Why Keep Rural Housing Programs at USDA?

Rural housing professionals complain about USDA’s Rural Development/Rural Housing Service all the time. We also tout the advantages of using HUD programs, such as HOME, in rural areas. But we hate the idea of moving USDA’s housing programs to HUD. That is not the cure for rural housing’s problems.

True, housing is not a major focus at USDA—its rural housing programs are dwarfed by its agriculture and food programs. But rural needs are not a major focus at HUD; HUD’s rural spending is dwarfed by its urban activities. USDA understands rural places, has experience with housing programs unlike any offered by HUD, and has a network of field offices far broader than HUD’s.

Different issues: Rural housing issues are not just smaller urban issues. Rural areas lack economies of scale. There are fewer strong local development organizations in rural places. Private financing is harder to find in rural places. Technology’s advantages are not always accessible: even where computers are available, fast and reliable Internet connections often are not. Nor can technology replace human beings. It is truly important for a low-income person, nervous about asking for government aid, to be able to request that aid in a one-on-one interaction with someone who lives in the same local culture.
Different program: HUD has limited experience administering programs that are directed exclusively to rural areas. Most of HUD’s programs can be used in rural areas as well as in larger towns and cities, but the programs’ designs are urban-oriented. Large programs like HOME and the state-administered Community Development Block Grant are intended to reach rural areas through state government agencies. Yet historically HOME, CDBG, and FHA have spent lower proportions of their funds in rural areas than the proportion of the population living there.

HUD’s experience is in delivering block grants, guarantees, and rental subsidies, not mortgage loans. HUD works through others: local governments, state and tribal governments, developers, banks, intermediary organizations, and public housing authorities. Unlike HUD, however, USDA can make loans directly to low-income homebuyers and homeowners. USDA also has the only programs targeted specifically to provide good housing for farmworkers. While the loans and grants offered by many of the rural housing programs are retail items, HUD is a wholesaler, not a retailer.

Different network: USDA’s field offices are designed to be accessible to rural Americans. USDA’s Rural Development mission area has 47 state offices and close to 500 field offices serving all 50 states and the U.S. territories. HUD has far fewer field offices and they are located in major urban centers. In California, for example, HUD has six field offices, located in Fresno, Los Angeles, Sacramento, San Diego, San Francisco, and Santa Ana. USDA RD has a state office in Davis and 18 local offices. In Illinois, HUD has offices in Chicago and Springfield, while RD has a state office in Champaign, 12 field offices, and two work stations. In West Virginia, HUD has a single office in Charleston, and Rural Development has a state office in Morgantown, four area offices, and seven sub-area and satellite offices.

The local USDA offices deliver all USDA Rural Development programs–not only housing, but also economic development, utilities, and community facilities. Housing improvement is inextricably intertwined with these other community improvement efforts. RD’s staff understand the relationships among them and can help rural places use these resources together.

Furthermore, removing housing functions from RD field offices would not reduce costs, since the offices and staff would remain in place to administer the other RD programs. At the national level, the cost of moving programs and staff from one department to another would be significant.

It is not surprising, then, that neither USDA nor HUD has supported the idea of moving USDA’s rural housing programs to HUD. Officials from both departments testified at hearings in May and September 2011 held by the House of Representatives Financial Services Committee’s Subcommittee on Insurance, Housing and Community Opportunity. (Parts of this blog post are based on the testimony at the May hearing of Peter Carey, representing the Housing Assistance Council, the National Rural Housing Coalition, and Self-Help Enterprises.) The draft legislation reviewed at those hearings has not been introduced in Congress, but the idea is occasionally raised by members of Congress and staff.

The Housing Assistance Council and others have many ideas for improving USDA’s rural housing programs while not throwing the baby out with the bath water. The taxpayers’ money and the government’s time would be far better spent making smaller changes to improve the programs within USDA, rather than creating new challenges for them to overcome.

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