For over 60 years, the Rural Housing Service, part of the Department of Agriculture's Rural Development Mission Area, has been supporting the community development needs of rural America. By providing essential credit access to areas in which low population density has hindered capital formation and infrastructure development, RHS helps foster the economic stability needed to sustain rural America, preserving its vital contribution to our nation's prosperity, security and success.
To ensure the effectiveness of efforts to improve capital access in rural areas, RHS over the past two years has reevaluated programs from both delivery and beneficiary perspectives, and made important enhancements, including re-engineering the Section 502 Single Family Housing Guaranteed program such that fees are expected to offset losses allowing the program to facilitate rural borrowers' access to credit while mitigating costs to the taxpayer, increasing flexibility in lending programs for better responsiveness to changing economic conditions, and actively emphasizing loan modifications and workout solutions designed to keep homeowners in their homes.
Our programs are far-reaching. The single-family housing, multifamily housing and community facilities service areas are closely integrated through the 47 state offices and 500 area offices that comprise our field office structure. This integration enables better resource management, improved data gathering and, most critically, more responsive interaction with the communities we serve. With a budget authority of $1.3 billion, RHS leveraged a program level of approximately $27.2 billion in loans, loan guarantees, grants and technical assistance in FY 2011. In undercapitalized rural economies across the nation, the significance of this level of commitment can hardly be overstated.
Since FY 2008, the program level for the Section 502 Single Family Housing Guaranteed program has increased almost fourfold. The strategic realignment of the fee structure, lowered the cost of new guarantees and has helped the program expand to the current program level of $24 billion from $6.2 billion in fiscal year 2008. The number of loans provided families throughout rural America more than doubled from 63,833 in FY 2008 to 129,560 in FY 2011. In the three years from FY 2009 to FY 2011, this program spurred $49.7 billion in new loans, making the dream of homeownership a reality for more than 395,000 Americans with limited credit access. Looking forward, the 2012 budget proposes a $24 billion program level for the Section 502 loan SFH guarantees which is anticipated to fully meet demand. The 2012 fee structure will be a 1.97% upfront fee and an annual fee of 0.3%.
For the Single Family Home Direct Program in FY 2008, 15,199 loans were made totaling $1.17 billion. In FY 2009, the number of loans increased to 16,820 and the total loan amount grew 26.9% to $1.48 billion bolstered in part by the housing provisions within the American Recovery and Reinvestment Act. ARRA's influence was also felt in 2010, as the number of loans and the loan amount rose to 22,266 and $2.17 million, respectively, the latter a 46.4% increase versus the previous year. In the three years from FY 2009 to FY 2011, more than 52,000 SFH Direct loans with obligations totaling $4.79 million were made to very low and low-income rural Americans.
The Section 502 SFH Direct Program is unique to RHS. It is a means-tested mortgage loan program targeting low- and very low-income families and households to assist them in purchasing decent, safe and sanitary housing in eligible rural areas. Low-income is defined as 80% of area median income or less. Forty percent of the funds are set aside for very low-income applicants. This program assists applicants who are unable to obtain credit from other sources on terms and conditions they can reasonably be expected to fulfill.
The SFH Direct and Guaranteed homeownership programs reflect the long-term benefits such ownership confers not just on families, but on society as a whole. Homeowners enhance community stability and they attract private capital in the form of businesses seeking established communities in which to invest. But above all, under normal conditions, home ownership provides one of the few opportunities for meaningful wealth creation which too often proves elusive for low income Americans. Even if housing prices only keep pace with inflation, the leveraging that occurs through a mortgage loan, coupled with the long homeownership terms that are typical in the direct and guaranteed programs, often provides a critical foundation for financial independence that can support families in present and future generations, that can fortify communities, and ultimately return tax dollars to state coffers.
When focus widens beyond financial returns, it becomes clear these are not the only benefits. Harvard's Joint Center for Housing Studies have repeatedly demonstrated that children of low-income homeowners achieve more in school, attaining higher math and reading scores, and have fewer behavioral problems than children in rental housing who move more frequently.
In addition to the credit extended through these loan programs, two RHS Single Family grant programs, 504 Direct (very low income) and 523 Mutual and Self-Help (low income), provided an additional $195.8 million to rural Americans needing home improvements or seeking to build their own homes from the start of FY 2009 through FY 2011.
For families and individuals who often could not qualify for single-family housing loans during that period, the RHS multifamily housing programs helped secure financing to build housing projects containing more than 9,300 units, through the 515 Direct, Farm Labor Housing and 538 Guaranteed Rural Rental Housing programs. In addition, more than 28,700 units were renovated, through the Multifamily Preservation and Revitalization Demonstration Program. Preservation of existing rental housing stock has ensured that program beneficiaries have acceptable housing that both meets safety standards and protects the substantial investment the U.S. taxpayer has made in rural communities. The leverage inherent to these programs greatly enhances their effectiveness. In FY 2009 and FY 2010 (the most recent years for which information is available), the USDA investment of $648.8 million attracted an additional $1.74 billion in third-party investments for rental housing in rural America.
These improvements to multifamily housing stock benefited some of the more than 460,000 Americans living in Rural Development units across the country. More than 270,000 of these people were provided rental assistance allowing them to live in rental apartments of their own.
These MFH programs are recognized by many as a lifeline not only for some of the poorest of America's rural poor, but also for many elderly and persons with disabilities.
Using program resources to encourage healthier, more efficient credit markets, RHS field offices develop innovative and holistic solutions to meet the prosperity challenges unique to rural communities. The needs of these communities are complex and RHS works closely with the other Rural Development Service groups to address the complicated environmental and economic dynamics. The goal to create viable and sustainable communities, means the overall needs of the community, not simply its residential needs must be foremost.
This work entails much more than raising roof beams. The loans and grants provided through the Community Facilities program support a broad range of facilities from hospitals and health clinics, to public safety buildings, school facilities and rural libraries. Municipal infrastructure such as town halls, courthouses, county office buildings, and streets and bridges are also eligible.
In FY 2011, 2,221 jobs and 4,627 jobs were estimated to have been retained and created respectively through projects financed by the CF programs. While some of these jobs are temporary construction jobs, a large complex project such as a critical access hospital or college multipurpose building may employ teams of various construction specialties for two years or more. During that period, those workers support the local economy through purchases of groceries, gas and other necessities.
Similar dividends are paid by homebuilding. Increased home construction is essential to the future U.S. economic rebound, and home improvement jobs are at least as critical to local economies. Within the construction sector, home improvement and maintenance added more jobs than new construction from the start of the year through June. This has implications beyond primary construction wages, since home improvement can potentially bring greater secondary benefits to the local economy because of the typically smaller reliance on national distributors of building materials.
The credit access provided by the Single Family Housing and Multifamily Housing programs is estimated to have generated sufficient demand in the U.S. economy to have sustained or created hundreds of thousands of jobs in FY 2011 alone. Many of these jobs are in industries prominent in parts of rural America that lack diversity of employment opportunities and are therefore especially vulnerable. For example, the timber and lumber products industries' recoveries, which continue at a snail's pace, are closely tied to the health of the housing and home repair markets.
Since FY 2009, the Single-Family Housing program has invested $4.7 billion, creating or sustaining an estimated 66,548 jobs. The Multifamily Housing program has invested $824.2 million, creating an estimated 17,773 jobs. The $3.1 billion invested by Community Facilities since FY 2009 is estimated to have directly created 9,996 jobs and saved 22,384 jobs. Of that amount, over $1.66 billion was invested in 464 rural health care facilities and is estimated to have created 4,124 jobs and saved 10,319 jobs.
These estimates are derived from a National Association of Home Builders analysis in 2008 which estimates that each $100,000 invested in multifamily housing remodeling generates 1.1 jobs and each newly constructed unit creates 1.16 new jobs.
The overall costs of foreclosure are often more significant than realized. A 2006 study suggests that each home foreclosure on a block reduces the price of nearby homes by 0.9%, and continues to exert downward pressure on community housing prices for as much as two years.
Tammye Trevino is the Rural Housing Service administrator.
