So Why Are Those Rural Housing Programs at USDA Anyway?

Housing folks often wonder why the U.S. Department of Agriculture has rural housing programs. The answer goes back to the New Deal and to efforts in the 1930s and 1940s to provide better homes for a rural population living in terrible conditions. In that period few rural homes had indoor plumbing or electricity, and rural poverty was at very high levels. The Housing Act of 1949, before there was a HUD, created the rural housing programs and placed them at USDA largely because the programs were initially for on-farm housing. Non-farm rural coverage was added later. The first USDA housing programs were for farm homeownership and home repair, and also did not fund much activity in the 1950s. Multifamily programs for rental bricks-and-mortar and for rental assistance started in the 1960s but did not have significant activity until the 1970s.

There are probably two major differences between USDA Rural Development (RD) and HUD programs.

USDA makes most of its loans and grants not to housing authorities or local government but directly to consumers. (Like FHA, USDA also has guaranteed many bank loans in recent years.) USDA also has a nationwide network of almost 500 local offices that offer direct financing to consumers. This structure has shrunk considerably from almost 2,000 local county offices 30 years ago, but it is still an important factor in enabling these programs to reach low-income rural residents.

The USDA programs since 1950 have built or assisted a total of 4.036 million units. The largest and oldest low-income program is Section 502 direct loans for homeownership. It has helped over 2.1 million low-income families become homeowners. USDA is actually the lender, making and servicing the loans directly to consumers. The peak year was 1976 when the 502 direct program funded over 132,000 mortgages. In 2011 the total was 9,400 units.

Since 2009 a more moderate-income program, Section 502 guaranteed loans, has become the dominant account at RD, with over 120,000 mortgages a year. Like VA and HUD FHA lending, this program guarantees bank loans.

The Section 515 rental program has provided loans to build 532,000 apartments for tenants with average incomes of under $12,000. Sixty percent of the tenants are elderly or disabled. In 1979 this program supported new construction of 38,000 units, but by 2010 only 626 were built, and in 2012 there was no Section 515 new construction at all. Supplementing the Section 515 units is a tenant subsidy called Section 521 Rental Assistance. In 2011 it supported over 218,000 units.

There is also a loan guarantee program for rental housing, Section 538. USDA has decades of success with other programs as well, supporting farm labor housing; self-help, sweat equity home building; repair grants for the very low-income elderly; and other initiatives.

Things have changed since 1949. USDA’s program delivery system has evolved. Offices have been consolidated (not always a good thing). Formerly unimaginable technology is now used routinely. A strong network of nonprofit organizations has come into being to put the rural housing programs to good use and to leverage funds from other private and public sources.

Rural housing has also come a long way. A 1934 USDA survey of 622,000 farm houses in 43 states found that only 44 percent of these homes had indoor water supplies (including pumps), 11.5 percent had bath tubs, 27.2 percent had kitchen sinks with drains. A meager 30 percent had electricity and 12 percent had central heat.

These physical problems are far less common in the 21st century, but they have not vanished. Even now, 5.8 percent of nonmetropolitan homes lack complete plumbing. Affordability, not a noteworthy issue 80 years ago, is now the major housing issue in rural areas, as in cities and suburbs, and it is a growing problem. Thirty percent of rural households were cost burdened in 2010, compared to 22 percent in 2000. The need for USDA’s housing programs remains. They are still an essential part of our country’s efforts to provide decent, affordable homes for all.

(Photo by the Housing Assistance Council.)

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