD continues to
fund rural low-income in a limited capacity, through its Section 8 and its
Federal Housing Administration (FHA) single family home mortgage program (USDA
2001). RHS currently functions to provide grants and loans to low-income
families and housing organizations to improve the overall quality of rural
housing.
Ø
FmHA/RHS
has financed or rehabilitated more than 2.7 million housing units since 1969 at
a cost of more than $70 billion.
Ø
The
need for subsidized rural housing continues to remain with more than 1.5
million occupied rural housing units that house more than 2.2 million tenants
who pay more than 30 percent of their incomes in rent.
Ø
At
the same time, funding by RHS for subsidized housing programs decreased from
$3.072 billion to $1.436 billion (late 90’s).
Ø
Unsubsidized
programs grew from $800 million to $2.3 billion.
Ø
Easing
access to rural housing financing is vital to developing and maintaining a
robust national housing improvement program.
§
Investments
or capital and credit must be available to housing developers at a cost that
allows them to develop housing affordable to those in need.
§
Nonmetropolitan
homeowners generally must pay higher interest rates on loans and make larger
down payments than in metropolitan areas.
CURRENT HOME OWNERSHIP ASSISTANCE
PROGRAMS
Ø
The
USDA and HUD are continuing to fund low-income rural housing initiatives.
Ø
Loans
are based on income categories that are regionally variable.
§
Very
low-income refers to incomes below 50 percent of the area median income (AMI).
§
Low-income
is between 50 and 80 percent of the AMI.
§
While
a moderate-income extends to $5,500 above the top of the low-income limit.
RHS Section 502
Ø
Section
502 is the USDA’s main housing loan program for single family housing.
§
502
provides over $1 billion in direct loans and over $3 billion in loan guarantees
for the purchase of single family homes.
§
RHS
works with private lenders to offer loans to individuals interested in building
or purchasing a home.
-
Interest
rates are negotiated between the lender and the borrower. However, the maximum
interest rate is fixed and is specified in the Notice of Funding Availability
(NOFA) published annually in the Federal Register.
-
Loan
terms are for 30 years and are made for up to 100% of the appraised value of
the home.
-
RHS
guarantees 90% of the worth of the loan to the lender.
§
Qualified
lenders for Section 502 include:
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Any
state housing agency.
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Farm
Credit System Institutions.
-
Lenders
approved by HUD, the U.S. Veterans Administration, Fannie Mae or Freddie Mac
(in certain circumstances).
-
Others
participating in other USDA Rural Development and/or Consolidated Farm Service
Agency guaranteed loan programs.
RHS Section 504
Ø
Section
504 provides home repair loans and grants to very low-income families.
§
Funds
available are for repairs, modernizations, the removal of health and safety
hazards, or to make home accessible for the disabled.
§
Loan
rates are set at one percent and repayments may extend 20 years.
§
Loans
for up to $20,000 are available while grants are available for up to $7,500.
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Grants
and loans may be combined for up to $27,500 in assistance.
RHS Section 523
Ø
Section
523 is the Mutual Self-Help Housing Program that makes homes affordable by
enabling future homeowners to work on homes themselves.
§
Parties
eligible for 523 loans are individuals who will complete at least 65 percent of
the work on building his or her own house.
§
523
loans may also be made to private or public nonprofit organizations that supervise
enrollees and provide sites for Self-Help Housing.
§
Loans
may be approved for up to $200,000, or more, with National Office Approval.
§
They
are for two years and bear a three percent interest rate. Eligible participants
must be low or moderate-income.
RHS Section 524
Ø
Section
524 loans are made to private or public nonprofit organizations to develop
housing sites for low or moderate-income families.
§
524
loans bear the market rate of interest at the time of approval or at the time
of the loan closing.
§
524
sites may be sold to low or moderate income families by using a mortgage
finance service (including RHS) that serves the same eligible family.
CURRENT RENTAL AND MULTI-FAMILY
HOUSING ASSISTANCE PROGRAMS
RHS Section 514
Ø
Section
514 is the Rural Housing Service’s Farm Labor Housing Program.
§
514
Loans may be used to buy, build, improve, or repair housing and amenities for
farm laborers whose income is earned by engaging in on-farm processing or
aquaculture.
§
Funds
may be used for the following:
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Purchase
a site.
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Purchase
a leasehold interest in a site.
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Construct
housing, day care facilities, or community rooms.
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Purchase
durable furnishings.
-
Pay
Construction loan interest.
§
514
loans may be granted in amounts of up to $400,000, or more with National Office
Approval.
§
Funds
may also be used in urban areas for nearby farm labor.
RHS Section 515
Ø
Section
515 provides Rural Rental Housing Loans for the landlords of multifamily
dwelling where very low, low, and moderate-income families reside.
§
Section
515 loans are direct and primarily used for mortgages.
§
Loans
may also be used to improve land, water and waste facilities, etc.
§
95
percent of tenants must have very low-incomes in new Section 515 projects.
§
In
existing projects, only 75 percent of tenants must have very low-incomes.
§
Loans
are for up to 50 years and are at a one percent interest rate.
RHS Section 538
Ø
Section
538 provides Rural Rental Housing Guaranteed Loans to fund construction,
acquisition, or rehabilitation of rural multifamily housing for very low, low,
and moderate-income occupants.
§
Tenants
may also be elderly, handicapped, or disabled with incomes not in excess of 115
percent of the AMI.
§
Loans
are made from private lenders to housing developers and are guaranteed up to 90
percent by RHS.
§
Loan
terms may be up to 40 years with fixed rates, as negotiated between the lender
and borrower.
-
Rates
must be within the maximum established under the Notice of Fund Availability
(NOFA) published in the Federal Register.
HUD Section 8
Ø
Section
8 provides rental housing assistance very low and low-income families, in the
form of direct payments to a private landlord.
§
The
tenant pays 30 percent of their household income for rent, with HUD paying the
balance, through the local housing authority to the landlord, in the form of a
voucher.
§
Tenants
obtain Section 8 payment vouchers from their local housing authority and rent a
HUD qualified apartment that does not exceed HUD’s Fair Market Rents for the
area.
-
If
the rent exceeds the fair market value for the area, the tenant must pay the
difference.
SOCIAL CHARACTERISTICS OF RURAL
HOUSING
Mortgages and Credit
Ø
A
shortage of mortgage credit in rural areas, contrasted to urban and suburban,
compounds the quality issues of rural housing.
Ø
According
to the U.S. Census (1994) such a credit shortage is illustrated by the fact
that 7 percent of home purchasers in nonmetropolitan areas, while only 3
percent in metropolitan areas, obtain first mortgages from individuals.
§
Many
of the individual creditors are home sellers.
Ø
Existing
housing conditions in rural
§
Such
indicators are may explain the fact that a greater proportion of dilapidated
housing exists in rural areas than in urban areas.
§
Another
indicator of the credit shortage is the high proportion of mobile homes in
nonmetro areas.
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According
to the 1990 Census 17 percent of rural homeowners owned mobile homes,
contrasted to only 8 percent of homeowners nationwide. Such a trend results
from the relative inexpense of mobile homes, contrasted to site-built homes,
and that mobile homes are often purchased from a dealer and financed by a
personal property loan (similar to a car) rather than a mortgage.
Minorities
Ø
Minorities
have historically suffered from mortgage and housing credit shortages more
severely than do whites.
Ø
A
1977 report on equal housing opportunity found that many African American and
Hispanic rural residents felt that they have had more difficulty than whites of
similar financial means in obtaining home and mortgage credit.
Ø
Native
Americans in general have been living in the worst rural housing in the
country.
§
Suffer
from the standard rural housing credit issues.
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Lands
are held in trusts and cannot be taken by foreclosure in the event of mortgage
default, rendering standard mortgages unavailable.
§
Market
value of existing homes tends to be less than other rural areas and the
infrastructure on native lands tends to be less complete, with relatively
substandard roads and utilities.
Older Rural Adults
Ø
Adequate
housing for older adults is a growing issue for rural communities.
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American
population as a whole is aging and many older adults are physically unable to
maintain their own homes
Ø
According
to the U.S. Census, the over-65 age cohort continues to be the fastest growing
group in the country.
Ø
The
Ø
We continue to see rural housing characterized by high interest
and mortgage rates and low wages, relative to metropolitan areas. Social issues
such as aging, education, race, and native land exploitation continue to
persist in rural
REFERENCES
Belden,
Joseph N. and Robert J. Wiener. 1999. Housing
in Rural
Affordable and Inclusive Communities.
Browne,
William P. 2001. The Failure of National
Rural Policy: Institutions and
Interests.
Katz, Michael
B. 1996. In the Shadow of the Poorhouse:
A Social History of Welfare in
National Housing Law Project. 2003. “National Housing Law Project: Section 8 Housing.”
Retrieved
Newman,
Sandra J. 1999. The Home Front:
Implications of Welfare Reform for
Housing Policy.
Nolan, Jill
Eversole and Thomas W. Blaine. 2001. “Rural Cooperative Housing for Older
Adults: An Emerging Challenge for Extension
Educators.” Journal Of Extension
39:2.
Retrieved
United States Department of Agriculture. 2001. “Housing Assistance Increases
in 2000.” Rural
Conditions and Trends 11 No.1:25-30. Retrieved
(http://www.ers.usda.gov/publications/rcat/rcat111/rcat111e.pdf).
United States Department of Agriculture. 2000. “Unique Housing Challenges
Face Rural
and Its Low-Income
Workers.” Rural Conditions and Trends
11 No.2:75-9. Retrieved
United States Department of Agriculture Rural Housing Service. 2003. USDA Rural
Development Online. Retrieved
Vissing,
Yvonne M. 1996. Out of Sight, Out of
Mind: Homeless Children and Families in Small
Town
Wallace,
George. 2000. “USDA’s Self-Help Loan Program Provides Unique Opportunities for
Home Ownership.” Rural
(http://www.ers.usda.gov/Publications/ruralamerica/sep2000/sep2000i.pdf).
Weber, Magaret J. and Jacquelyn W. McCray. “Life cycle differences in housing
perspectives of
Rural Households.” Home Economics Research Journal, March 1994, v22, n3, p309(15).
Whitener, Leslie A. 2000. “Housing Poverty in Rural Areas Greater for Racial and Ethnic
Minorities.” Rural
(http://www.ers.usda.gov/publications/ruralamerica/ra152/ra152c.pdf).