Mr. Chairman, thank you for holding this important series of hearings on housing in America. I am grateful for the opportunity to appear before you today to talk generally about the need for increased rural housing, and to talk more specifically about legislation I have introduced, the Rural Rental Housing Act.
There is nothing more important to a good life in America than good housing. And there is no problem in rural America larger than the shortage of affordable housing. For working families in rural America today, the shortage of affordable housing is becoming a crisis.
About 2.6 million rural households live in housing that either has serious structural problems or doesn't have indoor plumbing, heat, or electricity. In North Carolina, the problem is even bigger. As many as one in ten folks in five of North Carolina's rural counties live in inferior housing.
The rural housing shortage is part of a bigger problem. In America's economy today, rural areas are falling behind. They do not have the access they need to the technology, lending, and investment that will create good jobs. As a result, while Americans in rural areas have always been poorer than Americans in cities, but the gap has grown bigger since 1979. In many rural North Carolina counties, 20% or more of the people live below the poverty line.
While rural areas aren't able to address their housing problems alone, Washington has turned its back on the problem. Federal investment in rural rental housing is at its lowest level in more than 25 years. This year, the budget provided zero dollars for building rental homes in rural America -- zero Rural rental housing production financed by the federal government has been reduced by 88 percent since 1990. In addition, while 28 percent of the urban poor have access to federal housing subsidies, only 17 percent of very low-income rural renters get help.
Although the rural population is 22 percent of the nation's population, only 12 percent of HUD's Section 8 funds reach non-metropolitan areas. This is due in part to the lack of decent housing in rural areas. HOME and CDBG also neglect smaller communities by mostly funding larger ones. Rural counties also fared worse with Federal Housing Administration (FHA) assistance on a per capita basis as well, getting only $25 per capita versus $264 in metro areas. Our veterans in rural areas are no better off: only 11 percent of Veterans Affairs housing programs reach non-metropolitan areas.
In its recent report, the Millennial Housing Commission noted this funding disparity by pointing out that "rural housing needs ... are often neglected by major federal housing programs...." The Commission recommended that Congress provide additional funding for programs in rural areas. It also mentioned that states, too, must "pay special attention to the needs of rural areas." The Commission is right.
We know that there is a real scarcity of rural housing – and this scarcity is even greater when it comes to rural rental housing.
All of us recognize that owning a home is a central part of the American Dream. But the reality is that many people can't afford it, and these folks still need and deserve a decent roof over their heads. One out of every three renters in rural America pays more than 30 percent of his or her income for housing; 20 percent of rural renters pay more than 50 percent of their income for housing.
To address the shortage of rural rental housing, I believe that the federal government must come up with new solutions. We cannot simply throw money at the problem and expect the situation to improve. Instead, we have to work in partnership with State and local governments, private financial institutions, private philanthropic institutions, and the private and nonprofit sectors to make headway. We must leverage our resources to increase the supply and quality of rural rental housing for low-income households and the elderly.
Senator Jeffords, Senator Leahy, Senator Wellstone, and I have proposed a new solution. Our Rural Rental Housing Act would create a flexible source of financing to build or rehabilitate rental housing based on local needs. We demand that the federal dollars to be stretched by requiring State matching funds and by requiring the sponsor to find additional sources of funding for the project. We are pleased that more than 70 housing groups from 26 states have already indicated their support for this legislation.
Let me briefly describe what the measure would do. We propose a $250 million fund to be administered by the United States Department of Agriculture (USDA). The fund will be allotted to states based on their shared of rural substandard units and of the rural population living in poverty, with smaller states guaranteed a minimum of $2 million. We will leverage federal funding by requiring states or other non-profit intermediaries to provide a dollar-for-dollar match of project funds. The funds will be used for the acquisition, rehabilitation, and construction of low-income rural rental housing.
The USDA will make rental housing available for low-income populations in rural communities. The population served must earn less than 80 percent area median income. Housing must be in rural areas with populations not exceeding 25,000. Priority will be given to very low income households, those earning less than 50 percent of area median income, and to very low-income communities or in communities with a severe lack of affordable housing. To ensure that housing continues to serve low-income populations, the legislation specifies that housing financed under the legislation must have a low-income use restriction of not less than 30 years.
The Act promotes public-private partnerships to foster flexible, local solutions. The USDA will make assistance available to public bodies, Native American tribes, for-profit corporations, and private nonprofit corporations with a record of accomplishment in housing or community development. Again, the act stretches federal assistance by limiting most projects from financing more than 50 percent of a project cost with this funding. The assistance may be made available in the form of capital grants, direct, subsidized loans, guarantees, and other forms of financing for rental housing and related facilities.
Finally, the Act will be administered at the state level by organizations familiar with the unique needs of each state, not by creating a new federal bureaucracy. The USDA will be encouraged to identify intermediary organizations based in the state to administer the funding. These intermediary organizations can be states or state agencies, private nonprofit community development corporations, nonprofit housing corporations, community development loan funds, or community development credit unions.
Non-profit organizations, public bodies, and the other eligible intermediary organizations are well-versed in combining funding sources to finance housing for low-income families. In fact, it is almost impossible to find a housing project which is funded purely by Section 515 funds any more. Most rural rental housing projects have multiple sources of funding.
An example of a project which would clearly benefit from Rural Rental Housing Act funding is one sponsored by the non-profit organization Southern Maryland Tri-County Community Action Committee, in Calvert County, Maryland. This high rent area has such strong demand for Low Income Housing Tax Credit funding that it only has one funding round per year, rather than the usual two. The Community Action Committee received approval from the County to build 104 units of affordable rental housing. The land is available, but the funds are not.
Out of the 104 scheduled units, the Committee has only been able to find funding to build 28 units, through patching together funds from the Section 515 program, the state housing finance agency, tax credits, and the Affordable Housing Program of the Federal Home Loan Bank. Because the incomes served by this project are so low in comparison to the surrounding area, ranging from 21 percent ($17,000) to 33 percent ($30,000) of the area median income, tax credits alone are not an option to build the remaining units.
With additional federal funds through the Rural Rental Housing Act, to match tax credits or state funds or even conventional bank mortgages, the Committee would be able to finance the remaining 76 units of affordable housing that are desperately needed. You may have seen the recent articles in the Washington Post outlining the serious lack of housing in Calvert County, where even those families with valid Section 8 vouchers cannot find housing. Federal funding, matched by local, state, and private funds, is needed to begin to address this problem. In many rural areas, the local government does not have access to a federal funding stream to finance rental housing. In most states, there is a long line for HOME and CDBG funds. Small, isolated poor communities must compete with central cities, larger towns and suburbs for federal block grant funding.
The Rural Rental Housing Act would provide an additional source of funding, devoted exclusively to rural America, for rental housing development, acquisition and rehabilitation. By providing another tool, target to our small towns and farming communities, the Rural Rental Housing Act provides an additional tool, or resource, to finance rental housing for rural families.
The Rural Rental Housing Act is not meant to replace, but to supplement, the Section 515 Rural Rental Housing program, which has been the primary source of federal funding for affordable rental housing in rural America from its inception in 1963. Section 515, which is administered by the USDA's Rural Housing Service, makes direct loans to non-profit and for-profit developers to build rural rental housing for very low income tenants. Our support for 515 has decreased in recent years – there has been a 73 percent reduction since 1994 -- which has had two effects. It is practically impossible to build new rental housing, and our ability to preserve and maintain the current stock of Section 515 units is hobbled. Fully three-quarters of the Section 515 portfolio is more than 20 years old.
The time has come for us to take a new look at a critical problem facing rural America. How can we best work to promote the development of quality rental housing for low-income people in rural America? My colleagues and I believe that to answer this question, we must comply with certain basic principles. We do not want to create yet another program with a large federal bureaucracy. We want a program that is flexible, that fosters public-private partnerships, that leverages federal funding, and that is locally controlled. We believe that the Rural Rental Housing Act of 2001 satisfies these principles and will help move us in the direction of ensuring that everyone in America, including those in rural areas, have access to affordable, quality housing options.
There's no question that the Rural Rental Housing Act is only one part of the solution to the problem of affordable housing facing rural America. There is more we need to do. But I do believe this act is an important step on the road to making sure Americans who live in rural areas enjoy all the opportunities and promise of life in our great country. Mr. Chairman, I look forward to working with you on this bill and this issue in the future. Thank you.
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