The Rural Housing Service, or Rural Development Housing and Community Facilities Service (HCFP), is a division within the U.S. Department of Agriculture’s Rural Development agency, which administers aid to rural communities in the form of direct loans, loan guarantees and grants for housing and community facilities. Programs focus on home ownership and restoration, farm worker housing, multi-family housing projects, community facilities and rental assistance.
Historically, the processors to the RHS were meant to address underdevelopment and poverty specific to Depression-era rural America, and later to serve the needs of isolated and underserved rural communities.
Although an increasingly diverse landscape, rural America continues to show high poverty levels and a shortage of affordable housing. According to a 2004 CRS Report (PDF) to Congress, rural areas account for a “disproportionate share of the nation’s substandard housing.” In rural areas, homeownership is the principal form of housing, but residents are faced with higher development costs, limited access to mortgage credit, and pay more of their household income for housing than urban residents.
The Rural Housing Service is part of the USDA’s Rural Development department, which was officially established in 1994 as part of a Department reorganization. However, rural housing initiatives formed part of the earliest rural development initiatives, begun during the Great Depression. RHS continues the mission of the Farmer’s Home Administration (FmHA, founded in 1946 and incorporated into RD in 1994). Title V of the Housing Act of 1949 authorized the USDA to make loans (for construction, repair, safety, etc.) to farmers for their own dwellings and those housing workers or tenants, or affecting the safety or health of the community. Over time, the act was amended to include provisions for housing loans and grants for rural residents, not just farmers.
FmHA
(PDF)
Through more than 20 programs, the agency provides over $6 billion in funding each year. Rural housing assistance is administered through direct loans, loan guarantees (made to banks or other private institutions) and grants provided directly to individuals or organizations. The RHS also works with other federal agencies, non-profit and private-sector companies to provide housing assistance to rural America.
RHS programs include loans for buying, repairing or constructing single family homes, loans and grants to address safety and health hazards and to construct or rent housing for farm workers, populations with special needs and rural residents in general. The agency also provides rental assistance payments (and recently started a rental voucher program), interest subsidies for home loans (to make both homeownership and rental housing more affordable), and loans for site development for rural housing.
Other programs help provide housing projects for targeted communities (elderly or disabled) or community facilities - such as libraries, schools, municipal buildings - to organizations, governments or communities.
Organization/Offices
HCFP is headquartered in Washington, D.C., with state and local Rural Development offices and service centers throughout the country. In addition to local offices in each state, there are also four multi-state offices and a Centralized Servicing Center in St. Louis, Missouri, that processes Single-Family Housing loans.
Eligibility
Agency programs are directed at eligible applicants in rural areas, “typically defined as open country or rural towns with no more than 20,000 in population.” An exception to this requirement is made in the Farm Labor Housing Program (Section 514/516), which is offered in both rural and urban areas.
Single-Family Housing
A Guide to Appealing Rural Housing Service/Rural Development Decisions
(Housing Assistance Council)
Rural Housing Budget Cuts
According to reviews of the proposed FY 2009 budget by the Housing Assistance Council (a non-profit based in D.C.) and the National Association of Development Organizations, the Bush Administration’s budget cuts in rural housing for FY 2009 dwarf those of the previous year. There is a marked shift in program funding from loans to loan guarantees - as echoed by USDA budget documents that explain a total deficit of community facility grant funding because “most projects can be funded by loans and loan guarantees.”
As in FY 2008, there is no funding for the RHS’s major direct housing loan programs: Section 502 Single Family Guaranteed Loans are funded at $4.8 billion, $500 million less than the previous year, but no funding is provided for direct loans and there is an increase in the guarantee fee from 2 to 3 percent. Nor is there direct funding for organizations developing rental housing and the Rural Community Development Initiative under Section 515. The Administration is proposing $100 million for a pilot voucher program to cover some operations in the Section 515 Rental Assistance program. No funds are allocated to the Mutual and Self Help Housing Grants or the Rural Community Development Initiative (Section 523), and the $23.7 million for rural community facility loans and loan guarantees is $39.2 million less than current funding. As with other Sections, community facilities and development funds will be in the form of loans and loan guarantees, rather than grants. There is likewise no funding allocated to Section 514/516 for farm worker housing loans and grants. (PDF)
As with most all federal subsidies, debate will divide along traditional party lines - except where Republican politicians are drawing support from rural constituents and agribusiness. And with recent findings that recipients of rural development aid are, more often than not, not rural but metropolitan or suburban, the political landscape can be more complicated.
According to recent federal research (See CRS Report 2004 on the topic), poverty is still rampant in rural America, and residents face significant obstacles in obtaining basic quality-of-life needs - such as housing and access to clean water, as well as community resources and telecommunications facilities. With regard to housing in particular, as noted above, homeownership in rural areas is the principal form of housing, but residents usually pay higher development costs and a higher percentage of their income for mortgage, and have more limited access to credit than their rural counterparts. Though socio-economic conditions in rural America have evolved since the RD programs were founded, there is a continuing need to provide assistance for people who are structurally disadvantaged. Thus federal subsidies are more than warranted - and with a rapidly shrinking budget and most operations deferred to loan guarantees rather than direct aid, considered a business and structural investment by most supporters.
From the Left, the Housing Assistance Council (HAC) writes that the President’s proposed budget cuts for FY 2009 (see Controversies above) will be “devastating” to low-income rural Americans, arguing that they will be hurt most from the policy shift to loan guarantees - “as it’s direct loans [and grants] that assist people with the lowest-income.”
On the farthest side of the spectrum of Republicans who oppose USDA rural aid, the Cato Institute stresses that all USDA rural programs from housing to electricity “duplicate functions that the private sector usually performs without any federal subsidies” - and should be abolished. Cato literature further cites studies that claim farm subsidies are “a drag on growth” and that USDA programs are “inefficient and mismanaged.” More interesting still is the discrimination argument:
[R]ural subsidies are unjust redistributions of wealth, especially given that rural dwellers are better off than other Americans in many ways. Americans who live in rural areas should not be a privileged class deemed more important than other Americans. All USDA rural subsidies should be ended.
With regard to the RHS specifically, Cato claims the problems that the programs were built to address have been largely solved by economic growth. In keeping with the Cato formula, there are the ubiquitous claims of mismanagement and unfair privilege of rural residents and the summary recommendation: “USDA rural loan programs should be closed down, and rural homeowners, developers, and businesses should borrow in private markets as other Americans do.”
See
Budget cuts
in Controversy section
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Founded: 1994
Annual Budget: http://www.rurdev.usda.gov/rhs/
Employees: 5,831 (2006)
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Rural Development Housing and Community Facilities Service
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Davis, Russell
Administrator
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A native of Kennewick, Washington, Davis earned a B.A. from Harvard, and is currently pursuing his M.A. in applied economics at John Hopkins University. He has 15 years of experience in investment banking, specializing in public finance and economic development. Davis served under the previous Bush Administration as the Acting Deputy Assistant Secretary for Housing Operations at the U.S. Department of Housing and Urban Development. In 1992, Davis was a co-founder (along with former FHA Commissioner Caterine Austin Fitts) of The Hamilton Securities Group, an investment firm specializing in real estate transactions. Before joining the USDA, Davis was a Senior Policy Advisor in the Office of Sallie Mae of the Treasury Department. He was appointed to his current post in July of 2004.
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