Decent Housing: A Vanishing Right
As we approach the edge of the federal "fiscal cliff," pretty much everything except defense spending is up for grabs.
If past experience is any indication, however, programs benefitting the poor and minorities are particularly vulnerable. In particular, housing is on the endangered list, especially rural housing.
While we walk up to the cliff's edge, a lot of legislation is in limbo because these measures represent potential bargaining chips in whatever deal is struck. The Fiscal Year (FY) 2013 agricultural appropriations and new Farm Bill are among those left twisting in the wind.
Meantime, the outlook for rural housing is growing dimmer as the federal role declines.
An American Right?
Since the Great Depression of the 1930s, the social contract between the federal government and the American people has promised a decent home for everyone, emphasizing support for those FDR called the "least among us." In his 1944 State of the Union address, in fact, President Roosevelt enunciated a second bill of rights, including "...the right of every family to a decent home."
To help meet this commitment, the government has built, financed, managed and subsidized housing operations. Government has made, insured and purchased mortgages for new, renovated and existing homes and apartments. It has given tax breaks to homeowners and rental housing investors, supplemented rents and helped states and localities undertake similar activities.
Over the years, the level of activity and funding has had major ups and downs. Most of the ups came when the Democrats were in control.
Throughout, however, rural communities have received short shrift. In 1980, in a report entitled "Ways of Providing a Fairer Share of Federal Housing Support to Rural Areas’" the federal Government Accountability Office (GAO) reported: "The distribution of Federal housing support ...has not been consistent with relative need."
Three decades later, in "Options for Optimizing the Federal Role in Rural Development," the GAO reported improvement in rural housing since the 1930s, but noted that the condition of rural housing "still lags somewhat behind that of urban housing...."
The rural housing gap continues. The U.S. Department of Agriculture's Economic Research Service has calculated that 15 percent of all rural counties are housing stressed and 30 percent of rural residents live in housing that is overcrowded, lacks basics like plumbing or costs more than they can afford.
Rural people represent about 17 percent of all Americans, but still gain a disproportionately small share of the federal housing benefits open to all Americans.
Rural residents receive just 12 percent of the major rent subsidy program, Section 8 vouchers. Less than seven percent of the Federal Housing Administration (FHA) funding and only 10 percent of the Veterans Affairs home loans go to rural residents The latter figure is particularly surprising because rural residents represent 38 percent of the eight million living veterans.
The Signs Aren’t Promising
Even before any fiscal bargain is struck, the outlook for rural housing isn't good because federal support is already dwindling.
For some six decades, the US Department of Agriculture (USDA) has been the mainstay of housing finance for rural residents. It has helped more than 2.1 million families purchase modest homes, now worth an estimated $40 billion.
Section 502 direct home loans have been the lever that has moved rural housing. "502 direct," as it’s known, is designed to serve buyers with very low incomes. At least two-fifths of the borrowers must earn 50 percent or less of median income. Interest rates as low as one percent with loans as long as 38 years make these mortgages work.
At the height of the national foreclosure crisis, 502 direct defaults remained below five percent, well below the rate on higher income borrowers. Over the life of each mortgage, the cost to taxpayers averages just $7,200 compared to nearly $7,000 a year for Section 8 rental vouchers.
Despite impressive efficiency and results, and a waiting list of 25,000 families year in year out, funding for 502 direct loans is shriveling.
Between FY 2004 and FY 2012, appropriations took a 30 percent cut. For FY 2013, the Administration's budget and House version of the Appropriations Bill both call for another 27 percent reduction. If this proposal goes through, the number of families served will fall to between 5,000 and 6,000 — the same number as five decades ago.
This chart tells the story.
The Cuts Keep Coming
Another USDA program, highly lauded by leaders from both parties, faces slashing cuts nonetheless.
Self-Help Housing is unique among the panoply of federal programs. Under it, nonprofit housing developers provide training, technical assistance and close supervision to small teams of future owners who build their own homes. Each family invests roughly 1,200 hours, creating what's known as "sweat equity." Construction professionals do the rest. 502 direct loans finance the debt.
The average annual income of participant families is $27,000. Most are minorities. Their repayment record is better than higher income families.
The key to this success story is the assistance provided to participant families by nonprofits. But instead of increasing funding — or at least holding funding level — the Obama administration’s FY 2013 budget reduces funding for these groups by two thirds..
The House version cuts this program by half.
The Administration and the House also agree on zeroing out any monies for new Section 515 rental apartments, leaving the nearly one million rural residents in substandard housing high and dry.
Decreased federal support for housing extends beyond rural communities to the rest of the country. If current trends continue, when budget negotiators cut a deal, housing, particularly rural housing, will be on the chopping block.
Sandra Rosenblith is director of Stand Up For Rural America. As senior vice president of the Local Initiatives Support Corporation, she founded and managed Rural LiSC, the largest private supporter of grassroots rural community development. Rosenblith is also a board member of the Center for Rural Strategies, which publishes the Daily Yonder.