Rural Housing in
(Bullet version for
presentation)
Pat Kennealy
Graduate Research
Assistant, Rural Sociology
Comer Hall
334.844.5628
kennepj@auburn.edu
History
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Since
the early 1950’s, the
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The
Housing Act of 1949 brought about the Farmers Home Administration (FmHA), a
division of the United States Department of Agriculture (USDA).
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Oversaw
and funded public rural housing assistance programs.
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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.
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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.
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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.
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FmHA/RHS
has financed or rehabilitated more than 2.7 million housing units since 1969 at
a cost of more than $70 billion.
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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.
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At
the same time, funding by RHS for subsidized housing programs decreased from
$3.072 billion to $1.436 billion (late 90’s).
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Unsubsidized
programs grew from $800 million to $2.3 billion.
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Easing
access to rural housing financing is vital to developing and maintaining a
robust national housing improvement program.
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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.
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Nonmetropolitan
homeowners generally must pay higher interest rates on loans and make larger
down payments than in metropolitan areas.
CURRENT HOME OWNERSHIP ASSISTANCE
PROGRAMS
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The
USDA and HUD are continuing to fund low-income rural housing initiatives.
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Loans
are based on income categories that are regionally variable.
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Very
low-income refers to incomes below 50 percent of the area median income (AMI).
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Low-income
is between 50 and 80 percent of the AMI.
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While
a moderate-income extends to $5,500 above the top of the low-income limit.
RHS Section 502
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Section
502 is the USDA’s main housing loan program for single family housing.
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502
provides over $1 billion in direct loans and over $3 billion in loan guarantees
for the purchase of single family homes.
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RHS
works with private lenders to offer loans to individuals interested in building
or purchasing a home.
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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.
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Loan
terms are for 30 years and are made for up to 100% of the appraised value of
the home.
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RHS
guarantees 90% of the worth of the loan to the lender.
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Qualified
lenders for Section 502 include:
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Any
state housing agency.
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Farm
Credit System Institutions.
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Lenders
approved by HUD, the U.S. Veterans Administration, Fannie Mae or Freddie Mac
(in certain circumstances).
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Others
participating in other USDA Rural Development and/or Consolidated Farm Service
Agency guaranteed loan programs.
RHS Section 504
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Section
504 provides home repair loans and grants to very low-income families.
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Funds
available are for repairs, modernizations, the removal of health and safety
hazards, or to make home accessible for the disabled.
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Loan
rates are set at one percent and repayments may extend 20 years.
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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
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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 5