RURAL PROBLEMS
Renters, like homeowners, in rural areas live in difficult situations. 35% of rural renters are cost-burdened, paying more than 30 percent of their income for housing costs. Almost one million rural renter households suffer from multiple housing problems. An unbelievable two-thirds pay more than 70% of their income for housing.

Moreover, poor rural renters do not fair as well as poor urban renters in terms of access to existing programs. HUD has done little to pick up the slack as only 17% of very-low income rural renters receive housing subsidies, compared to 28% of the urban poor. Overall, only 12% of HUD Section 8 assistance reaches rural areas. While HOME funds and other HUD assistance is important, rural areas do not receive a fair share because too often there are no regulatory set-asides established.

Rural Delaware, in particular Sussex County, which is the second largest county east of the Mississippi River, faces many problems in common with other rural communities and counties nationwide. In many ways, Sussex County is a snapshot of broader Rural America. You may have traveled to Delaware's beaches. Unfortunately, there is another side to Sussex County. Some of the housing problems are:

• Highest rate of substandard housing in the state.
• The highest poverty rate in the state.
• Housing costs requiring a $13 per hour wage to afford a basic two-bedroom apartment.
• A housing stock that has not kept pace with the 369% increase in the County's Hispanic population.
• A 700% increase in overcrowding between the 1990 and 2000 census.
• People renting beds and sleeping in shifts similar to their work at the poultry processing plants.
• Increased sales of manufactured homes, with dual payments on unit and land, the insecurity of not being able to sell or move, all while the unit depreciates in value.
• Median incomes which are 35% less than our urban brethren.
• Agricultural and service employment dominate with a seasonal migrant farmworker population and increasing demand for employment in the poultry processing industry.
• Less access to credit, CRA resources, and charitable giving in southern, rural Delaware.
• High construction and infrastructure costs relative to incomes and the ability to pay.
• Finally, and not least, NIMBY (Not In My Back Yard) opposition creates substantial barriers to affordable housing development.

THE ROLE OF NON-PROFITS
Housing needs are great and non-profit organizations, rooted in their communities, highly accountable, have a mission of affordability, and are increasingly experienced in responding to community housing needs. With little private sector activity serving low and very low income households, many non-profits have stepped in and pursued a multiple funding strategy. Skilled local organizations meld federal, state, local and private resources together to provide affordable financing packages to low-income families. In Delaware we have numerous successes showing what nonprofit ownership and USDA's rental and farm labor housing financing can achieve.

USDA'S PROGRAMS
Almost all federal funding dedicated to rural housing comes from USDA’s Rural Housing Service (RHS). Here are some of the most important programs that serve low-income rural families. In these programs, non-profit organizations are often a vital link between USDA and local families.

Unfortunately, these programs have received drastic funding cuts in recent years.

Section 502 Home Ownership: Under Section 502, funding was available for 132,000 units annually in 1976 when I started at NCALL, but because of funding, production has dropped by 88% to fewer than 15,600 units. Currently funded at $1.1 billion, the President's budget cuts this program by 13% to $957 million in program level. Nonprofit rural housing organizations provide much needed packaging and pre- and post-housing counseling for these attractive mortgages. In many rural communities, "502" is the only homeownership option available to low-income families. Therefore, it is not a surprise that there is a $5 billion backlog with 80,000 unfulfilled loan requests in RHS offices across the country.

Section 523 Mutual Self-Help Housing: With the assistance of local housing agencies, groups of families eligible for Section 502 loans perform approximately 65 percent of the construction labor on each other’s homes under qualified supervision. This program, which has received growing support because of its proven model, has existed since 1961. For the past 3 years, approximately 1,500 homes have been built annually. This excellent program is critical to increasing minority ownership nationwide.

Section 515 Rental Housing: The portfolio contains 450,000 rented apartments. The delinquency rate is a low 1.6 percent. The average tenant income is just over $8,000, which is equal to only 30 percent of the nation’s rural median household income. Sixty percent of the tenants are elderly or disabled and one-quarter are minority.

Loans are made to private owners and non-profit organizations on the condition that the housing remain available for eligible families for at least 20 years. Spending for this program has been cut by 73 percent since 1994; and unit production has been reduced by 88 percent since 1990. Funding levels are at a 25 year low, so low there are no longer state by state allocations, rather a small national competition. Once a leading rental production program, 515 is a mere shadow of its former self. Nonprofit developers are relegated to doing occasional 12 unit mini-apartment projects. Yet in design, Section 515 can serve those in greatest need and in Delaware and Maryland the portfolio is well managed, maintaining quality housing in good condition. This certainly is a program we need in rural Sussex County to help serve poultry processing plant employees to overcome the overcrowded, unsafe and substandard conditions they are forced to inhabit. To be effective, a permanent and far more substantial new construction production component needs to be funded.

Preservation Issues: Prepayment at the end of the 20 year use restriction is a threat to two-thirds of the portfolio. In 1987, Congress enacted legislation restricting prepayment, and provided financial incentives to owners to stay in the program. With cuts in the program, however, there is little money to provide these incentives and other resources for preservation. The capital replacement needs alone for 2001 were $130 million, with only $50 million in available funding. Where possible, non-profit organizations have saved 515 properties from being permanently lost to low-income families by purchasing the properties. Approximately 990 units or 76% of the affordable Section 515 rental units in Sussex County alone are vulnerable through opt-out and de-regulation initiatives. Loss of even a portion of these units would be devastating. A 24 unit complex in Milton, Delaware was recently saved by nonprofit intervention, establishing a model for preservation.

Section 514 and Section 516 Farm Labor Housing Loan and Grant Programs: These are the only federal housing programs specifically targeted to migrant and seasonal farmworkers and their housing needs. Non-profit organizations and public bodies use the loan and grant funds, along with Section 521 rental assistance, to provide affordable units. These funds are used to plan and develop housing and related facilities. We believe the people that put the food on our tables should have access to decent, affordable housing.

They have been successfully used for award winning projects on the Delmarva Peninsula. No alternative resources exist for farmworker housing and these excellent programs need expansion. In Delaware alone, we have one 16 unit migrant complex ready for construction next spring and another 30 unit seasonal complex recently obligated.

Rural Community Development Initiative (RCDI): Initiated by the National Rural Housing Coalition, this funding became available in FY 2000. Non-profit intermediaries match these grant funds and provide technical support, enhance staffing capacity, and provide pre-development assistance to build the capacity of rural organizations. In the FY 2000 funding round, USDA's RHS received some $80 million in applications for $6 million in appropriated funds, a ratio of 13 to 1. On-going capacity and resource development for rural non-profits and communities is critical and RCDI should be expanded to address this documented need.

PENDING LEGISLATION
Rural Rental Housing Act (S.652): Sponsored by Senator John Edwards, this legislation proposes a $250 million federal matching grant program for low-income households and the elderly. Federal assistance in the form of capital grants, subsidized loans, guarantees, and other forms of financing, would be available to finance up to 50 percent of rental project costs. The legislation specifies a low-income use restriction of not less than 20 years. USDA would administer the program, and could delegate administration to intermediaries, including states and non-profits. In Delaware our Rural Consortium has several projects in development stage that could benefit from enactment of this legislation: an 11 unit elderly apartment rehabilitation, a 35 unit family new construction apartment, and a 12 unit family Phase II apartment complex.

This new and flexible resource is critical to achieving a measurable impact in rural America and balancing rental and homeownership strategies.

A FINAL THOUGHT
We understand necessary budget reductions; however, USDA's programs have born unconscionable cuts since 1994. These need to be recouped! The programs at HUD would work better for rural America if assistance was targeted to non-metro areas. Without rural set-asides at HUD, our communities will continue to receive crumbs from the table.

The challenge is to maintain opportunities for affordable homeownership through Self-Help Housing and Section 502, to implement and fund a serious rental housing production program, while assuring we preserve existing affordable rental housing stock.

Decent, affordable housing impacts every aspect of our lives. Is it not time to make decent, affordable housing a priority by investing commensurate resources to address the substandard, overcrowded, and rent-burdened conditions, the backlogs, the long waiting lists? In doing so, we can literally change the lives of thousands of people in rural America.

Joe Myer is the Founding President of the Delaware Housing Coalition and Executive Director of NCALL Research. This paper is from remarks presented to U.S. Senate staffers on October 25, 2002 on behalf of the Executive Committee of the National Rural Housing Coalition.