The U.S. Senate is examining a proposed law aimed at expanding affordable housing in rural areas.
On May 2, the Subcommittee on Housing, Transportation, and Community Development held a hearing on the legislation, which was introduced by subcommittee chair Sen. Tina Smith (D-Minn.) and Sen. Mike Rounds (R-S.D.).
Senators heard testimony from witnesses representing rental assistance advocate groups and development organizations.
The legislation contains several provisions, key among them providing more affordable housing stock in rural communities for low-income people, those with disabilities, and the elderly.
The federal government does not have an official and precise definition of “rural.” However, the U.S. Census Bureau offers this language on its website:
“In general, rural areas are sparsely populated, have low housing density, and are far from urban centers.”
The Rural Housing Service Reform Act would revise the U.S. Department of Agriculture’s (USDA) rural affordable housing rules, among them the 514, 515, and 521 programs, which the senators and witnesses focused on in the hearing.
Through the 514 and 515 programs, developers receive low-interest mortgages to finance construction of affordable rural housing. The 521 program provides subsidized rent at 514 or 515 properties, with the subsidy equal to the difference of 30 percent of the renter’s income and the total rent.
How Owners, Renters Would Benefit
The Rural Housing Service Reform Act would “decouple” the programs, allowing owners to stay in the program after they pay off their 514 or 515 mortgages.Owners that continued in the program would profit by receiving a steady flow of rental income and qualifying for investments and financing from banks, community development institutions (CDFIs), and other groups.
Renters would benefit from being able to stay in their units at an affordable price.
In her opening remarks, Sen. Smith (D-Minn.) described how the Rural Housing Service Reform Act would change USDA law to increase affordable housing in rural areas and boost rental assistance options.
“We have a serious shortage of housing in this country, especially in rural communities–and those challenges are across the housing continuum, from the most affordable properties to market-rate workforce housing,” said Smith.
“Housing challenges can be about families trying to find a place to live or people with disabilities or seniors that can’t find a place to live on a fixed income.
“Often, it is about people who want to take a job at a grain elevator or a meat processor or a manufacturing facility, but the closest home they can afford is miles and miles away,” she said.
Ms. Smith said that the legislation would make it easier for nonprofits to acquire properties with their USDA mortgage paid off and continue offering affordable housing in those properties.
The bill also would “decouple rental assistance from those mortgages so that people can continue to use rental assistance even if the units where they live are no longer in a USDA mortgage building,” Ms. Smith said.
Subcommittee member John Tester (R-Mont.) represents a state that, according to World Population Review, has a rural population of 44.1 percent. This trails only Maine (61.3 percent), Vermont (61.1 pe?cent), West Virginia (51.3 percent), and Mississippi (50.7 percent).
“Look, I think you all know we’ve got too many people that can’t find a house, can’t afford a house, or living in cars or living with relatives,” said Mr. Tester. “It’s not good, and I think it’s a serious, serious problem in Montana. And I can’t speak for the other states, but I got a notion we’re not alone.”
Mr. Tester then asked one of the witnesses, David Lipsetz, president and CEO of the Housing Assistance Council, a national nonprofit that supports affordable housing, “How would decoupling these 515 loans benefit the communities in a rural state like Montana or anywhere else for that matter?”
Mr. Lipsetz responded: “Every single property that all of us live in in this country, except for a small number, have private finance or public finance as a mortgage. You borrow money so that you can move in today. You make your payments to get back and you capitalize.
“You bring that money into your building so that you can keep the roof up, the windows up, fix the door frame when it’s needed,” he said.
Mr. Lipsetz added: “If you’re able to take the USDA mortgage after it’s prepaid, set it aside, and do all of the things that we’re talking about, about protecting the affordability of the unit, then you’re gonna have 521 rental assistance that can go out and help that owner leverage that finance.
“There’s no better tool.”
