March 15, 2017

Housing Rural America: Funding Rural Affordable Housing and Community Revitalization

Angela Moreno-Long

Rural residents face several barriers to affordable housing because of lower incomes and higher poverty rates in rural areas. Residents also struggle with substandard housing conditions and additional associated costs including maintenance repair and healthcare costs.

A recent report from the National Rural Housing Coalition describes that the rural poverty rate is at 16.5 percent and that in 2010, rural median incomes ($40,038) were 20 percent lower than the national median income ($50,046), and more than 23 percent less than median urban incomes ($51,998). Generally, folks should not exceed spending 30 percent of their income on housing. According to the Housing Assistance Council, nearly half of rural renters are paying more than 50 percent of their monthly incomes on housing. In addition, almost six percent of rural homes are considered substandard, without hot water, with inadequate heating or plumbing systems, and with poor conditions defined by rodent infestation, asbestos, lead paint, or mold.

These factors present not only immediate challenges to accessing affordable housing, but also long term impacts and burdens on rural residents. Higher rates of asthma and lead poisoning in children have been associated with poor housing quality. While a variety of environmental conditions like pollution and air quality affect health, indoor home quality plays a major role as well. Conditions such as mold, moisture, dust mites, and rodents can all be triggers for asthma ( Findings from a study among children under six years of age revealed that roughly 39% of doctor-diagnosed cases of asthma among children in the United States could be avoided by eliminating indoor environmental exposures. Another study found that children from low-income families are 5 times more likely to have elevated blood lead levels.

Dispersed housing development, often located on the edges of communities, create another cost and time burden for low-income residents as they must spend more money on transportation, and travel greater distances to access work and services. Difficult access to services disproportionately affects vulnerable populations like rural seniors who end up using more emergency room trips and visits as a result of lower access to health and related support services. The number of seniors in the United States is expected to double by 2030 (one out of five citizens will be over 65) and there are currently 7.6 million seniors living in rural America, 10% of whom live in poverty. The Housing Assistance Council has produced a report, Taking Stock: Rural People, Poverty and Housing in the 21st Century, which provides a more in-depth investigation of the current challenges in rural affordable housing.

Affordable and safe housing is an integral part of a healthy community.  Often in rural areas there is a lack of access to mortgage credit, low incentive for developers to invest and limited financing for affordable rental housing. The USDA has several single-family and multi-family housing programs which help low-income Americans buy or rent safe and affordable housing in rural areas.

  • The Section 502 Direct Home Loan Program is the only federal homeownership program that is exclusively targeted to very low- and low-income rural families and helps rural communities gain access to mortgage credit. The loans can be used to build, repair, renovate, or relocate homes, or to purchase and prepare sites, including providing water and sewage facilities.
  • Section 515 Rural Rental Housing Loans are direct, competitive mortgage loans made to provide affordable multifamily rental housing for very low-, low-, and moderate-income families, elderly persons, and persons with disabilities. Section 515 is the principal source of financing for rental housing in rural communities.
  • Section 514/516 Farm Labor Housing Program is the only federal program that provides affordable loans and grants to purchase, construct, or repair housing for America’s farm laborers. Funds can be used to purchase a site or a leasehold interest in a site; to construct or repair housing, day care facilities, or community rooms; to pay fees to purchase durable household furnishings; and to pay construction loan interest. This program is important in providing housing and ability for farms to provide adequate facilities for workers needed to continue agricultural production.  

In addressing the affordable housing needs of rural residents it is important to also consider the sustainability and revitalization potential of affordable housing projects. USDA financing provides important opportunities for rural residents to access decent, clean, and affordable rural housing. Innovative uses of USDA loans and additional financing can create projects which address rural housing needs while also acting as catalysts for creating more enjoyable, economically vibrant and sustainable rural places.

Relevant Case Studies:

Arcata, California

Using a combination of Section 515 Rural Rental Housing Direct Loans, low income housing tax credits, and a loan from the City of Arcata (population 17, 697) the city and a private developer created an affordable senior citizen apartment complex in downtown Arcata, California. Home to Humboldt State University and known for a thriving downtown with locally owned businesses and farmers markets, the area lacked truly affordable housing. 69.16% of households who rent in Arcata are overburdened. The median gross income for households in Arcata is $30,244 a year ($2,520 a month). The median rent for the city is $908 a month. In Arcata, a household making less than $3,027 a month would be considered overburdened when renting an apartment at or above the median rent. The Plaza Point multi use building was opened in 2012 and has first floor commercial space, a fitness center and garden plots for residents and 29 apartments for seniors earning 50 percent or below area median income. The building was designed with sustainability and walkability in mind: it is centrally located and within walking distance of a grocery store, pharmacy, hospital, and bus line. The connections to services and downtown foster a strong sense of community, keep transportation costs down for the residents and the high energy efficiency and green building technology also reduce monthly energy costs for residents.

The project was financed using a combination of funding sources-the City of Arcata first committed a $2.3 million loan to the developer, Danco, who then applied for a USDA Section 515 Rural Rental Housing Direct Loan for $1 million. The USDA loan was used just for the rental housing in the development, and the following year Danco received $3.8 million in Low Income Housing Tax Credits (LIHTC).    

Pittsburg, Kansas

Using a USDA Rural Development Section 538 Loan Guarantee, state and federal Historic Tax Credits, and a city loan to the City of Pittsburg, Kansas (population 20,398) worked with a local developer, Garrison Development Company, to convert the long vacant historic Besse Hotel in downtown into 46 apartment units priced for low-to-moderate income individuals and families. The renovation transformed the 13-story hotel into high rise apartments with a community room, exercise room, and restored two story lobby with original woodwork and terrazzo tile. The apartments opened in December 2010 and have attracted new residents to downtown Pittsburg who now support local business and have easy access to important services.

In total the project cost over $11 million which was financed through a combination of construction loans from local banks totaling $2.1 million, a $1,170,000 USDA Rural Development Section 538 Loan Guarantee, $9,700,00 in state and federal Historic Tax Credits and a $200,000 loan from the City of Pittsburg.  

Clendenin, West Virginia

Community members in Clendenin, West Virginia (population 1,212) created a local non-profit organization in order to renovate an historic and abandoned school building in the downtown. The non-profit, 20545-A New Clendenin, partnered with Cabin Creek Health Care Systems and transformed the school into affordable senior housing and a medical clinic which was completed in October 2011. The project was funded by a combination of USDA Community Facilities Loans, USDA Rural Business Enterprise grants and state and federal Historic Tax Credits.

There is an urgent need for access to clean, high-quality affordable housing in rural America. Creative uses and combinations of funding, collaborative public-private partnerships and thoughtful development can aid in creating affordable and livable communities for all residents of rural America. Affordable and safe housing for low-to-moderate income rural populations reduces burdens on individuals and families. These burdens include expense on housing as well as the residual costs (healthcare, transportation) of living in substandard housing. These examples of rural affordable housing projects also demonstrate how affordable housing can be incorporated into renovation and revitalization plans to create vibrant, active communities where everyone is welcome and have access to services which ultimately benefits the local economy and community.