NEW RESEARCH FROM THE Bob Rapoza NATIONAL RURAL HOUSING May 11, 2017 COALITION 1
Barriers to Affordable Rural Housing Income and Quality of Lack of Poverty Housing Credit Lower incomes, higher rates of poverty, poor quality of the available housing stock, and a lack of affordable credit options are all barriers for affordable rural housing in America. 2
RURAL INCOMES AND POVERTY RATES National Urban (inside Rural MSA) (Outside MSA) Median $56,516 $59,258 $44,657 Incomes Poverty Rate 13.5% 13% 16.7% But what about rural renters? 3
RURAL RENTERS ARE COST BURDENED 41 percent of all rural renters pay more than 30 percent of their monthly income on rent. Non-Cost Burdened Rural Renters 21% Cost Burdened Rural Renters paying between 30% and 49.9% of income on rent 59% 20% Severely Cost Burdened Rural Renters paying more than 50% of income on rent 4
4% of non-metro units are “inadequate,” compared to 2% nationally – this means the unit lacks plumbing or a complete kitchen. QUALITY 10.3% of inadequate non-metro units also have more than one occupant per room (compared to 8.2% in metro areas), suggesting that overcrowding is more common in inadequate units in non-metro areas. 5
RURAL COMMUNITIES LACK ACCESS TO AFFORDABLE CREDIT OPTIONS Because rural communities are smaller and geographically large, they can struggle to attract affordable credit options and achieve economies of scale to make housing affordable 6
RECENT RURAL HOUSING In 2017 NRHC has released an Impact Report and a RESEARCH Review of Federal Rural Rental Housing Programs. 7
NRHC 2017 IMPACT REPORT In April we released the 2017 Impact Report on the FY 2016 activity of 104 organizations. These organizations helped low-income families and communities secure $1 billion in financing to build, purchase, preserve, or rehabilitate: 6,505 units of affordable housing and improved access to rural water, and sewer systems for 138,115 of families This resulted in the creation of 13,920 jobs, over $816.43 million generated income, and $442.2 million in tax revenue. 8
84 organizations reported HOMEOWNERSHIP PROGRAMS on their homeownership activity. 9
Responding organizations secured $314.5 million in financing; These groups assisted 3,139 families through some type of HOMEOWNERSHIP homeownership program; IN RURAL 59 Mutual Self-Help Housing Organizations assisted 378 families in the construction of their homes; COMMUNITIES Those Mutual Self-Help families contributed over $6.8 million in sweat-equity .
RENTAL PROGRAMS 22 organizations reported on their multifamily activity. 11
FINANCING SOURCES FOR RENTAL HOUSING [CATEGORY NAME] [CATEGORY NAME] [CATEGORY NAME] [CATEGORY NAME] 1.75% 4.61% 7.31% 7.15% [CATEGORY NAME] [CATEGORY NAME] 4.55% 16.06% [CATEGORY NAME] 3.84% [CATEGORY NAME] [CATEGORY NAME] 6.37% 2.29% [CATEGORY NAME] [CATEGORY NAME] 1.97% 0.51% [CATEGORY NAME] 43.57% 2,859 rental housing unit developed, constructed, preserved, AFFORDABLE or rehabilitated ; RURAL RENTAL Over $472 million in financing secured for rural rental housing units; and HOUSING 17 organizations reported to own, manage, or sponsored 298 developments .
A REVIEW OF FEDERAL RURAL RENTAL HOUSING PROGRAMS, POLICIES AND PRACTICES In October 2016, NRHC held a first-of-its kind one-day conference devoted entirely to discussing and analyzing the issues facing the rural rental housing portfolio. This report was created to provide an assessment of the current state of the portfolio, identify and examine the relevant programs and policies involved, and to provide recommendations for policy makers on how to preserve and maintain the portfolio. 13
QUICK OVERVIEW OF RURAL RENTAL HOUSING PROGRAMS Section 515 Section 514/516 Section 521 Rental Assistance Multifamily Housing Preservation and Revitalization demonstration program HOME Investment Partnership Program Community Development Block Grants Low-Income Housing Tax Credit 14
USDA’S MULTIFAMILY HOUSING PORTFOLIO As of June 2016 there are: 417,511 Section 515 units 13,877 Section 515 properties On average these properties are 34 years old Who are the tenants? Average income of $12,377 per year 92.25% are very-low-income 62 % of households are elderly or disabled 15
FEDERAL RURAL HOUSING STRATEGY Rental Direct Assistance Loans Preservation Tools 16
FUNDING DECLINE IN SECTION 515 Despite significant demand for Section 515 Program Levels New Construction Units rental housing in rural communities, 1,200 35,000 Section 515 has been reduced drastically since its peak 30,000 1,000 In FY 2017, Section 515 is funded Program Levels ($ in millions) 25,000 New Construction Units 800 at $35 million, $6.6 million increase over FY 2016 20,000 600 However, this is a 96.3% reduction 15,000 from FY 1982, when Section 515 400 was funded at $954 million 10,000 200 This has lead to a decline in new 5,000 construction - - 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 17
QUICK OVERVIEW OF RURAL RENTAL HOUSING PROGRAMS Section 515 Section 514/516 Section 521 Rental Assistance Multifamily Housing Preservation and Revitalization demonstration program HOME Investment Partnership Program Community Development Block Grants Low-Income Housing Tax Credit 18
700 30.0% 600 25.0% 500 20.0% 400 15.0% 300 10.0% 200 5.0% 100 0 0.0% 198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010 Section 515 Program Level LIHTC Units in Rural Areas LOW-INCOME Between 1987 and 1994, 31% of all affordable housing properties financed with LIHTC also leveraged Section 515 Rural Rental Housing Loans. HOUSING As funding for Section 515 has been cut, LIHTC investments in rural areas have declined. TAX CREDITS Between 1995 and 2009, only 9% of LIHTC-financed rental properties leveraged Section 515 funds. 19
FEDERAL RURAL HOUSING STRATEGY Rental Direct Assistance Loans Preservati on Tools Preservation Tools 20
THE PORTFOLIO IS AGING USDA has financed 28,000 Section 515 properties (533,000 units) through Section 515 through the history of the program. Rate of maturing mortgages: 2016 to 2027: averages around 74 properties per year 2028: 407 properties expected to exit, and 2028 to 2032: averages 556 properties per year 2032 to 2050: 12,530 properties will mature or be prepaid Without Section 515 funding, there has historically been little USDA could do to prevent loan prepayments or to provide new loans to property owners when their existing loans mature. 21
WHAT HAS USDA DONE TO ADDRESS THE PORTFOLIO’S NEED? After a 2004 USDA Report estimated that $2.6 billion is needed, Congress created the Multifamily Preservation and Revitalization (MPR) demonstration program. MPR has financed an estimated 26,459 units in 1,218 properties between 2006 and 2014. Significant barriers to using USDA Preservation Tools: Policies do not conform to LIHTC Processing Delays Cumbersome Policies MPR is not permanently authorized and is underfunded 22
WHAT HAS USDA DONE TO ADDRESS THE PORTFOLIO’S NEED? (CONTINUED) A 2016 USDA Report now estimates that ………. A 2016 USDA Report now estimates that $5.596 billion is needed just to preserve the portfolio. $4.7 billion of that need relates to Section 515 developments 23
FEDERAL RURAL HOUSING STRATEGY Rental Assistance Rental Direct Assistance Loans Preservati on Tools Preservation Tools 24
Rental Assistance as a Percentage of the USDA Rural Housing Budget Authority 100% 85% 85% 84% 89% 81% 90% 81% 80% 72% 68% 70% 60% 50% 40% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 GROWING Tenants receiving rental assistance have an average income of $10,554 per year. RENTAL 65% of tenants in USDA’s portfolio receive Section ASSISTANCE 521 RA The estimated average annual per unit cost of rental COSTS assistance is $4,911. 25
NRHC’S RECOMMENDATIONS USDA should: 1. Revamp Section 515 rules to accommodate other partners, including state housing agencies and other federal agencies. 2. Encourage participation of nonprofit organizations and public housing agencies. 3. Help Section 515 owners understand the relevant rules, regulations and resources to allow the owners make the right decisions in preserving housing. 4. Address the emerging increase of maturing mortgages by encouraging owners to take advantage of MPR and other tools for refinancing developments with Section 515, so that Rental Assistance remains available for the property. Policy makers at the state level should: 5. Consider providing additional 9% LIHTC credits to rural areas or, failing that, encourage the greater allocation of HOME and CDBG to accommodate the four percent credit in rural areas. 26
LIHTC LEGISLATION Both Sen. Cantwell (S. 548) and Rep. Tiberi (H.R. 1661) have introduced bills in Congress on LIHTC. Both bills: Establish a minimum 4% rate for credits paired with bonds Permit income averaging at LIHTC properties, this will allow projects to feasibly target deeper affordability Standardize income eligibility for rural projects to improve the ability to serve rural areas. S. 548 Calls for a 50% expansion to the Credit – this is not included in H.R. 1661 27
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