Hac: Connecting The Dots - Full Report

Housing Assistance Council

CONNECTING THE DOTS: A Location Analysis of USDA’s Section 515 Rental Housing and Other Federally Subsidized Rental Properties in Rural America

$10.00 May 2008 Housing Assistance Council 1025 Vermont Avenue, N.W. Suite 606 Washington, DC 20005 202-842-8600 (voice) 202-347-3441 (fax) [email protected] www.ruralhome.org ISBN 978-1-58064-158-6 This report was prepared by Lance George, Leslie R. Strauss, and Mark Kudlowitz of the Housing Assistance Council (HAC). The work that provided the basis for this publication was supported by funding from the John D. and Catherine T. MacArthur Foundation. HAC is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the MacArthur Foundation. HAC greatly appreciates the assistance of Keith Wardrip of the National Low Income Housing Coalition and Matt Foulkes of the University of Missouri for their valuable expertise and comments on preliminary drafts of this report. HAC, founded in 1971, is a nonprofit corporation that supports the development of rural lowincome housing nationwide. HAC provides technical housing services, loans from a revolving fund, housing program and policy assistance, research and demonstration projects, and training and information services. HAC is an equal opportunity lender.

TABLE OF CONTENTS Executive Summary ....................................................................................................................... 1 Findings: Counties with High Proportions of Section 515 Properties................................. 1 Findings: Proximity to Other Subsidized Properties........................................................... 2 Recommendations: Connecting the Dots ........................................................................... 3 Introduction .................................................................................................................................. 5 Rental Housing in Rural America: A Backdrop .............................................................................. 6 Rural Rental Housing Characteristics................................................................................. 6 Housing Problems Among Rural Renters ........................................................................... 7 USDA’s Section 515 Rental Housing Program ............................................................................... 8 The Section 515 Prepayment Dilemma.............................................................................. 9 The Geography of Section 515 Rental Housing ............................................................... 10 Section 515 Prepayment and Minorities .......................................................................... 11 Analysis ....................................................................................................................................... 12 Methodology.................................................................................................................... 12 What’s Not Included............................................................................................. 13 A Cautionary Note About Cross-Subsidy .............................................................. 15 What is Rural? ..................................................................................................... 16 County Level Analysis ...................................................................................................... 16 Metropolitan Status ............................................................................................. 17 Population Decline............................................................................................... 20 Urbanization ........................................................................................................ 22 Minority Populations............................................................................................ 24 Housing Stress ..................................................................................................... 26 Distance Analysis ............................................................................................................. 27 How It Works....................................................................................................... 30 Discussion.................................................................................................................................... 34 Findings: Counties with High Proportions of Section 515 Properties............................... 34 Nonmetro Counties, Particularly OCBSA Counties............................................... 34 Urbanizing Counties ............................................................................................ 35 Housing Stress Counties....................................................................................... 35 Native American and Other Minority Counties .................................................... 36 Findings: Proximity to Other Subsidized Properties......................................................... 36 Recommendations: Connecting the Dots ......................................................................... 37 Endnotes to Text ......................................................................................................................... 40 Appendix A: Section 515 Rental Housing Properties in Proximity to Selected Federally Subsidized Housing Properties............................................................................. 43 Public Housing................................................................................................................. 44 HUD Project Based Section 8 Rental Assistance............................................................... 46 Low Income Housing Tax Credit...................................................................................... 48

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HUD Section 202-811 Elderly and Supportive Housing ................................................... 50 HUD Section 236 Loans ................................................................................................... 52 Section 538 Guaranteed Rural Rental Housing Program ................................................. 54 Endnotes to Appendix A .................................................................................................. 56 Appendix B: Selected Data Tables ............................................................................................... 57 Table 1. Section 515 Properties and Units by State ........................................................ 58 Table 2. Section 515 Rental Housing Program and Prepayment Status .......................... 59 Appendix C: Selected State Level Maps ....................................................................................... 60 USDA Section 515 Properties and Units by State............................................................. 61 Section 515 Prepayment Eligibility Status by State.......................................................... 62 Section 515 Rental Housing Loan Prepayments 2001-2006............................................. 63 Subsidized Rental Units by Program and State ................................................................ 64 Figures 1. Housing Tenure by Residence.......................................................................................... 6 2. Housing Affordability by Tenure...................................................................................... 7 3. Section 515 Rural Rental Housing Program, FY 1963-FY 2006 ....................................... 8 4. USDA Section 515 Prepayment Status, Properties ........................................................... 9 5. USDA Section 515 Rental Housing Units ....................................................................... 10 6. USDA Section 515 Properties......................................................................................... 11 7. Location Analysis: Research Model ................................................................................ 14 8. Cross Subsidy, USDA Section 515 and LIHTC................................................................ 15 9. Section 515 Units as a Percent of All Subsidized Units by Metropolitan Status ............. 18 10. Section 515 Units as a Percent of all Subsidized Rental Units........................................ 19 11. Counties Where Section 515 Units Make up More than Half of All Subsidized Rental Units ................................................................................................ 20 12. Population Loss Counties ............................................................................................... 21 13. Population Loss Counties: Section 515 Units as a Percent of All Subsidized Rental Units ................................................................................................ 22 14. Urbanizing Counties ...................................................................................................... 24 15. Urbanizing Counties: Section 515 Units as a Percent of All Subsidized Rental Units ................................................................................................ 24 16. Rural Minority Counties................................................................................................. 25 17. Section 515 Rental Units in Rural Minority Counties..................................................... 26 18. Housing Stress Counties ................................................................................................ 27 19. Housing Stress Counties: Section 515 Units as a Percent of All Subsidized Rental Units ................................................................................................ 28 20. Average Distance to Nearest Subsidized Property.......................................................... 29 21. Distance Buffers, USDA Section 515 Rural Rental Properties ........................................ 30 22. USDA Section 515 Rental Properties in Proximity to Other Subsidized Housing Properties ....................................................................................................... 32 23. Percent of Section 515 Properties within 10 Miles of Another Subsidized Property....... 33

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EXECUTIVE SUMMARY The U.S. Department of Agriculture’s Section 515 program provides more than 400,000 decent, affordable rental homes for rural Americans with low incomes, but many of these rentals are now at risk. Seeking to inform the debate on preservation of these units, this Housing Assistance Council report examines where Section 515 developments are located with respect to other federally subsidized rentals and reviews their role in their rural communities’ rental housing networks. It discusses the policy implications of HAC’s research findings and makes recommendations. Rural renters experience some of the most significant housing problems in the United States, and USDA’s Section 515 Rural Rental Housing program has been a critical tool in the effort to meet the housing needs of the poorest of the rural poor. Since 1963, Section 515 has funded the production of more than half a million affordable rental homes for low-income rural residents. Section 515 tenants’ annual income averaged $9,785 in January 2006, the most recent data available. Today, however, a significant portion of the properties in the Section 515 rental housing portfolio are at risk. Physical deterioration, or owners’ desires to remove the restrictions imposed by their Section 515 mortgages, threaten the continued availability of these apartments as decent, affordable homes for low-income people. At the same time, more than half of all rural renters live in poor quality housing or spend more than the standard 30 percent of income on rent. Some federal policy responses to current rural housing preservation concerns rely at least in part on the availability of other decent, affordable rental housing nearby. HAC undertook a geospatial analysis of federally subsidized housing properties to determine the extent to which USDA’s Section 515 rural rental housing units co-exist with other federally subsidized units, as well as to understand their role in their rural communities. Findings: Counties with High Proportions of Section 515 Properties HAC’s analysis demonstrates that Section 515 units comprise particularly high proportions of the subsidized housing stock in four specific types of counties: o Nonmetropolitan counties, particularly the more remote counties that are Outside Core Based Statistical Areas. In areas outside metropolitan counties, Section 515 properties comprise approximately one-half of subsidized rental properties and over 36 percent of subsidized rental units. The 5,878 Section 515 properties in the more remote Outside Core Based Statistical Areas (OCSBA) counties account for 46 percent of the subsidized rental units there. o Urbanizing counties. The 40,000 Section 515 units in urbanizing counties make up 34 percent of the subsidized housing stock there, far higher than the 9 percent proportion in metropolitan counties overall. Because these counties’ populations are growing and their economies are developing, demand for housing there is increasing. Thus rents are rising, giving owners of Section 515 developments a strong economic incentive to prepay their restricted-use mortgages in order to charge market-rate rents, while a significant loss of

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o

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Section 515 units in these urbanizing areas could leave a substantial void in the subsidized and affordable rental markets. Nonmetropolitan housing stress counties. In nonmetropolitan housing stress counties, where at least one-third of all households experience housing problems, Section 515 accounts for 38 percent of federally subsidized units. Almost half (49 percent) of the 46,137 Section 515 units in these places are eligible for prepayment. Housing stress counties’ economies may be either booming or stagnant, but all of these counties, by definition, suffer a shortage of decent, affordable housing. Therefore tenants from a Section 515 property in a housing stress county are very unlikely to be able to find alternative rentals nearby. Counties with proportionately high minority populations. Section 515 accounts for about one in every five subsidized rentals in counties that had a specific racial or ethnic minority population of one-third or more in 1980, 1990, and 2000. In Native American counties, Section 515 units comprise fully 44 percent of subsidized rentals. Given these high proportions, particularly in Native American counties, these places deserve special attention. Prepayment and preservation of Section 515 rental housing are critical issues for minority households and in rural minority communities. In the prepayment process, current RD regulations mandate an assessment of the potential impact of prepayment on housing opportunities for minorities.

Findings: Proximity to Other Subsidized Properties The Section 515 program has an extremely large reach across a vast and varied land mass. Section 515 projects are geographically dispersed and can be found in nearly 90 percent of U.S. counties. Fewer than half of all Section 515 properties are very close to other federally subsidized rental properties (within one mile). More than one-fifth are relatively far from other subsidized properties (more than 10 miles). Nearly half (45 percent) of these more isolated developments are located in the Midwest, and nearly the same proportion are located in OCBSA counties, the places farthest from metropolitan centers. Section 515 properties are more likely to be close to some types of other subsidized properties than to others:

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Over half of all Section 515 properties are within 10 miles of project-based Section 8 or public housing properties.

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Similarly, over 44 percent of Section 515 properties are within 10 miles of Low Income Housing Tax Credit properties.

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Only 30 percent of Section 515 properties are within 10 miles of U.S. Department of Housing and Urban Development (HUD) Section 202-811 properties, which provide rentals specifically for elderly and disabled people, and just 17 percent are that close to HUD Section 236 properties. Only half of counties with a Section 515 property also have a Section 202 or 811 development.

Connecting the Dots

These findings are particularly relevant for the approximately 60 percent of Section 515 residents who are elderly or disabled. Federally subsidized alternative housing is scarce in many of their communities, so a loss of Section 515 properties could have profound impacts on their housing choices. Recommendations: Connecting the Dots HAC’s analysis demonstrates that geographic proximity and distance are important factors relating to the supply of subsidized housing in rural areas, and identifies certain types of places in which, and certain populations for whom, there may be few choices besides Section 515 properties in a search for decent, affordable housing. The analysis cannot support broad prescriptions for prepayment and preservation policy: one cannot say, for example, that prepayment should be prohibited for Section 515 properties in remote counties, or that prepayment should be permitted for Section 515 properties that are close to other federally subsidized properties. Instead, the need for the units in any given location must be determined individually. This analysis does point to a need for reconsidering some assumptions made about prepayment and preservation to date. A Comprehensive Property Assessment conducted for USDA recommended that properties for which prepayment is economically viable, such as many of those in urbanizing areas, be allowed to prepay and that their current tenants be protected. Tenant protection provided by Congress and USDA has been in the form of vouchers through which USDA makes rent payments to landlords to supplement the amounts paid by tenants. The effectiveness of vouchers for individual households is not yet known; USDA’s voucher program is relatively new, having begun operation in fiscal year 2006, and USDA has not released data on the vouchers it has provided or the characteristics of the tenants affected. The long-term impact of providing vouchers to specific tenant households is also unknown. Under USDA’s current voucher program, if a family leaves its community, so does its voucher. Over time, therefore, if nothing else changes, switching from Section 515 apartments to tenant vouchers means that the number of assisted households in many communities will decrease, without regard to changes in the number of remaining households who need subsidies in order to find decent, affordable places to live. Policy must also take into account the significant and growing rental housing needs in rural America. There are still millions of rural renters with housing problems related to cost, quality, and crowding. Section 515 rental housing is an important resource to help address these needs. HAC recommends: o

USDA should continue to take into account the availability of alternate affordable housing in a community, and the impact of prepayment on minorities, when deciding whether to accept a requested prepayment. Information about the analyses conducted for each property should be available to

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tenants, their representatives, and the public. Tenants should have a right to appeal prepayment approvals based on these analyses.

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Analyses of the availability of alternative housing should consider tenant demographics. For example, when prepayment of a Section 515 loan will affect elderly tenants with very low incomes, a nearby tax credit project for families with low incomes probably does not provide suitable alternative housing.

o

Research should be conducted to identify and study the actual properties that would be affected by the Comprehensive Property Assessment’s recommendation to allow prepayment for certain properties, estimated to comprise 10 percent of the Section 515 portfolio. HAC’s analysis indicates that at least half of these properties may be in urbanizing counties with “hot” rental markets and few alternative housing choices for their tenants, and thus points to a need to preserve or replace these units for future low-income renters, rather than allowing their owners to prepay and protecting only the current tenants.

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Data should be collected regarding the use of USDA vouchers and the locations and housing conditions of former voucher holders. Because USDA’s voucher program is new, too little is known about the long-term efficacy of these vouchers to be sure that they are a good solution for protecting current tenants. The existence of other people who need help now or in the future to obtain decent, affordable housing must be taken into account as well.

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Research should be conducted to determine how prepaid properties and their tenants fare after prepayment.

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Vouchers should remain available in the communities where they were first issued if they are needed there, even after the specific tenants to whom they were first issued no longer need them.

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Tenants in prepaying Section 515 properties should have the same protections as Section 8 voucher tenants in prepaying HUD-financed properties.

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Data collected by USDA should be readily available to the public.

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Research should be conducted on the extent and characteristics of unsubsidized affordable rental properties.

Connecting the Dots

INTRODUCTION Since 1963, the Section 515 Rural Rental Housing program of the U.S. Department of Agriculture (USDA) has funded the production of more than half a million affordable rental homes for lowincome rural Americans. Section 515 tenants include seniors and people with disabilities living on fixed incomes, as well as families struggling to make ends meet on minimum wages and others with scant resources. Their annual income averaged $9,785 in January 2006, the most recent data available.1 Today, a significant portion of the properties in the Section 515 rental housing portfolio are at risk. Physical deterioration, or owners’ desires to remove the restrictions imposed by their Section 515 mortgages, threaten the continued availability of these apartments as decent, affordable homes for low-income people. Among the federal policy responses to these threats are two related to the availability of other decent, affordable rental housing nearby. First, when a property owner requests USDA permission to prepay a Section 515 mortgage and thus to remove USDA’s affordability requirements, USDA considers (along with other factors) the availability of other affordable housing in the area and the impact prepayment would have on housing opportunities for minorities. Second, when USDA approves a prepayment it provides rental vouchers to the property’s tenants, with the expectation that they will find landlords who will accept the vouchers – either the owners of the former Section 515 properties, or others. No data are available, however, to evaluate these determinations and assumptions, and no such information is available about Section 515 properties in general. Are alternate decent, affordable apartments usually available for tenants displaced from Section 515 developments? The answer to this question would help determine whether current approaches to preservation and prepayment issues are appropriate, or whether changes should be made. As a first step towards finding an answer, the Housing Assistance Council undertook a geospatial analysis to determine where Section 515 units are located with respect to other federally subsidized units, and to understand their role in their rural communities’ rental housing networks. This study provides a comprehensive look at the location, composition, and proximity of federally subsidized rental housing properties and units in rural communities, with a special focus on Section 515. Contextual factors such as population decline, rurality and urbanization, minority populations, and local housing characteristics are also incorporated into the analysis. Ultimately, this research seeks to inform the larger debate on the role, availability, and preservation of affordable rental housing in rural America.

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RENTAL HOUSING IN RURAL AMERICA: A BACKDROP Rural Rental Housing Characteristics In a nation that places a high value on homeownership and has committed substantial resources to increasing ownership opportunities, the needs of renters are often overlooked. While homeownership rates are higher in rural American than in cities, renting provides a housing alternative for the millions of rural families unable to purchase or uninterested in owning a home. More than 6.3 million housing units, or 24 percent of the total occupied rural housing stock, are renter-occupied. Geographically, rural rental housing rates are consistent across much of the United States, as only four states – Alaska, California, Hawaii, and Rhode Island – have rural rental rates above the national average.2

Figure 1. Housing Tenure by Residence 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Metropolitan

Nonmetropolitan Tenure

Homeowners

Renters

Rural renters generally have much lower incomes than rural homeowners: rural renters’ median household income is approximately $21,000 compared to $43,000 for rural owners. Poverty levels among rural renters are also much higher. Over 20 percent of rural renters have incomes below the poverty level compared to less than 10 percent of rural owners.3 As is true in the nation as a whole, in rural areas a greater percentage of minorities than whites are renters. Approximately one-fifth of rural white-headed households rent their homes compared to 39 percent of rural minority-headed households. Nevertheless, rural minorities are much more likely to be homeowners than their urban minority counterparts. Rural renters are most likely to live in single-family homes or in small multifamily structures. Nearly 40 percent occupy single-family homes – twice the rate of metropolitan area renters. About the same proportion (42 percent) of rural renters live in multifamily structures of two or more apartments. Manufactured housing is much more prevalent in rural areas than urban locales and over 15 percent of rural renter-occupied units are manufactured homes. Rural 6

Connecting the Dots

renters also live in older housing than owners; 34 percent of rural renter-occupied units were built before 1960. Housing Problems among Rural Renters Rural rental households experience some of the most significant housing problems in the United States. Renter households in rural areas are twice as likely to live in substandard housing as their owner counterparts. Approximately 11 percent of rural renters live in either moderately or severely inadequate housing, compared to 5 percent of rural owners. For rural minority renters, the substandard housing rate increases to 16 percent. Although housing costs are generally lower in rural areas than in cities, many rural households, particularly renters, find it difficult to meet these expenses. Approximately 36 percent of rural renter households pay more than 30 percent of their monthly income for housing costs and are considered cost-burdened, compared to 20 percent for owners. Most cost-burdened households have low incomes, and a disproportionate number are renters. Thirty-five percent of costburdened rural households are renters, while renters comprise only one-quarter of all rural households.

Figure 2. Housing Affordability by Tenure

40.0%

Percent Cost Burdened

35.0% 30.0%

16.3%

25.0% 20.0% 15.0%

12.1% 20.1%

10.0% 5.0%

8.8%

0.0% Owners Severe Cost Burden (50%+ of income)

Renters

Moderate Cost Burden (30%-50% of income)

Unfortunately, housing cost, quality, and crowding concerns are not mutually exclusive – many rural households experience multiple housing problems. Not surprisingly, rural renters are also more prevalent among households with multiple problems. Over half of the 662,000 rural households with multiple housing problems are renters. Given the range of housing issues facing rural renters, federal programs have been a critical resource in providing needed support to develop affordable rental units and subsidize lowincome renter households. Housing Assistance Council

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USDA’s SECTION 515 RENTAL HOUSING PROGRAM USDA’s Section 515 Rural Rental Housing program has been the mainstay of the agency’s efforts to serve the poorest of the rural poor for the past 45 years. The Section 515 program provides mortgage loans to develop rental housing for very low-, low- and moderate-income households. Section 515 is administered by USDA Rural Development (RD), successor to the former Farmers Home Administration. Since the program’s inception in 1963, Section 515 has produced thousands of housing developments containing more than half a million rental homes that are affordable for lowincome rural residents.4 The current Section 515 portfolio contains nearly 16,000 projects providing affordable homes for over 445,000 rural households. Most Section 515 residents have very low incomes; their average annual income is $9,785. Additionally, nearly 60 percent of Section 515 residents are elderly or have disabilities.5 Many federal rural housing programs have gone through dramatic transformations in recent years due to budget cuts and program alterations. A prime example has been the reductions in the Section 515 rural rental program. In Federal Fiscal Year (FY) 1994 the program funded the development of 11,542 units of affordable rental housing. In contrast, only 486 units were developed under the program in FY 2006, reflecting a reduction of more than 90 percent from mid-1990s production levels.6

45000 40000 35000 30000 25000 20000 15000 10000 5000 0

19 63 19 66 19 69 19 72 19 75 19 78 19 81 19 84 19 87 19 90 19 93 19 96 19 99 20 02 20 05

Units Built

Figure 3. Section 515 Rural Rental Housing Program, FY 1963 - FY 2006

Year

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Connecting the Dots

The Section 515 Prepayment Dilemma A significant portion of the projects in the Section 515 Rural Rental Housing portfolio are at risk of being lost as low-income housing. Under current law, owners of projects that received loans prior to 1989 can request prepayment of the loan balances and convert the projects to market-rate housing, albeit with some restrictions designed to encourage affordable housing preservation. Owners of projects that received loans prior to 1979 can generally request prepayment of a Section 515 loan at any time. Section 515 mortgages made after December 15, 1989 cannot be prepaid. By 2007, Section 515 owners have prepaid the loans on over 50,000 affordable homes, removing the mortgage provisions requiring them to house low-income residents. Many more loans are likely to be prepaid over the next several years. As of 2007, approximately 7,372 Section 515 projects (encompassing over 195,000 units) are eligible to prepay. Another 2,008 Section 515 properties built before 1989 will ultimately be eligible to prepay, but “restrictive use clauses” require them to remain affordable for low-income tenants for specified time periods. Overall, 46 percent of all properties with active Section 515 mortgages are eligible to prepay now and a total of 60 percent will be in the near future. While some developments will remain affordable for low-income tenants after prepayment, others will not. Neither USDA nor any other entity collects data on properties that leave the Section 515 program or on their tenants.

Figure 4. USDA Section 515 Prepayment Status, Properties Pre 1989 Loan Current Restrictive Use Clause, 12.6%

Post 1989 Loan Not Eligible to Prepay, 41.3%

Pre 1989 Loan Eligible to Prepay, 46.1% Post 1989 Loan - Not Eligible to Prepay Pre 1989 Loan - Eligible to Prepay Pre 1989 Loan - Current Restrictive Use Clause

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The Geography of Section 515 Rental Housing USDA Section 515 properties have a broad reach across the United States. Every state, as well as Puerto Rico, the U.S. Virgin Islands, and the West Pacific territories, has at least one Section 515 property. Nearly 2,800 counties (89 percent) across the United States have Section 515 properties located within their boundaries.I Around 12 percent of counties have only one Section 515 project and approximately half the counties with a Section 515 property have four or fewer projects. Forty percent have between five and ten Section 515 projects. Approximately 11 percent have 10 or more Section 515 projects. Regionally, Section 515 properties are most prevalent in the Southern and Midwestern United States, which are also among the most rural regions in the nation. Over 38 percent of Section 515 projects are located in the Southeast. Another 38 percent of properties are located in the Midwest. However, 46 percent of all units are in the South and just 30 percent of Section 515 units are in the Midwest, indicating that the Midwestern projects are generally smaller than those in the South. The Northeast and Western portions of the United States have substantially fewer Section 515 properties than the South and Midwest. Figure 5.

USDA Section 515 Rental Housing Units

Legend

Counties

Section 515 Units 2.00 - 101.00 101.01 - 215.00 215.01 - 387.00 387.01 - 751.00 751.01 - 2137.00 No Section 515 Properties

I Approximately 126 Section 515 rental projects are located outside the United States in Puerto Rico, the U.S. Virgin Islands, and West Pacific Territories.

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Connecting the Dots

Figure 6.

USDA Section 515 Properties

Legend

Section 515 Property

Section 515 Prepayment and Minorities Recognizing that prepayment and preservation of Section 515 rental housing are critical issues for minority households and in rural minority communities, the statutory restrictions on prepayment require USDA and property owners to take into account the impact on minorities.7 If an owner applies for permission to prepay a Section 515 mortgage and rejects incentives offered by USDA to keep the property in the program, USDA must evaluate the impact of the prepayment on housing opportunities for minorities and the adequacy of the supply of other affordable housing in the community. If prepayment would adversely impact housing opportunities for minorities then, regardless of the existence of other affordable housing in the community, the owner must offer the property for sale to a nonprofit organization or public agency for 180 days. The mortgage can be prepaid only if no feasible offer is received within 180 days or if a potential purchaser cannot complete the purchase within 24 months. It is possible, therefore, for a prepayment to occur despite a negative impact on minorities. In such a situation, tenants – like tenants of any prepaying property – are eligible for USDA vouchers (unless they already have HUD Housing Choice Vouchers), which can be used to rent at the prepaying property or another eligible development.8

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ANALYSIS Methodology The study undertakes a location analysis of federally subsidized housing properties in rural America. Data on federally assisted housing are used to illustrate the location and scope of subsidized rental properties across rural areas. The analysis also helps determine the extent to which USDA’s Section 515 rural rental housing units co-exist with other federally subsidized programs, as well as understanding their role in a rural community’s rental housing network. The report investigates the geographic interplay between Section 515 properties and other federally subsidized properties through a two-tiered analysis from the 1) county and 2) distancespecific perspectives. The county level analysis provides the ratio and composition of subsidized rental housing with an emphasis on various contextual and demographic factors particularly salient to the provision of affordable rural rental housing. For greater depth and detail, this is followed by a distance-specific analysis of Section 515 and other subsidized rental properties. Both levels of analysis also focus on the issue of prepayment of Section 515 projects in relation to geographic location. The federally subsidized housing programs incorporated into the geographic analysis include:I

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USDA Section 515 Rural Rental Housing. USDA Rural Development’s primary rental housing program, Section 515 is targeted to rural areas and currently encompasses 15,988 properties with 445,681 housing units. The most recent available data show that tenant households’ annual incomes averaged $9,785 as of January 2006.9

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HUD Public Housing. The public housing program administered by the U.S. Department of Housing and Urban Development (HUD) is one of the oldest and largest subsidized rental housing programs in the United States. Public housing was created in 1937 and currently encompasses over 1.2 million housing units located within 14,000 public housing properties operated by 3,050 public housing authorities.10 The average household income for public housing tenants was $10,000 in 2000.11

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HUD Project Based Section 8 Rental Assistance. Project Based Section 8 properties are privately owned, multifamily developments that receive federal subsidy through a mortgage and/or rental assistance. Over 1 million households live in homes with Section 8 project-based assistance, and more than two-thirds of these housing units are occupied by elderly or disabled residents.12

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Low Income Housing Tax Credit. Created by Congress in the 1986 Tax Reform Act, the Low Income Housing Tax Credit (LIHTC) provides a reduction in the dollar amount of federal taxes owed by an individual or corporation, in exchange for its investment in lowincome rental housing. There are over 25,000 LIHTC properties located across the United States and Puerto Rico encompassing 1.4 million units of rental housing. Approximately 90 percent of LIHTC units are occupied by low-income households.

Detailed information on these housing programs and specific program analyses is provided in Appendix A.

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Connecting the Dots

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HUD Section 202 and 811. HUD’s Section 202 and 811 programs provide capital and operating funds to nonprofit organizations that develop and operate housing for seniors and disabled persons, respectively. As of 2006, there are approximately 3,871 Section 202-811 properties across the United States. These properties account for nearly 210,000 units of affordable rental housing for seniors and persons with disabilities. The average annual income of Section 202 residents is just over $10,000.13

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HUD Section 236. Under Section 236 of the National Housing Act, HUD subsidizes interest payments on mortgages for rental or cooperative housing owned by private nonprofit or limited-profit landlords and rented to low-income tenants. The program is no longer funding new properties, but there are approximately 2,700 Section 236 properties accounting for nearly 330,000 units of affordable housing. The average household income for Section 236 tenants was $11,200 in 2000.14

What’s Not Included To provide the most comprehensive picture of subsidized housing in rural communities, the study includes as many federally subsidized housing properties and units as possible. There are several notable omissions, however. One of the largest sources of rental subsidy not included in this analysis is HUD’s Housing Choice Voucher (HCV) program. Often referred to as tenant-based Section 8, HCVs allow lowincome households to access privately owned units of their choosing. HCVs are currently utilized by 1.8 million households. In many respects, HCVs and subsidized physical properties are not directly comparable. Subsidized properties include actual units whereas vouchers subsidize households who may move from unit to unit or even state to state. Units with vouchers are also not reserved for long-term occupancy by low-income households, whereas other subsidy programs require property owners to keep their rentals affordable for 15 or more years. Additionally, HUD does not report the specific location of units occupied by voucher holders. Rental properties developed with HUD’s HOME Investment Partnerships Program, Community Development Block Grant, or other federal funding sources that are passed through to, and administered by, states and local governments are also not included in the comparative analysis. USDA Rural Development’s Section 514/516 Farm Labor Housing properties are also omitted from the analysis because only farmworkers are eligible to live there. RD Section 521 Rental Assistance units are excluded because Section 521 aid is available only in Section 515 and 514/516 properties. For more information on data and housing programs incorporated in the analysis please consult Appendix A.

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USDA Section 538 Guaranteed Rental Housing. Under the Section 538 program, USDA RD guarantees loans made by private lenders for the development of affordable rural rental housing with at least five units. Tenants in the Section 538 program must have incomes at or below 115 percent of area median income at the time of initial occupancy. The current Section 538 portfolio contains approximately 150 rental properties with more than 8,000 units of affordable rental housing.

Local geography and geographic components are also integral aspects of the analysis. Geographic patterns are particularly important for rural areas that tend to have smaller and more sparsely settled populations over a large land area. Extensive use of geographic information systems (GIS) and mapping technologies are incorporated into the analysis. Figure 7.

Location Analysis: Research Model

Distance Relationships

County Relationships USDA USDA Section 515 Section 515 Properties Properties And Units And Units

PHA

Property Location

Section 8 Property

Average Distance

LIHTC Section 202-811

Proportion of Subsidized Units Population Decline

Located within 10 miles of Section 515

Urbanization Housing Stress

Section 236

PHA Section 8 Property LIHTC Section 202-811 Section 236

Minority Population Section 538

Coverage Coverage and and Prepayment Prepayment

The analysis relies most heavily on HAC tabulations of secondary data sources of federally assisted housing programs from HUD and USDA RD. One primary source of data for the analysis is the 2000 Picture of Subsidized Housing produced by HUD. This dataset provides the location and tenant characteristics of most HUD-assisted housing developments, including public housing. 14

Connecting the Dots

The “Picture” data was augmented with more recent information on HUD properties from public use data sets including the Low-Income Housing Tax Credit Database and HUD’s Project Based Rental Assistance (Section 8) and Section 202-811 properties through the Multifamily Assistance and Section 8 Contracts Database. In addition, updates of HUD Section 236 data were accessed on the HUD User website. Data for USDA Section 515 and Section 538 properties were provided by USDA Rural Development. For more information on data and housing programs incorporated in the analysis, please consult Appendix A. A Cautionary Note About Cross-Subsidy Multiple sources of housing subsidy are usually required to make a single affordable housing project feasible. For example, Section 515 loans are often used in conjunction with Low Income Housing Tax Credits. Approximately 21 percent of LIHTC projects (5,542 properties) also include USDA Section 515 funding. Likewise, approximately 10 percent of HUD Section 8 project-based properties (1,464) are also Section 515 developments. The analysis attempts to control for cross-subsidy of differing programs by excluding Section 515 units from the HUD property databases when possible. Similar exclusions were made in other crosssubsidized housing properties, particularly Section 202-811 properties, which often have HUD Section 8 project-based rental assistance. In other words, if a property has Section 515 funding it is counted as a Section 515 property only, not as an LIHTC or Section 8 property. This procedure of mutual exclusion helps minimize potential double counting of affordable housing units within the analysis. Cross-subsidies cannot be entirely accounted for, however, and this fact presents one of the major limitations of the analysis. Figure 8.

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What is Rural? Numerous definitions of “rural” are available for use in statistical analyses of social characteristics and trends. In general, rural areas share the common characteristics of comparatively few people living in an area, limited access to large cities, and considerable traveling distances to "market areas" for work and everyday living activities. But rurality, like most other aspects of society, exists along a continuum and varies extensively based on proximity to a central place, community size, population density, total population, and various social and economic factors. Over the years, public agencies and researchers have used combinations of factors to define and designate geographic areas as rural.I One of the most commonly used definitions, and the one employed for this analysis, is the Office of Management and Budget’s classification of Metropolitan Statistical Areas. Metropolitan and Micropolitan Statistical Areas are delineated along county lines, as follows:I

Metropolitan Statistical Areas (used here as a proxy for urban places). Metropolitan Statistical Areas have at least one urbanized area of 50,000 or more population, plus adjacent counties that have a high degree of social and economic integration with the core as measured by commuting ties.

Micropolitan Statistical Areas (used here as a proxy for rural places and small towns).

Micropolitan Statistical Areas – a new set of statistical areas first defined in 2003 using data from the 2000 census – have at least one urban cluster of at least 10,000 but less than 50,000 population, plus adjacent counties that have a high degree of social and economic integration with the core as measured by commuting ties.

Outside Core Based Statistical Areas (used here as a proxy for remote rural places). Places that are Outside Core Based Statistical Areas are those not included in Metropolitan or Micropolitan Statistical Areas.

It should be noted that these terms do not correspond to the definition of “rural” that determines where USDA rural housing program funding can be used. Therefore Section 515 and 538 properties may be found in metro, micro, and Outside Core Based Statistical Areas.

County Level Analysis The first component of the study involves a county-level location analysis of all USDA Section 515 rental properties and units in relation to other federally subsidized housing properties. An investigation from the county perspective contextualizes Section 515 units based on the social, economic, demographic, and housing characteristics of the communities in which they are located and their proximity to other subsidized housing in rural areas. The county was chosen as the level of geographic analysis because of its significance and importance in rural America. In many rural areas, the county is often the most identified geographic unit in political, social, and economic contexts. Additionally, there is a wealth of easily accessible and uniform social, 16

Connecting the Dots

economic, and political data available at the county level from which to make contextual comparisons.15 Counties are relatively large geographic entities, and most counties in the U.S. – even rural counties that are remote from urban centers – contain several different types of subsidized housing properties. Nationwide there are roughly 63,000 subsidized housing properties encompassing 3.1 million units of federally subsidized rental housing. Prior studies and market analyses of Section 515 rural rental properties indicate that the feasibility of prepayment and the propensity to prepay are influenced greatly by population and demographic characteristics, in addition to individual property characteristics. A Comprehensive Property Assessment and Portfolio Analysis (CPA) prepared for USDA divided Section 515 properties into three segments. It estimated that prepayment was “economically viable” for approximately 10 percent of the Section 515 stock in hot or urbanizing markets, and recommended that USDA allow those properties to prepay. It also recommended prepayment for properties in depressed or declining markets, estimated to be another 10 percent. The remaining 80 percent of the stock was deemed to be still viable as subsidized affordable housing, and the CPA recommended those properties be targeted for revitalization efforts.16 There are several limitations to the CPA’s calculations. First, researchers admitted property owners seek to prepay for many reasons unrelated to the economics of continuing to operate a rental property. Second, the CPA did not attempt to identify what locations fit each tier. While the CPA recommended protecting current tenants by providing vouchers, its authors did not consider the availability of other units for displaced tenants with vouchers – even if owners who prepay in order to raise rents in growing markets are required to retain low-income tenants and accept their vouchers, tenants in communities that are losing population may not have the option to remain in their homes if a financially unsustainable, perhaps partially unoccupied, property is closed down. Finally, the CPA researchers were not asked to consider the plight of the millions of rural renters currently not served by any housing assistance program. To investigate these elements of potential prepayment further, various contextual factors such as urbanization, population decline, minority population, and housing characteristics are examined in relation to geography and proximity to other subsidized rental properties. Metropolitan Status Findings In counties with at least one Section 515 project, Section 515 properties make up over one-third of all subsidized properties and about 17 percent of all subsidized rental units. The proportions are much higher in rural places than in metro areas. ⌂

Metropolitan counties. Approximately one-third of all Section 515 properties are located in metropolitan areas where many other forms of subsidized housing are also concentrated. There are over 5,600 Section 515 properties in metropolitan counties but they account for only 9 percent of all subsidized units in those metropolitan areas. In areas outside

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metropolitan counties, Section 515 projects comprise approximately one-half of subsidized properties and over 36 percent of subsidized rental units. ⌂

Micropolitan counties. Section 515 developments comprise 29 percent of subsidized units in small towns and rural communities (i.e., micropolitan counties).

⌂

Outside Core Based Statistical Areas Counties. The 5,878 Section 515 properties in more remote counties Outside Core Based Statistical Areas (OCBSA) comprise a much greater proportion of subsidized housing than in metropolitan or micropolitan counties. Section 515 properties account for 46 percent of the subsidized rental units in these OCBSA counties.

Figure 9. Section 515 Units as a Percent of All Subsidized Units by Metropolitan Status 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Metropolitan

Micropolitan USDA Section 515

OCBSA

Other Subsidy

In over 900 counties, Section 515 properties comprise more than half of all subsidized units. These counties with high proportions of Section 515 units tend to be remote from metro areas: close to two-thirds of them are OCBSA counties and nearly 40 percent are in the Midwest.

18

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Figure 10.

Section 515 Units as a Percent of All Subsidized Rental Units

Legend states

Counties Percent Section 515 Units 0.1 - 17.3 17.4 - 36.2 36.3 - 55.6 55.7 - 81.1 81.2 - 100.0 No Section 515 Units

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Figure 11.

Counties Where Section 515 Units Make up More than Half of All Subsidized Rental Units

Legend states No Section 515 Units

Counties County Status Section 515 Less than 50% of Subsidized Units Section 515 50% or more of Subsidized Units

Population Decline While the United States as a whole has been gaining population, some areas have experienced population stagnation and even decline. Rural areas with the greatest concentrated population loss are largely located in the Great Plains portion of the Midwest. The Great Plains is loosely defined as the vast grassland east of the Rocky Mountains that stretches from northern Texas to Montana and North Dakota. Approximately half of all population loss counties identified by the USDA Economic Research Service are in the Great Plains. Rural population loss is also occurring in other economically distressed areas such as Central Appalachia, the Northwestern industrial rust belt, and the southern “Black Belt.”17 Population loss areas commonly lack economic diversity, particularly in the Plains states where there is a heavy reliance on transforming agriculture industry. As a result, much of the population decline is precipitated by outmigration of young working age adults in search of more viable employment options. This often leaves an older population and a mismatch between the current residents’ housing needs and the available housing stock. Older residents will often remain in units that may not meet their immediate needs because of a lack of other options such as rental housing or assisted living. In addition, homes in this region are older than the national average and, consequently, may require more rehabilitation.18

20

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The issue of Section 515 prepayment and preservation looms large in communities with declining populations. The Comprehensive Property Assessment and Portfolio Analysis asserted that approximately 10 percent of potential prepayment properties in the Section 515 stock are in declining markets where population outmigration combined with stagnant economies have resulted in high vacancy rates and depressed housing markets.19 HAC’s analysis used as a population loss indicator the U.S. Department of Agriculture’s Economic Research Service (ERS) definition of population loss counties: counties where the number of residents declined both between the 1980 and 1990 censuses and between the 1990 and 2000 censuses.20 There are a total of 601 population loss counties in the United States. Nearly 90 percent of them are nonmetropolitan, illustrating the disproportionate impact depopulation has on rural America.

Figure 12.

Population Loss Counties

Legend

states Population Loss County with a Sec. 515 No Section 515 Property

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Findings There are over 2,400 Section 515 properties in population loss counties, comprising slightly more than 50,000 units of rental housing. ⌂

On average, Section 515 units make up approximately 17 percent of subsidized rental units in these declining population counties.

⌂

In the population loss counties in the Midwest, the proportion of Section 515 units increases to 22 percent.

⌂

Prepayment is potentially a significant issue in this region, as nearly 70 percent of the Section 515 properties in these counties are eligible for prepayment.

Figure 13.

Population Loss Counties Section 515 Units as a Percent of All Subsidized Rental Units

Legend states

Counties Percent Section 515 Units 0.1 - 17.3 17.4 - 36.2 36.3 - 55.6 55.7 - 81.1 81.2 - 100.0 No Section 515 Units

Urbanization For most of its history the United States has been a predominately rural place. The first census in 1790 revealed that 9 out of 10 Americans resided in rural areas. In the early 20th century industrialization shifted the balance toward cities and urban centers. From this point until today, the urbanization/suburbanization trend in the U.S. has been unabated.21 22

Connecting the Dots

As is the case in population decline regions, prepayment of Section 515 mortgages is a potentially significant issue in urbanizing and population growth communities. The CPA reported that roughly 10 percent of properties located in “hot” markets could command rent increases of 60 percent or more after prepayment, and it seems likely that many such markets are located in urbanizing counties, defined as those that were classified as nonmetropolitan in 1993 (based on 1990 census data), but were recategorized as metropolitan after the 2000 census. There are 289 counties, with a population of 9.5 million persons, in this category.22

Figure 14.

Urbanizing Counties

Legend

states Urbanizing County with a Sec. 515 No Section 515 Property

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Findings The nearly 1,500 Section 515 properties in urbanizing counties contain approximately 40,000 units of subsidized rental housing. They comprise a substantial proportion of the overall subsidized market in these counties. ⌂

Section 515 properties make up 34 percent of these counties’ subsidized units.

⌂

Approximately 60 percent of Section 515 units in these urbanizing counties – about 24,000 homes – are eligible for prepayment. These units may account for just over half the CPA’s estimate of 46,000 units likely to prepay by 2009.

Figure 15.

Urbanizing Counties Section 515 Units as a Percent of All Subsidized Rental Units

Legend states

Counties Percent Section 515 Units 0.1 - 17.3 17.4 - 36.2 36.3 - 55.6 55.7 - 81.1 81.2 - 100.0 No Section 515 Units

Minority Populations23 In the past few decades dramatic progress has been made in improving the quality of housing in rural America. Despite this progress, however, housing problems persist, particularly among racial and ethnic minorities. Minorities in rural areas are among the poorest and worst housed groups in the entire nation, experiencing disproportionately high levels of inadequate housing conditions. Minority and Hispanic rural households are three times more likely to live in 24

Connecting the Dots

substandard housing than non-Hispanic white rural residents. These housing problems are more pronounced in rural areas with large concentrations of minorities. While much of the discussion about housing problems has moved on to other issues, quality of housing is still very much a key issue for minorities in these areas. Rural minority counties are the last bastion of poor quality housing conditions in this nation.

Figure 16.

Rural Minority Counties

Legend

states

County Status Hispanic County Asian County Native American County African American County No Section 515 property

For this analysis, rural minority counties are defined as those rural counties with a specific racial or ethnic minority population of one-third or more in 1980, 1990, and 2000. Under this definition, there are 301 rural minority counties with at least one Section 515 property in their borders, including: ⌂ ⌂ ⌂ ⌂

211 African-American counties, 4 Asian counties, 62 Hispanic counties, and 24 Native American counties.

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These communities are concentrated in regions that are historically connected to specific racial and ethnic groups. Hispanic rural minority counties can be found predominantly along the U.S.Mexico border. Rural African Americans tend to be clustered in the South in what is known as the Black Belt, and Native American counties are found in regions where Native American reservations are located. Findings ⌂

In the 301 rural minority communities with Section 515 properties, approximately onefifth of all subsidized units are in Section 515 properties.

⌂

Section 515 properties are particularly noticeable in counties with substantial and longterm Native American populations. In Native American rural minority counties, Section 515 units comprise 44 percent of all subsidized rental units.

⌂

In African-American rural minority counties Section 515 units make up 22 percent of subsidized units.

⌂

Nearly half the Section 515 properties in rural minority counties are eligible for prepayment.

Percent Section 515 Units

Figure 17. Section 515 Rental Units in Rural Minority Counties 50 45 40 35 30 25 20 15 10 5 0 All RMC

African American

Native American

Asian

Hispanic

Rural Minority County Percent of Subsidized Units that are Section 515 Units

Housing Stress For much of the 20th century, the poor quality and condition of homes was the primary housing concern facing rural America.24 Affordability has replaced poor housing conditions as the greatest problem for low-income rural households. Housing costs have increased drastically and incomes have not kept pace. Approximately one-third of rural households (6 million) have at 26

Connecting the Dots

least one major problem of quality, cost, or crowding, and many of those with problems have more than one problem. Fully 3 million rural renter households (51 percent) have housing problems.25

Figure 18.

Housing Stress Counties

Legend states

County Status Housing Stress County with Sec. 515 No Section 515 Property

To help examine housing quality in relation to the spatial analysis of subsidized housing, the research incorporates an indicator of “housing stress” formulated by the USDA Economic Research Service.I Housing stress counties are those where 30 percent or more of all households had a housing problem in 2000, experiencing one or more of the following: lacked complete plumbing, lacked complete kitchen, paid 30 percent or more of income for owner costs or rent, or were overcrowded (had more than one person per room).26 There are 432 housing stress counties averaging about 73,000 housing units per county. Housing stress counties are heavily concentrated in the South and West.

I

ERS uses data from the 2000 Census to identify housing stress counties. The decennial census does not collect data on housing quality measurements such as dilapidation or lack of electricity. Such factors are measured in the American Housing Survey, but AHS data are not available at the county or state level. Housing Assistance Council

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Findings There are nearly 90,000 Section 515 units in housing stress counties, located in approximately 2,700 Section 515 projects. ⌂ ⌂

Overall, 11 percent of subsidized units in these housing counties are located in Section 515 properties. Approximately one-third of housing stress counties are in metropolitan areas. In nonmetropolitan housing stress counties, Section 515 units make up 38 percent of subsidized units.

Figure 19.

Housing Stress Counties Section 515 Units as a Percent of All Subsidized Rental Units

Legend states

Counties Percent Section 515 Units 0.1 - 17.3 17.4 - 36.2 36.3 - 55.6 55.7 - 81.1 81.2 - 100.0 No Section 515 Units

Distance AnalysisI To augment the county level analysis and provide greater geographic specificity, a “distancespecific” location analysis of all USDA Section 515 properties in proximity to other federally I RD Section 538 guaranteed rental properties are not included in the distance-specific analysis due to a lack of specific location information that precluded quality geocoding.

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subsidized rental housing properties was conducted. The distance analysis calculates approximate distance between Section 515 projects and other federally subsidized properties using an array of geographic and mapping techniques. USDA Section 515 properties falling within a range or distance radius of another federally subsidized property are identified and analyzed based on their proximity.

Figure 20.

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How It Works To illustrate the concept of “distance buffers,” two counties in New Mexico are presented as an example. As indicated in Figure 21, there are two USDA Section 515 properties in Eddy County and one in Chaves County. There are also several HUD Section 8 properties and one LIHTC property in Chaves County. Yet these HUD properties are located outside the 10-mile radius (buffer) of the county’s lone Section 515 property and would not be considered to be in close proximity under the distance analysis. In Eddy County there are two Section 515 properties. A public housing property and project-based Section 8 projects are well within 10 miles of one of the Section 515 properties and thus would be considered in close proximity. Several tax credit and PHA properties are just outside the 10-mile buffer around Eddy County’s other Section 515 and therefore would not be considered in close proximity. While the county names are used to identify property locations in this example, county lines are irrelevant to the distance analysis. In other words, the ten-mile distance buffers may cross county lines, as illustrated at the far left of Figure 21.

Figure 21. Distance Buffers

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On average, the nearest subsidized housing property is located approximately 5.6 miles away from a Section 515 property.I These distances vary by type of subsidized property, however. For example, the nearest Section 202-811 property is on average 15.6 miles away from a Section 515 and the nearest project-based Section 8 property is on average 11.1 miles from a Section 515 project. Among Section 515 properties that are eligible for prepayment, the average distance to the nearest subsidized property increases slightly to 6.0 miles. To classify properties based on proximity, a 10-mile distance buffer was selected. Any USDA Section 515 properties within 10 miles of another federally subsidized property were identified as “in close proximity” to the other property. Conversely, Section 515 properties more than 10 miles from other subsidized properties were considered “not in close proximity.” In some respects, this 10-mile buffer is an arbitrary designation. Given the spatial dynamics of rural communities, however, combined with the structure of subsidized housing programs in general, a 10-mile designation to indicate proximity is justifiable.II Findings ⌂

Properties within 10-mile radius. Approximately 79 percent of all USDA Section 515 properties are located within 10 miles of another federally subsidized rental property. They include about 331,000, or 85 percent, of the total Section 515 units.

⌂

Properties outside 10-mile radius. Over one-fifth of Section 515 properties are located more than 10 miles from another subsidized property. There are just over 3,000 of these more isolated Section 515 properties, accounting for over 60,000 units of rental housing. These more isolated Section 515 properties tend to be smaller than the average Section 515 property, consisting of 20 units compared to 27 units for all properties. Nearly half (45 percent) of these properties are located in the Midwest and nearly the same proportion are located in OCBSA counties.

I

Average nearest distance was calculated using Hawth’s distance tests. Nearest subsidized property does not include other Section 515 properties. Average nearest distance was calculated for the continental United States only. Alaska, Hawaii, Puerto Rico, and Guam are not included. II As an example, over 90 percent of the non-USDA subsidized properties utilized in this analysis (public housing, LIHTC, project based Section 8, Section 202-811, etc.) are within one mile of another subsidized property. Therefore, even factoring in the low density of rural areas, a 10-mile buffer in any direction appears to be a good threshold for proximity to other properties. Additionally, other social and economic factors such as commuting patterns and population density characteristics were consulted in the establishment of this indicator.

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Figure 22.

USDA Section 515 Rental Properties in proximity to other Subsidized Housing Properties

Legend

Subsidized Property PROGRAM PHA LIHTC Project Based Section 8 Section 202-811 Section 236 Section 515 Property

While more than three-quarters of all Section 515 properties are within 10 miles of another subsidized property, the findings vary somewhat by specific subsidy program.

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⌂

Over half of all Section 515 properties are within 10 miles of a project-based Section 8 or public housing property.

⌂

Similarly, over 44 percent of Section 515 properties are within 10 miles of a LIHTC property.

⌂

HUD Section 202-811 and Section 236 properties are less prevalent nationwide, including in Section 515 communities. Only 30 percent of Section 515 properties are within 10 miles of Section 202-811 properties and just 17 percent are that close to HUD Section 236 properties.

Connecting the Dots

Percent of Section 515 Properties

Figure 23. Percent of Section 515 Properties within 10 Miles of Another Subsidized Property 60 50 40 30 20 10 0 PHA

Section 8 Project Based

LIHTC

Section 202-811

Section 236

HUD Property

Section 515 properties eligible to prepay are no more or less likely than other Section 515 developments to be close to other subsidized rentals. Approximately 5,791, or nearly 79 percent of Section 515 properties that are eligible to prepay, are within 10 miles of another subsidized rental property.

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DISCUSSION The U.S. subsidized rental housing network is a patchwork of differing types and forms of housing. The Housing Assistance Council’s investigation of the geographic relationship between the Section 515 housing stock and other forms of subsidized housing shows that Section 515 housing is a significant component of this subsidized network, especially in the small towns and more remote areas of rural America. A steady trickle of Section 515 property owners seek to prepay their mortgages and leave the program’s affordability requirements. USDA will, and should, continue to make prepayment decisions about individual Section 515 properties on an individual basis. Overarching policy decisions, however, benefit from access to a larger picture. Like the data analysis, the discussion below focuses on existing housing. It does not address the need for additional decent, affordable rental homes or rent subsidies for the 3 million rural renter households with housing problems. Nor does it take into account the existence of units subsidized solely by state or local sources, or units that are unsubsidized but decent and affordable. Findings: Counties with High Proportions of Section 515 Properties HAC’s analysis demonstrates that Section 515 units comprise particularly high proportions of the subsidized housing stock in four specific types of counties: o nonmetropolitan counties, particularly the more remote counties that are Outside Core Based Statistical Areas; o urbanizing counties; o nonmetro housing stress counties; and o counties with predominantly Native American populations as well as, to a lesser extent, those with significant concentrations of other minorities. A closer examination of these counties’ characteristics and the demographics of Section 515 tenants reveals important considerations for discussions of prepayment and preservation policy. Nonmetro Counties, Particularly OCBSA Counties In areas outside metropolitan counties, Section 515 properties comprise approximately one-half of subsidized properties and over 36 percent of subsidized rental units. The 5,878 Section 515 properties in the more remote Outside Core Based Statistical Areas counties account for 46 percent of the subsidized rental units there. It is not surprising that Section 515 developments comprise a large portion of the subsidized housing stock in nonmetro counties: while nonmetropolitan status does not determine whether a place is considered “rural” and therefore eligible for USDA’s Section 515 and other housing programs, there is a considerable overlap between nonmetro areas and USDA-defined rural areas. More interesting, perhaps, is the importance of Section 515 properties in the places farthest away from cities of 50,000 or more. Section 515 rentals that are located more than 10 miles from other federally subsidized rental properties (totaling just over 3,000, or about one-fifth of all 34

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Section 515 properties and more than 60,000 units) are disproportionately located in the Midwest and in counties that are Outside Core Based Statistical Areas. Likewise, the more than 900 counties in which Section 515 units make up over half of all subsidized rental units are disproportionately likely to be in the Midwest and to be OCBSA counties. Many of these places are losing population, and also have relatively large and growing elderly populations.27 While Section 515 properties in such areas may be less than fully occupied and may struggle to cover operating expenses, prepayment decisions must consider the availability – or unavailability – of alternative housing for their tenants. The Section 515 developments that are more than 10 miles from other subsidized properties also tend to be smaller than other Section 515 properties, averaging 20 units compared to an overall average of 27. Their size does not indicate that they are unimportant: 20 apartments may be essential in a small rental market, and 20 potentially displaced tenant families may have no readily available alternatives. Urbanizing Counties Urbanizing counties became parts of metropolitan areas between 1990 and 2000 because of increasing social and economic ties to sizeable cities. Such growing areas on the metropolitan edges, often called exurbs, are characterized by “fast-paced, low density growth and development.”28 The 40,000 Section 515 units in these counties make up 34 percent of the subsidized housing stock here, far higher than the 9 percent proportion in metropolitan counties overall. This location pattern probably developed for two reasons. First, the developers who chose the locations and applied for Section 515 financing would have tended to select markets with steady or growing demand for housing. Second, USDA regulations require that Section 515 properties be located near community and commercial facilities. Because these counties’ populations are growing and their economies are developing, demand for housing there is increasing. In fact, the search for affordable homes may be precisely what draws some urbanites to these places.29 Many are looking for homes they can afford to purchase and others seek affordable rentals, increasing the pressure on rental housing here. Thus rents are rising, giving owners of Section 515 developments a strong economic incentive to prepay their restricted-use mortgages in order to charge market-rate rents, while a significant loss of Section 515 units in these urbanizing areas could leave a substantial void in the subsidized and affordable rental markets. Housing Stress Counties In nonmetropolitan housing stress counties, where at least one-third of all households experience housing problems, Section 515 accounts for 38 percent of federally subsidized units. 49 percent of the 46,137 Section 515 units in these places are eligible for prepayment.

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Housing stress counties include a number of urbanizing counties (44, or 10 percent of all urbanizing counties) as well as a third of all persistent poverty counties (153, or 35 percent). Unlike urbanizing counties (discussed above), persistent poverty counties – where the decennial Censuses found poverty rates of 20 percent or more in 1970, 1980, 1990, and 2000 – provide little positive economic incentive for Section 515 owners to prepay their mortgages in order to obtain higher rents. They are subject, of course, to all the non-economic reasons owners may have for prepayment; these could not be quantified and were not included in the CPA’s analysis. Housing stress counties’ economies may be either booming or stagnant but all of these counties, by definition, suffer a shortage of decent, affordable housing. Therefore tenants from a Section 515 property in a housing stress county are very unlikely to be able to find alternative rentals nearby. Native American and Other Minority Counties Rural communities with significant populations of racial and ethnic minorities also often rely on the Section 515 program as a source of quality and affordable housing. Section 515 accounts for about one in every five subsidized rentals in counties that had a specific racial or ethnic minority population of one-third or more in 1980, 1990, and 2000. In Native American counties, Section 515 units comprise fully 44 percent of subsidized rentals. Over two-thirds (69 percent) of rural minority counties are also persistent poverty counties.30 As noted above, the likelihood of prepayment in these places has not been estimated. Given the high proportion of Section 515 properties among subsidized rentals in minority counties, particularly Native American counties, these places deserve special attention. Findings: Proximity to Other Subsidized Properties The Section 515 program has an extremely large reach across a vast and varied land mass. Section 515 projects are geographically dispersed and can be found in nearly 90 percent of U.S. counties. Less than half of Section 515 properties are within one mile of other federally subsidized rental properties. In contrast, over 90 percent of all non-USDA subsidized rental properties are within one mile of another subsidized property. The majority of Section 515 properties are farther from, but still not remote from, other properties: about 79 percent of all Section 515 properties – containing 85 percent (about 331,000) of total Section 515 units – are located within 10 miles of other federally subsidized rentals. Section 515 properties are more likely to be close to some types of other subsidized properties than to others: ⌂

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Over half of all Section 515 properties are within 10 miles of a project-based Section 8 or public housing property.

Connecting the Dots

⌂

Similarly, over 44 percent of Section 515 properties are within 10 miles of a Low Income Housing Tax Credit property.

⌂

Only 30 percent of Section 515 properties are within 10 miles of Section 202-811 properties, which provide rentals specifically for elderly and disabled people, and just 17 percent are that close to HUD Section 236 properties. Only half of counties with a Section 515 property also have a Section 202 or 811 development.

These findings are particularly relevant for the approximately 60 percent of Section 515 residents who are elderly or disabled. Federally subsidized alternative housing is scarce in many of their communities, so a loss of Section 515 properties could have profound impacts on their housing choices. Recommendations: Connecting the Dots HAC’s analysis demonstrates that geographic proximity and distance are important factors relating to the supply of subsidized housing in rural areas, and identifies certain types of places in which, and certain populations for whom, there may be few choices besides Section 515 properties in a search for decent, affordable housing. The analysis cannot support broad prescriptions for prepayment and preservation policy: one cannot say, for example, that prepayment should be prohibited for Section 515 properties in remote counties, or that prepayment should be permitted for Section 515 properties that are close to other federally subsidized properties. Instead, the need for the units in any given location must be determined individually. This analysis does, nevertheless, point to a need for reconsidering some assumptions made about prepayment and preservation to date. The Comprehensive Property Assessment conducted for USDA recommended that properties for which prepayment is economically viable, such as many of those in urbanizing areas, be allowed to prepay and that their current tenants be protected. Tenant protection provided by Congress and USDA has been in the form of vouchers through which USDA makes rent payments to landlords to supplement the amounts paid by tenants. The effectiveness of vouchers for individual households is not yet known; USDA’s voucher program is relatively new, having begun operation in fiscal year 2006, and USDA has not released data on the vouchers it has provided or the characteristics of the tenants affected. The long-term impact of providing vouchers to specific tenant households is also unknown. Under USDA’s current voucher program, if a family leaves its community, so does its voucher. Over time, therefore, if nothing else changes, switching from Section 515 apartments to tenant vouchers means that the number of assisted households in many communities will decrease, without regard to changes in the number of remaining households who need subsidies in order to find decent, affordable places to live. Too many unknowns remain, and the lives of too many vulnerable rural Americans are affected, for federal policy to adopt the CPA’s prepayment recommendation as is. HAC’s analysis demonstrates the importance of USDA’s current determinations regarding alternative housing Housing Assistance Council

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availability and impact on minorities, and raise a number of questions on the advisability of relying on vouchers. The looming question of meeting all housing needs and fulfilling the nation’s commitment to decent, affordable housing for all Americans31 is also unaddressed. HAC recommends:

38

o

USDA should continue to take into account the availability of alternate affordable housing in a community, and the impact of prepayment on minorities, when deciding whether to accept a requested prepayment. Information about the analyses conducted for each property should be available to tenants, their representatives, and the public. Tenants should have a right to appeal prepayment approvals based on these analyses.

o

Analyses of the availability of alternative housing should consider tenant demographics. For example, when prepayment of a Section 515 loan will affect elderly tenants with very low incomes, a nearby tax credit project for families with low incomes probably does not provide suitable alternative housing.

o

Research should be conducted to identify and study the actual properties that would be affected by the Comprehensive Property Assessment’s recommendation to allow prepayment for certain properties, estimated to comprise 10 percent of the Section 515 portfolio. HAC’s analysis indicates that at least half of these properties may be in urbanizing counties with “hot” rental markets and few alternative housing choices for their tenants, and thus points to a need to preserve or replace these units for future low-income renters, rather than allowing their owners to prepay and protecting only the current tenants.

o

Data should be collected regarding the use of USDA vouchers and the locations and housing conditions of former voucher holders. Because USDA’s voucher program is new, too little is known about the long-term efficacy of these vouchers to be sure that they are a good solution for protecting current tenants. The existence of other people who need help now or in the future to obtain decent, affordable housing must be taken into account as well.

o

Research should be conducted to determine how prepaid properties and their tenants fare after prepayment.

o

Vouchers should remain available in the communities where they were first issued if they are needed there, even after the specific tenants to whom they were first issued no longer need them.

o

Tenants in prepaying Section 515 properties should have the same protections as Section 8 voucher tenants in prepaying HUD-financed properties.

o

Data collected by USDA should be readily available to the public.

Connecting the Dots

o

Research should be conducted on the extent and characteristics of unsubsidized affordable rental properties.

Housing Assistance Council

39

ENDNOTES TO TEXT 1

U.S. Department of Agriculture (USDA) Rural Development (RD), Multi-Family Housing Occupancy: Statistics Report as of January 2006 (unnumbered letter dated March 22, 2006), 2.

2

Housing Assistance Council tabulations of 2000 Census of Population and Housing.

3

Housing Assistance Council tabulations of 2003 American Housing Survey.

Housing Assistance Council (HAC), Since Inception Reports: Section 515 Rural Rental Housing Program Totals, FY 1963 – 2006 (Washington, D.C.: Housing Assistance Council, 2006), http://www.ruralhome.org/rhs/06inception/515TOT_06b.pdf. 4

5

USDA RD, Multi-Family Housing Occupancy.

6

HAC, Since Inception Reports: Section 515.

7

USDA Rural Development, Direct Multi-Family Loans and Grants Regulations, 7 CFR 3560.

8

Russell T. Davis, Administrator, USDA Rural Development Housing and Community Facilities Programs, Letter to USDA Rural Development State Directors (April 27, 2007), 3, http://www.rurdev.usda.gov/regs/ul/ulapril07.pdf. 9

USDA RD, Multi-Family Housing Occupancy, 2006.

National Low Income Housing Coalition (NLIHC), 2007 Advocates Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007).

10

U.S. Department of Housing and Urban Development (HUD), A Picture of Subsidized Households – 2000, http://www.huduser.org/picture2000/index.html.

11

12

NLIHC, 2007 Advocates Guide.

13

NLIHC, 2007 Advocates Guide. (The date for which this income level applies is not stated.)

14

HUD, A Picture of Subsidized Households – 2000.

Charles Tolbert and Molly Sizer, U.S. Commuting Zones and Labor Market Areas: A 1990 Update (Washington, D.C.: U.S. Department of Agriculture, Economic Research Service, September 1996). 15

ICF Consulting, Rural Rental Housing – Comprehensive Property Assessment and Portfolio Analysis (Fairfax, Virginia: ICF Consulting, November 2004); Laurence Anderson, USDA Section 515 Revitalization: A New Commitment to Preserve the Section 515 Portfolio, presentation at Housing Assistance Council training conference in 2007 (available from HAC upon request). 16

40

Connecting the Dots

Housing Assistance Council, Turning Challenges into Opportunities: Housing and Community Development Strategies in Rural Population Loss Counties (Washington, D.C.: Housing Assistance Council, 2007). 17

18

Ibid.

19

ICF Consulting, Comprehensive Property Assessment.

U.S. Department of Agriculture Economic Research Service, Population Loss Counties, http://www.ers.usda.gov/Briefing/Rurality/Typology/maps/Population.htm.

20

Frank Hobbs and Nicole Stoops, Demographic Trends in the 20th Century (Washington, DC: U.S. Government Printing Office, 2002), 7. 21

Housing Assistance Council, What is Rural?: Working Towards a Better Programmatic Definition (Washington, D.C.: Housing Assistance Council, forthcoming). 22

Much of the information in this subsection was drawn from Housing Assistance Council, Race, Place, and Housing: Housing Conditions in Rural Minority Counties (Washington, D.C.: Housing Assistance Council, 2004). 23

Housing Assistance Council, Taking Stock: Rural People, Poverty and Housing at the Turn of the 21st Century (Washington, D.C.: Housing Assistance Council, 2002). 24

25

HAC tabulations of 2005 American Housing Survey.

U.S. Department of Agriculture Economic Research Service, Housing Stress Counties, http://www.ers.usda.gov/Briefing/Rurality/Typology/maps/Housing.htm.

26

27

HAC, Turning Challenges into Opportunities.

Alan Berube, Audrey Singer, Jill H. Wilson, and William H. Frey, Finding Exurbia: America’s Fast-Growing Communities at the Metropolitan Fringe (Washington, D.C.: Brookings Institution, 2006), 2. http://www.brookings.edu/~/media/Files/rc/reports/2006/10metropolitanpolicy _berube/20061017_exurbia.pdf. It should be noted that Berube et al. develop a definition of “exurbs” that is not the same as, though it overlaps with, the definition of “urbanizing counties” used here by HAC.

28

29

Berube et al., 28.

HAC, Race, Place, and Housing. The Race, Place, and Housing study analyzed the 304 total rural minority counties in the United States; 301 of these counties contain at least one Section 515 property and are included in the current report. 30

Housing Assistance Council

41

31

42 U.S. Code 1441 (Housing Act of 1949, Section 2); 42 U.S. Code 1441a (Housing and Urban Development Act of 1968, Section 2); 42 U.S. Code 5301 note (Housing and Community Development Act of 1987, Section 2(b)).

42

Connecting the Dots

APPENDIX A SECTION 515 RENTAL HOUSING PROPERTIES IN PROXIMITY TO SELECTED FEDERALLY SUBSIDIZED HOUSING PROPERTIES

Housing Assistance Council

43

Public HousingI The public housing program of the Department of Housing and Urban Development (HUD) is one of the nation’s oldest and largest subsidized rental options. Created by the 1937 Housing Act, public housing is a hallmark of the New Deal. Public housing is owned and operated by public housing authorities (PHAs). PHAs are operated and governed by locally appointed or elected boards of commissioners. There are over 14,000 public housing developments around the United States operated by 3,050 PHAs and containing more than 1.2 million units.1 Public housing is home to several million residents. Children live in over 40 percent of these units. Approximately 19 percent of PHA residents are elderly. More than half the households are headed by racial and ethnic minorities and nearly 40 percent are headed by women. The demand for public housing far exceeds the supply. In many large cities, waiting list times can be up to 10 years.2 Public housing is available for low-income households or those who make less than 80 percent of the area median income. Like residents in many other federal housing assistance programs, public housing occupants pay the highest of: (1) 30 percent of their monthly adjusted income; (2) 10 percent of their monthly gross income; (3) their welfare shelter allowance; or (4) a PHAestablished minimum rent of up to $50.3 The Geography of HUD Public Housing and RD Section 515 Units County Level Relationships Among the 2,789 counties with a USDA Section 515 property, just over 1,811 (65 percent) also have at least one HUD public housing authority property. Over 70 percent of metropolitan and micropolitan counties with a Section 515 property also had at least one public housing property. Approximately 56 percent of Section 515 counties outside core based statistical areas also had a public housing property. On average, there are two public housing units to every Section 515 unit in these counties. Distance Relationships Among USDA Section 515 properties, 7,022 or 49.7 percent are within 10 miles of a public housing property. These Section 515 properties near public housing developments include 214,924 (54.9 percent) of the Section 515 units.

I

The analysis includes approximately 96 percent of public housing properties – 13,819 properties encompassing 1,244,985 rental units – which were successfully geocoded. 44

Connecting the Dots

Counties with USDA Section 515 Properties and HUD Public Housing Properties

Legend

Counties

County Status No Section 515 and PHA Property Section 515 and PHA Property No Section 515 Properties

USDA Section 515 Rental Properties in proximity to HUD Public Housing Properties

Legend

HUD Public Housing Section 515

Produced by the Housing Assistance Council Washington, DC

Source:

Housing Assistance Council

45

HUD Project Based Section 8 Rental AssistanceI HUD’s Project Based Rental Assistance – often referred to as project-based Section 8 – program provides for privately owned multifamily housing for low-income family households through a federal subsidy of the mortgage, rental assistance, or a combination of the two. Over 1 million households live in homes with project-based assistance; two-thirds of these include elderly or disabled family members. Original Section 8 project-based assistance contracts were between the HUD and project owners for up to 40 years.4 Residents in units receiving project-based Section 8 assistance must have low incomes (less than 80 percent of area median income). Forty percent of new admissions are required to have very low incomes (at or below 30 percent of area median income).5 The Geography of HUD Project Based Rental Assistance and RD Section 515 UnitsII County Level Relationships Among the 2,789 counties with a USDA Section 515 property, just over 1,766 or 63 percent also have at least one project based Section 8 property. In these counties there are 8,482 projectbased Section 8 properties with 613,874 units. On average, there are 1.4 project based Section 8 units to every Section 515 unit in these counties. Distance Relationships On average, the nearest project-based Section 8 property is located 11.1 miles from a Section 515 property. Among USDA Section 515 properties, 7,590 or 53.7 percent are within 10 miles of a project-based Section 8 property.

I

The analysis includes approximately 87 percent of project based Section 8 properties – 11,002 properties encompassing 887,102 rental units – which were successfully geocoded. II Approximately 10 percent (1,464) of HUD project based Section 8 properties also have Section 515 funding and are included in the analysis as Section 515 properties. Project based Section 8 properties that also have Section 202-811 funding were included in the analysis as Section 202-811 properties. 46

Connecting the Dots

Counties with USDA Section 515 Properties and Section 8 Project Based Properties

Legend

Counties

County Status No Sec. 515 and Sec. 8 Project Based Property Sec. 515 and Sec. 8 Project Based Property No Section 515 Properties

USDA Section 515 Rental Properties in proximity to Section 8 Project Based Properties

Legend

Section 8 Project Based Section 515

Produced by the Housing Assistance Coun cil Washington, DC

Source:

Housing Assistance Council

47

Low Income Housing Tax CreditI The Low Income Housing Tax Credit (LIHTC), adopted by Congress in the 1986 Tax Reform Act, is a reduction in the dollar amount of federal taxes owed by an individual or corporation in exchange for its investment in low-income rental housing. The amount of tax reduction is tied directly to the proportion of low-income persons among the residents of the housing produced. To obtain the tax reduction, an investor provides the capital that is used to help develop the project. The investor has no role in the development process or the management of the project after it is rented up. A for-profit or nonprofit developer undertakes those tasks. The investor receives a tax credit paid annually over a 10-year period and cannot withdraw its investment for 15 years.6 The tax credit program provides funding for two types of rental housing development: construction of new buildings or substantial rehabilitation of existing buildings. New construction can produce single-family houses, apartment buildings, duplexes, rowhouses or townhouses. Rehabilitation can be performed on these same types of buildings, and conversion of structures like warehouses, schools, and motels is also possible.7 As of 2004, there were approximately 25,000 LIHTC properties located across the United States and Puerto Rico providing about 1.4 million units of housing. Approximately 90 percent of these LIHTC units are occupied by low-income households.8 The Geography of Low Income Housing Tax Credit and RD Section 515 UnitsII County Level Relationships Among the 2,789 counties with a USDA Section 515 property, over 1,600 or 57.4 percent also have at least one LIHTC property. More than seven out of ten metropolitan and micropolitan counties with a Section 515 property also had at least one tax credit property. Outside core based statistical areas, however, only 36 percent of Section 515 counties also had any Tax Credit units. On average, in the counties that have both Section 515 and LIHTC properties, there are three Section 515 properties to every one LIHTC property and four Section 515 units to every one LIHTC unit. Distance Relationships On average, the nearest LIHTC property is located 14.1 miles from a Section 515 property. Among USDA Section 515 properties with no LIHTC cross subsidy, 6,461 or 43.5 percent were within 10 miles of an LIHTC project. These Section 515 properties within close proximity of a tax credit development include about 206,000 units or 53 percent of the Section 515 units.

I

The analysis includes approximately 84 percent of LIHTC properties, which were successfully geocoded. Approximately 21 percent (5,542) of LIHTC properties also have Section 515 funding and are included in the analysis as Section 515 properties.

II

48

Connecting the Dots

Counties with USDA Section 515 Properties and Low Income Housing Tax Credit Properties

Legend

Counties

County Status No Section 515 and LIHTC Property Section 515 and LIHTC Property No Section 515 Properties

USDA Section 515 Rental Properties in proximity to Low Income Housing Tax Credit Properties

Legend

LIHTC Section 515

Housing Assistance Council

49

HUD Section 202–811 Elderly and Supportive HousingI Section 202 Supportive Housing for the Elderly. HUD’s Section 202 program provides capital and operating funds to nonprofit organizations that develop and operate senior housing. Section 202 has two components. The first provides capital advances to nonprofit organizations for the construction, rehabilitation, or acquisition of supportive housing for seniors. Additionally, Section 202 provides rental assistance in the form of Project Rental Assistance Contracts (PRACs) to subsidize the operating expenses of the developments.9 Residents of Section 202 housing must generally be at least 62 years old and have very low incomes. The average Section 202 resident is 79 years old, and nearly 39 percent of this program’s residents are over the age of 80. The average annual income of a resident is little more than $10,000. According to HUD, elderly households with very low incomes are the likeliest to pay more than they can afford for their housing.10 Section 811 Supportive Housing for Persons with Disabilities. HUD’s Section 811 program provides funding to developers of housing for disabled, low-income households. Section 811 was created through the National Affordable Housing Act of 1990, which separated housing for people with disabilities from the Section 202 program.11 Section 811 provides capital advances in the form of forgivable no-interest loans to construct or rehabilitate supportive housing for persons with disabilities. Additionally, Section 811 provides for project rental assistance to cover the difference between the HUD-approved operating cost per unit and 30 percent of a resident's adjusted income.12 There are approximately 7,924 Section 202-811 properties across the United States, accounting for nearly 312,000 units of affordable rental housing for seniors and persons with disabilities. The Geography of HUD Section 202-811 and RD Section 515 Units County Level Relationships Among the 2,789 counties with a USDA Section 515 property, just over 1,400 or 51 percent also have at least one HUD Section 202-811 property. In these Section 515 counties, there are 5,676 Section 202-811 properties encompassing 195,676 units of rental housing for seniors or disabled persons. Distance Relationships On average, the nearest Section 202-811 property is located 15.6 miles from a Section 515 property. Among USDA Section 515 properties, 29.5 percent are within 10 miles of a Section 202-811 property.

I

The analysis includes approximately 92 percent of Section 202-811 properties, which were successfully geocoded.

50

Connecting the Dots

Counties with USDA Section 515 Properties and Section 202-811 Properties

Legend states No Section 515 Units

Counties County Status No Sec 515 and Sec 202-811 Sec 515 and Sec 202-811

USDA Section 515 Rental Properties in proximity of HUD Section 202-811 Properties

Legend

Section 202-811 Section 515

Housing Assistance Council

51

HUD Section 236 LoansI Under Section 236 of the National Housing Act, HUD subsidized the interest payments on mortgages for rental or cooperative housing owned by private nonprofit or limited-profit landlords and rented to low-income tenants.13 Section 236 replaced the Section 221(d) below market interest rate (BMIR) program in 1968 and was itself discontinued in 1973.14 There are approximately 2,700 Section 236 properties accounting for nearly 330,000 units of affordable housing. The Geography of HUD Section 236 and RHS Section 515 Units County Level Relationships Only 620 of the 2,789 counties with a USDA Section 515 property also have at least one HUD Section 236 property. Approximately one-third of metropolitan counties with a Section 515 property also have at least one Section 236 property, as well as 28 percent of micropolitan counties. Only 5 percent of Section 515 counties outside core based statistical areas also have a Section 236 property, however. On average, there is one Section 515 property to every one Section 236 property and two Section 515 units to every one Section 236 unit in these counties. Distance Relationships On average, the nearest Section 236 property is located 28.1 miles from a Section 515 property. Among USDA Section 515 properties, 1,984 or 14.0 percent are within 10 miles of a Section 236 property. These Section 515 properties within close proximity to Section 236 developments include about 68,392 units or 17.4 percent of the Section 515 units.

I

The analysis includes approximately 95 percent of Section 236 properties, excluding 114 (approximately 5 percent) that could not be successfully geocoded. 52

Connecting the Dots

Counties with USDA Section 515 Properties and HUD Section 236 Properties

Legend

Counties

County Status No Section 515 and Section 236 Properties Section 515 and Section 236 Properties No Section 515 Properties

USDA Section 515 Rental Properties in proximity to HUD Section 236 Properties

Legend

Section 236 Section 515

Housing Assistance Council

53

Section 538 Guaranteed Rural Rental Housing Program Under the Section 538 program, USDA RD guarantees loans made by private lenders, generally banks and savings and loans institutions, for the development of affordable rural rental housing with at least five units. The program is used to guarantee permanent financing, or a combination construction and permanent loan. A Section 538 guaranteed loan is often combined with other financing sources such as Low Income Housing Tax Credits, a HOME grant or loan, state or local assistance (including tax-exempt bond financing), or a second bank loan. Eligible borrowers include individuals, nonprofit or for-profit corporations, partnerships, state or local public agencies, limited liability companies, trusts, or Indian tribes. Tenants in the Section 538 program must have incomes at or under 115 percent of area median income at the time of initial occupancy.15 Section 538, which was created by Congress in 1996, differs in some important ways from the Section 515 program. Section 538 focuses on partnerships between USDA and qualified lenders, whereas Section 515 makes loans directly to nonprofit or for-profit rural housing developers. Section 538 is intended to provide decent, affordable rental housing for low- and moderateincome rural with incomes that are generally higher than those served by Section 515. Income calculations for Section 538 tenants do not take into account the deductions permitted under Section 515. Units developed with Section 538 loans can be larger than those financed by Section 515.16 The current Section 538 portfolio contains just under 150 properties, encompassing a little over 8,000 units of affordable rental housing. Section 538 properties are located in 115 counties across the United States and almost all of these counties also have Section 515 properties. The Geography of RD Section 538 and RD Section 515 Units County Level Relationships Only 113 of the 2,789 counties with a USDA Section 515 Property also have at least one RD Section 538 property in the same county. Distance Relationships Distance relationships were not determined for Section 538 properties due to a lack of street level data for geocoding purposes.

54

Connecting the Dots

Counties with USDA Section 515 and Section 538 Properties

Legend states No Section 515 Units

Counties County Status No Secs 515 and Sec. 538 Sec. 515 and 538

Housing Assistance Council

55

APPENDIX A: ENDNOTES National Low Income Housing Coalition, “Public Housing,” 2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007). 1

2

Ibid.

3

Ibid.

National Low Income Housing Coalition, “Project Based Rental Assistance,” 2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007).

4

5

Ibid.

National Low Income Housing Coalition, “Low Income Housing Tax Credit,” 2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007). 6

7

Ibid.

8

Ibid.

9

National Low Income Housing Coalition, “Section 202 Supportive Housing for the Elderly,” 2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007). 10

Ibid.

11

National Low Income Housing Coalition, “Section 811 Supportive Housing for Persons with Disabilities,” 2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007). 12

Ibid.

National Housing Law Project. Section 236 Program. http://www.nhlp.org/html/hud/sec236.htm. 13

National Low Income Housing Coalition, “Project-Based Rental Assistance,” 2007 Advocates’ Guide to Housing and Community Development (Washington, D.C.: National Low Income Housing Coalition, 2007).

14

Housing Assistance Council, Information Sheet: Guaranteed Rural Rental Housing Program (Section 538), http://www.ruralhome.org/infoSheets.php?id=197.

15

16

Ibid.

56

Connecting the Dots

APPENDIX B SELECTED DATA TABLES

Housing Assistance Council

57

Table 1. Section 515 Properties and Units by State Section 515 Rental Progam State Alabama

Properties

Units

488

15,986

Alaska

41

906

Arizona

111

3,469

Arkansas

358

10,088

California

416

18,710

Colorado

133

3,426

Connecticut

65

2,482

Delaware

51

1,598

District of Columbia

0

0

Florida

433

16,626

Georgia

465

16,255

Guam

1

49

Hawaii

23

955

Idaho

190

4,316

Illinois

645

10,922

Indiana

559

14,154

Iowa

611

11,026

Kansas

388

6,655

Kentucky

453

12,256

Louisiana

389

12,643

Maine

342

8,090

Maryland

168

5,326

62

1,984

Massachusetts Michigan

613

18,548

Minnesota

648

11,726

Mississippi

495

15,322

Missouri

873

19,625

Montana

166

2,665

Nebraska

266

3,773

77

2,141

Nevada New Hampshire

81

2,486

New Jersey

81

3,311

New Mexico

111

3,966

New York

449

13,215

North Carolina

626

22,419

North Dakota

241

3,245

Ohio

389

14,496

Oklahoma

296

8,101

Oregon

189

5,573

Pennsylvania

309

9,816

Puerto Rico

100

6,173

Rhode Island South Carolina

12

421

333

12,284

South Dakota

478

6,713

Tennessee

378

12,879

Texas

758

24,519

Utah

91

2,105

Vermont

62

1,517

Virgin Islands

21

476

Virginia

261

10,220

Washington

300

8,762

West Virginia

246

7,115

Wisconsin

525

10,333

Wyoming

58

1,579

Table 2. Section 515 Rental Housing Program and Prepayment Status Prepayment Eligible State

Alabama Alaska

Section 515

Properties

Properties

Units

Number

488

15,986

41

906

Units %

Number

%

280

57.4

9,775

57.4

22

53.7

470

53.7

Arizona

111

3,469

45

40.5

1,585

40.5

Arkansas

358

10,088

184

51.4

5,469

51.4

California

416

18,710

242

58.2

10,693

58.2

Colorado

133

3,426

73

54.9

1,891

54.9

Connecticut

65

2,482

37

56.9

1,512

56.9

Delaware

51

1,598

19

37.3

657

37.3

0

0

0

0.0

0

0.0

Florida

433

16,626

240

55.4

9,469

55.4

Georgia

465

16,255

287

61.7

10,234

61.7

1

49

1

100.0

49

100.0

District of Columbia

Guam Hawaii

23

955

15

65.2

621

65.2

Idaho

190

4,316

102

53.7

1,983

53.7

Illinois

645

10,922

336

52.1

5,127

52.1

Indiana

559

14,154

375

67.1

9,099

67.1

Iowa

611

11,026

448

73.3

7,846

73.3

Kansas

388

6,655

264

68.0

4,091

68.0

Kentucky

453

12,256

281

62.0

8,179

62.0

Louisiana

389

12,643

223

57.3

7,238

57.3

Maine

342

8,090

229

67.0

5,538

67.0

Maryland

168

5,326

85

50.6

2,682

50.6

62

1,984

34

54.8

1,192

54.8

Massachusetts Michigan

613

18,548

354

57.7

10,667

57.7

Minnesota

648

11,726

504

77.8

9,103

77.8

Mississippi

495

15,322

273

55.2

8,735

55.2

Missouri

873

19,625

607

69.5

13,914

69.5

Montana

166

2,665

95

57.2

1,480

57.2

Nebraska

266

3,773

143

53.8

1,823

53.8

Nevada

77

2,141

46

59.7

1,232

59.7

New Hampshire

81

2,486

56

69.1

1,815

69.1

New Jersey

81

3,311

46

56.8

1,600

56.8

New Mexico

111

3,966

60

54.1

2,218

54.1

New York

449

13,215

252

56.1

7,514

56.1

North Carolina

626

22,419

353

56.4

12,851

56.4

North Dakota

241

3,245

203

84.2

2,583

84.2

Ohio

389

14,496

215

55.3

7,911

55.3

Oklahoma

296

8,101

107

36.1

2,799

36.1

Oregon

189

5,573

117

61.9

3,064

61.9

Pennsylvania

309

9,816

155

50.2

4,867

50.2

Puerto Rico

100

6,173

21

21.0

1,310

21.0

12

421

6

50.0

239

50.0

South Carolina

333

12,284

188

56.5

7,332

56.5

South Dakota

478

6,713

260

54.4

3,429

54.4

Tennessee

378

12,879

222

58.7

7,530

58.7

Texas

758

24,519

407

53.7

12,830

53.7

Utah

91

2,105

44

48.4

907

48.4

Vermont

62

1,517

21

33.9

564

33.9 14.3

Rhode Island

Virgin Islands

21

476

3

14.3

96

Virginia

261

10,220

118

45.2

4,698

45.2

Washington

300

8,762

155

51.7

4,350

51.7

West Virginia

246

7,115

142

57.7

4,016

57.7

Wisconsin

525

10,333

309

58.9

6,074

58.9

Wyoming

58

1,579

37

63.8

874

63.8

APPENDIX C SELECTED STATE LEVEL MAPS

60

Connecting the Dots

USDA Section 515 Properties and Units by State

Washington 301 properties 8,794 units Montana 166 properties 2,665 units Oregon 190 properties 5,597 units

Idaho 191 properties 4,328 units Wyoming 58 properties 1,579 units

California 416 properti es 18,710 units

Nevada 76 properties 2,129 units

North Dakota 241 properties 3,245 units

Minnesota 650 properties 11,786 units

South Dakota 483 proper ties 6,753 units

Nebraska 266 proper ties 3,773 units Utah 91 properties 2,105 units

Colorado 133 properties 3,426 units

Maine 342 properti es 8,090 units

Kansas 388 properties 6,655 units

Ver mont New Hampshire 63 properties 81 properties 1,541 units 2,486 units New York Massachusetts 450 properties 63 properties Michigan 13,239 units 1,996 units 615 properties Connecticut 18,612 units 65 properties 2,482 units Iowa Pennsylvania New Jersey 611 properties 315 properties 81 properties 11,026 units 10,307 units 3,311 units Ohio 394 properties Maryland Delaware Illinois 14,689 units 168 properties 51 properties 646 properties Indiana 5,326 units 1,598 units W est Virgini a 10,966 units 561 properties 246 properties 14,202 units 7,115 units Virginia Missouri 262 properties Kentucky 875 properties 10,252 units 19,653 uni ts 454 properties Wisconsin 529 properties 10,453 units

12,280 units

Arizona 115 properties 3,639 units

New Mexico 110 properti es 3,946 units

Oklahoma 296 properties 8,101 units

Texas 774 properties 25,099 units

Tennessee 380 properties 12,934 units

Ark ansas 358 properties 10,088 units

South Carolina 333 properties 12,284 units

Mississippi 496 properties Alabama 15,334 units 487 properties 15,958 units

states Section 515 Properties Hawaii 23 properties 955 units

Georgia 465 properties 16,255 units

Louisiana 390 properties 12,671 units

Legend Alaska 41 properties 906 units

North Carolina 626 properties 22,419 units

12 - 91 92 - 191 192 - 358 359 - 561 562 - 875

Florida 434 properties 16,646 units

Guam 1 property 49 units Puerto Rico 100 properties 6173 units U.S. Virgin Islands 21 properties 476 units

Section 515 Prepayment Eligibility Status by State

ME

WA MT

ND

MN

VT

SD

WI

NY

WY

NJ

MI IA

NE CA

NH

ID

OR

PA

NV IN

UT

IL

CO

WV

MD

OH

KS

AZ

OK

AR

NM

VA

KY

MO

NC

TN MS

SC AL

GA

LA TX FL

AK

Legend

Guam 100% Properties Prepayment Eligible PR 21% Properties Prepayment Eligible VI 14% Properties Prepayment Eligible

HI

Section 515 properties eligible for prepayment Section 515 properties not eligible for prepayment

Section 515 Rental Housing Loan Prepayments 2001 - 2006 Washington 2 proper ties 56 units Montana 7 properties 84 units Ore gon 1 property 20 units

North Dakota 37 propertie s 337 units

Idaho 8 properties 157 units

California 4 propertie s 59 units

Minnesota 55 properties 721 units

Nebraska 21 properties 240 units Uta h 4 properties 34 units

Arizona 6 properties 186 units

Colorado 1 property 20 units

Kansas 6 properties 47 units

Oklahoma 4 properti es 114 units

Ne w M exico 1 prope rty 12 units

Ver mont New Ha mpshire 3 propertie s 10 properties 107 units 434 units

Wisconsin 26 properties 413 units

South Dakota 54 properties 384 units

Wyoming 1 property 28 units

Ne va da 3 prope rtie s 136 units

Maine 3 prope rtie s 32 units

M ichigan 2 properties 66 units

Iowa 456 prope rtie s 2120

Ohio 13 properties Maryla nd Delaware Illinois 404 units 0 properties0 properties 25 properties Indiana 0 units 0 units West Virginia 316 units 11 properties 12 properties 276 units Virginia 242 units Missouri 1 property Ke ntucky 31 properties 4 units 1 property 460 units 12 units North Carolina 8 properties Tennesse e 144 units 9 properties 280 units Ark ansas South Carolina 2 properties 14 prope rtie s 48 units 509 units Alaba ma Mississippi 13 properties 3 prope rtie s 348 units 71 units

Texas 7 properties 146 units

New York Massachusetts 9 properties 11 properties 416 units 402 units Connecticut 3 properties 53 units Pennsylvania New Jersey 12 properties 1 property 323 units 48 units

Georgia 22 proper ties 568 units

Louisiana 1 property 4 units Florida 7 properties 289 units

Alaska 1 property 12 units

Legend

states Prepaid Section 515 Loans, 2001-2006 0.00 - 4.00 4.01 - 14.00 Hawaii 1 p rop erty 58 unit s

14.01 - 37.00 37.01 - 55.00 55.01 - 456.00

Subsidized Rental Units by Program and State

ME

WA MT

ND

MN

VT

SD

WI

NY

WY

NJ

MI IA

NE CA

NH

ID

OR

PA

IN

NV

WV

UT

IL

CO

MD

OH

KS

AZ

OK

AR

NM

VA

KY

MO

NC

TN MS

AL

GA

SC Legend

LA TX FL

PHA LIHTC Project Based Section 8

AK

Section 202-811 Section 236 Section 538 Section 515

HI

BOARD OF DIRECTORS HOUSING ASSISTANCE COUNCIL Gideon Anders National Housing Law Project Oakland, California Robert Calvillo Affordable Homes of South Texas, Inc. McAllen, Texas Peter N. Carey Self-Help Enterprises Visalia, California Joseph Debro Trans Bay Engineering & Builders Oakland, California

Galveston, Texas Polly Nichol, HAC Secretary Vermont Housing and Conservation Board Montpelier, Vermont William Picotte Eagle Thunder Consulting Rapid City, South Dakota William Powers Rural California Housing Corporation Sacramento, California Pedro Rodriguez, Jr. Waukesha, Wisconsin

Sandra Ferniza Arizona State University Tempe, Arizona

Irene E. Sikelianos Delphi, Inc. Cedar Creek, New Mexico

Ninfa R. Gutierrez Diocese of Yakima Housing Services Yakima, Washington

Debra D. Singletary, HAC President Delmarva Rural Ministries, Inc. Dover, Delaware

Lenin Juarez Action Gypsum Supply Company Houston, Texas

Hon. Bennie G. Thompson U.S. House of Representatives Bolton, Mississippi

David Lollis Appalbanc / FAHE Retired Berea, Kentucky

Rebecca Torres-Swanson Tucson, Arizona

Arturo Lopez Coalition of Florida Farmworker Organizations Florida City, Florida Moises Loza, HAC Second Vice President Housing Assistance Council Washington, D.C. Twila Martin-Kekahbah, HAC Vice President Turtle Mountain Band of Chippewa Bismarck, North Dakota Maria Luisa Mercado Lone Star Legal Aid

Jose Trevino Lansing, Illinois Richard Tucker, HAC Treasurer Washington, D.C. Lauriette West-Hoff, HAC Chair Southern Real Estate Management & Consultants, Inc. Durham, North Carolina Peggy R. Wright Arkansas State University – Delta Studies Center Jonesboro, Arkansas

The U.S. Department of Agriculture’s Section 515 program provides more than 400,000 decent, affordable rental homes for rural Americans with low incomes, but many of these rentals are now at risk. Seeking to inform the debate on preservation of these units, this Housing Assistance Council report examines where Section 515 developments are located with respect to other federally subsidized rentals and reviews their role in their rural communities’ rental housing networks. It discusses the policy implications of HAC’s research findings and makes recommendations.

ISBN 978-1-58064-158-6