Rural housing crisis subject of recent Senate hearing

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WASHINGTON — The crisis in affordability in America’s suburbs and cities has eclipsed the reality in rural America where there are fewer options for rental housing.

Sen. Tina Smith spoke at Tuesday’s hearing on rural housing within a Senate subcommittee. “We know that the lack of affordable housing is an obstacle to attracting new business, new residents, and new talent,” she said. “The truth is that you can’t do anything if there’s no safe and affordable housing.”

Smith, D.Minn. is leading a bipartisan effort to reform more than 60-year-old U.S. Department of Agriculture programs that are aimed at helping low income rural residents to keep their roof over their heads, and to find other solutions to the shrinking supply of affordable housing in America’s heartland.

The Section 515 Rural Housing Loan program is a USDA program that has been around for decades. It provides affordable housing for those with low or moderate incomes, seniors, and people with disabilities, and offers 30-year mortgages at 1 % interest.

These tenants may be eligible for Section 521 Rural Rental Assistance. This program covers the difference between the qualified tenant’s monthly income and the Section 521 Rural Rental Assistance.

Many Section 515 homeowners sell their homes or convert them to conventional rental units as the mortgages on Section 515 housing units end. This renders Section 521 tenants unable to receive the assistance that they received for their rent.

Smith stated that the rental assistance ceases when the mortgage is canceled.

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Senator Tina Smith, Tuesday hearing on rural housing in the Senate banking subcommittee. “We know that the lack of affordable housing is a barrier to new businesses, new residents, and new talent.”

Section 521 housing may also have fallen into disrepair, causing tenants to move.

Smith asked witnesses to describe what happened to 521-housing tenants.

Nobody seemed to be able to tell.

Smith concluded, “Everything’s up in the air.”

Minnesota was one of the first to implement rural housing programs. However, the state had only 450 Section 521 mortgage borrowers and 9,760 renters who were receiving rental assistance. Witnesses at the hearing stated that rural tenants and those with properties receiving USDA assistance are decreasing.

Smith and Senator Jeanne Shaheen (D-N.H.) introduced a bill this week which would allow tenants to still be eligible for rental assistance, even if their property is not in the Section 515 program. This legislation would also reform existing Section 515 loans and provide incentives for property owners to remain in the program.

Housing advocates and Smith themselves believe that the legislation is only the first step. Other proposals were also discussed, including more funding for rural housing programs, administration of those programs, and the possibility for manufactured housing to be eligible under Section 515 loans.

A witness from South Dakota’s housing non-profit suggested that the USDA program that subsidizes mortgage payments to low- and medium-income homeowners be modified so that all subsidy is not repaid when the property is sold.

Marcia Erickson CEO of GROW South Dakota stated that the subsidy payback at amortization’s end can adversely impact low-income families’ ability to accumulate wealth.

One of the pandemic relief legislations approved by Congress was the American Rescue Plan. It included $100 million for Section 520 rental assistance for households and units previously unassisted. This allowed the USDA’s Rural Housing Service (USDA) to expand rental assistance coverage to 27,000 units across 3,700 properties. This additional funding will expire at the end the federal fiscal year on Sept. 30.

Elizabeth Glidden (Deputy Executive Director of the Minnesota Housing Partnership) stated that rural communities are facing a housing affordability crisis.

She stated that 24% of Minnesota homeowners are “cost-burdened”, meaning they spend more than 30% of their monthly income to pay for housing. This number rises to 41% in rural renter households.

She also stated that nearly half of Minnesota’s renter households earn less than $50,000 per year. This is below 50% of the state’s median income.

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Elizabeth Glidden is the deputy executive director at Minnesota Housing Partnership. She says that “rural communities are facing a housing affordability crisis.”

Glidden stated that rural Minnesotans have fewer housing options than urban counterparts and are more likely live in substandard housing. This is due to an older housing stock and lower compliance with codes.

She stated that Greater Minnesota homes are more than half a century old and were built before 1970. New construction permits in rural areas remain low. Some communities have gone years without building a multifamily housing project.

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