For decades, the rural housing program has been a mainstay of national and state efforts to improve the living conditions of low-income people in the U.S. At the federal level, Congress adopted a series of initiatives during the 1930s to stabilize rural families on family farms and rehouse the Depression-era rural poor, which laid the groundwork for a national rural housing program. At the state level, since the mid-1970s, the state of California has operated programs targeted specifically to small towns and rural communities and amelioration of the dismal living conditions of farm workers and Native Americans.

At the forefront of these efforts in California has been a strong network of community-based, nonprofit and public organizations and agencies located throughout the state and delivering a variety of housing services. These services include: acquisition, rehabilitation, construction, and operation of rental housing for low-income families, the elderly and disabled, homeless, and farm workers; construction supervision and loan packaging for families participating in owner-build programs; rehabilitation and retrofits of existing owner-occupied homes; installation of sewer, water, and other infrastructure improvements; provision of supportive services; and foreclosure prevention intervention, homeownership counseling, financial literacy training, and asset-building. These services have been funded by an array of federal, state, and local government housing and community development programs, lending institutions, such as banks and nonprofit financial intermediaries, private investors, and others.

The California Coalition for Rural Housing (CCRH) was created in 1976 to represent the interests of this network of rural affordable housing providers and their clients and ensure continuing funding and supportive land use and planning laws. CCRH is the oldest statewide affordable housing coalition in the U.S. Our members include some of the oldest nonprofit housing development organizations in the country, groups that emerged in the 1960s and 1970s to provide decent and affordable homes for California farm workers and other rural poor. They include the largest producers of mutual self-help housing in the country, a precursor of Habitat for Humanity. They also include some of the largest operators of farm labor housing for permanent and migrant workers.

It is this highly successful network of sophisticated, mission-driven, rural housing providers that is currently seriously threatened by shrinking funding resources. The threats are manifold. But, with the threats come several new opportunities.

Rural Housing in the Crosshairs: New Challenges and New Opportunities

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For decades, the rural housing program has been a mainstay of national and state efforts to improve the living conditions of low-income people in the U.S. At the federal level, Congress adopted a series of initiatives during the 1930s to stabilize rural families on family farms and rehouse the Depression-era rural poor, which laid the groundwork for a national rural housing program. At the state level, since the mid-1970s, the state of California has operated programs targeted specifically to small towns and rural communities and amelioration of the dismal living conditions of farm workers and Native Americans.

At the forefront of these efforts in California has been a strong network of community-based, nonprofit and public organizations and agencies located throughout the state and delivering a variety of housing services. These services include: acquisition, rehabilitation, construction, and operation of rental housing for low-income families, the elderly and disabled, homeless, and farm workers; construction supervision and loan packaging for families participating in owner-build programs; rehabilitation and retrofits of existing owner-occupied homes; installation of sewer, water, and other infrastructure improvements; provision of supportive services; and foreclosure prevention intervention, homeownership counseling, financial literacy training, and asset-building. These services have been funded by an array of federal, state, and local government housing and community development programs, lending institutions, such as banks and nonprofit financial intermediaries, private investors, and others.

The California Coalition for Rural Housing (CCRH) was created in 1976 to represent the interests of this network of rural affordable housing providers and their clients and ensure continuing funding and supportive land use and planning laws. CCRH is the oldest statewide affordable housing coalition in the U.S. Our members include some of the oldest nonprofit housing development organizations in the country, groups that emerged in the 1960s and 1970s to provide decent and affordable homes for California farm workers and other rural poor. They include the largest producers of mutual self-help housing in the country, a precursor of Habitat for Humanity. They also include some of the largest operators of farm labor housing for permanent and migrant workers.

It is this highly successful network of sophisticated, mission-driven, rural housing providers that is currently seriously threatened by shrinking funding resources. The threats are manifold. But, with the threats come several new opportunities.

Federal Housing Program Challenges

Obama Administration Program Cuts and Eliminations: 
Advocates were hopeful that the new Obama Administration would usher in a renewed commitment to rural housing. Unfortunately, this has been one of the weakest administrations in memory. With respect to the U.S. Department of Agriculture (USDA), the Administration’s Fiscal Year (FY) 2012 budget proposed cuts or eliminations of seven housing programs. Most notably, this is the first administration in history to seek to eliminate the Mutual Self-Help Housing Program, which has been continuously funded since the mid-1960s with strong bipartisan support. The program enables groups of eight-12 low-income families over the course of a year to build their own homes under the supervision of a nonprofit organization, their “sweat-equity” serving as the down payment to secure a low-interest USDA mortgage. The USDA sought to zero-fund the program that pays for construction supervision, Section 523, and to cut by 80 percent the direct mortgage loan program, Section 502. Fortunately, majority Republicans in the House joined Democrats in restoring the funding, although at levels considerably below FY 2011. The Administration’s FY 2013 budget is modestly better, but still seeks to eviscerate self-help and eliminate funds for production of new rental housing. Advocates have been told the choice is either food supports or housing.

With respect to the U.S. Department of Housing and Rural Development (HUD), the picture is similarly disappointing. The Obama Administration has effectively eliminated two Bush-era rural housing programs by requesting zero funding in FY 12 and, again, in FY 13. The Rural Innovation Program, the successor to the Rural Housing and Economic Development Program, provided grants to transformational projects with a housing and economic development component. The Self-Help Homeownership Opportunity Program provided grants for purchase of sites for self-help housing. Congress was happy to oblige HUD with the first program, but restored funds for the second.

Consolidation of HUD and USDA Housing Programs:
Another challenge is periodic discussions about moving USDA’s housing programs to HUD. This idea resurfaced, again, in 2011 in the Administration and Congress. The idea is for the USDA Rural Housing Service to load-shed its housing programs and consolidate all housing programs under the auspices of HUD. While there no longer appears to be the appetite to consolidate right now, rural housing advocates are deeply concerned. The USDA has an 80-year history of direct delivery of rural housing assistance through a system of highly decentralized county, regional, and state offices, while HUD is much less attuned to the needs of Rural America.

Changing Rural Definition: 
A third challenge at the federal level is the potential loss of rural housing assistance by some 80 California jurisdictions that may no longer be considered eligible under population thresholds. Simply stated, the USDA defines ‘rural’ for purposes of housing program eligibility as places with populations under 10,000 in metropolitan areas and 20,000 in nonmetropolitan areas and a serious lack of mortgage credit for lower-income families. Since the 1990 U.S. Census, federal legislation has ‘grandfathered’ in localities that met population thresholds in the 1980 Census and did not exceed 25,000 in any successive Census counts. This provision is due to sunset and the 2010 Census will disqualify many previously eligible localities that are still rural in character. Proposed legislation in Congress could expand the population threshold to 35,000 or even 50,000 with the USDA Secretary’s discretion.

State Housing Program Challenges

Demise of Redevelopment Agencies:
The passage of ABx1 26 by the California Legislature in 2011 and validation by the California Supreme Court has eliminated 60 years of redevelopment agency operations and 40 years of tax increment financing for affordable housing. Annually, redevelopment agencies generated about $1 billion for affordable housing. Typically, these funds were the first dollars into proposed new housing developments and demonstrated local commitment. While many rural communities did not have redevelopment agencies or generated too little tax increment to do housing projects of any volume, many rural housing developers did count on these funds around the state. Under ABx1 26, the encumbered housing funds of redevelopment agencies were to be assigned to successor local housing agencies on February 1, 2012. State legislation – SB 654 and AB 1585 – would clarify that about $1.4 billion in unencumbered housing funds would also transfer to successor agencies and retain their use for housing. This has significant implications for rural communities, which may not have capable successor agencies to manage these funds and spearhead new housing production.

Exhaustion of Proposition 1C:
In 2006, the voters of California approved the Housing and Emergency Shelter Trust Fund Act authorizing the state to sell $2.85 billion in general obligation bonds for affordable housing and related infrastructure. These funds followed on the heels of five earlier, successful housing bond initiatives on the state ballot that have sustained the state housing program since 1988. A significant percentage of these dollars end up in Rural California via the Joe Serna, Jr. Farmworker Housing Grant Program and other programs for rent and purchase that have rural set-asides and/or can be easily leveraged with USDA housing funds. Regrettably, Prop 1C housing funds are now nearly exhausted. The loss of these funds, together with the loss of redevelopment dollars and federal cutbacks, means that the future pipeline of affordable rural housing will shrink and come to a virtual standstill in many communities.

Chill in Inclusionary Housing:
California leads the nation in the adoption and implementation of local government Inclusionary Housing (IH) programs. IH is a strategy whereby local governments mandate that private residential developers ensure that a percentage of the total units they develop for rent or sale in any new development be affordable and available to lower-income residents. In some cases, developers may opt to dedicate land or make fee payments in lieu of development.  According to research by CCRH, about 145 jurisdictions have these programs, about one-third of all cities and counties in the state, and more than 30,000 affordable homes were produced from 1999 to 2006. About 30 percent are located in jurisdictions with populations under 20,000 and 55 percent in jurisdictions under 50,000. Recent California court decisions, however, question the legal authority of local governments to impose rental inclusionary requirements and have created a chill in implementation and adoption of programs.

Volatile Housing Markets:
Finally, the emergence of the foreclosure crisis in 2007-2008, especially in high-growth, interior, and rural areas of California, has turned the housing market upside down. The glut of foreclosed homes has dragged down housing and land costs and created the perception that we no longer need new affordable home production. In fact, the poor have gotten poorer and have no greater access to decent homes for rent and purchase than when the economy was more robust. Loss of income, loss of jobs, poor credit, and other factors still greatly limit their housing choices. Moreover, rural housing developers who bought land in the mid-2000s when runaway land costs threatened to make affordable housing production financially infeasible, now own land that has lost significant value. With respect to the Mutual Self-Help Housing Program, for example, this means in some cases that the cost of development, including the land cost, will exceed the appraised value of the home upon completion. In other words, owner-builders may end up in homes that cost more to build than they are valued on the open market with the drag on home prices from nearby foreclosures.

Opportunities and Prospects for the Future

Given these challenges, which in many ways are daunting and unprecedented, what hope is there for the future of rural housing? Well, within every crisis there is the prospect for a new paradigm and a sense of urgency to address big problems.

In terms of federal housing appropriations, there is a sense that the worst was averted in FY 2012 and that there is still a wellspring of bipartisan support for the rural housing program that will survive the dire economic climate and the relative indifference of the Obama Administration. The 2012 election may, of course, set a new direction that could be worse. But, for now, advocates hope to hold the line on additional funding cuts, avert the transfer of rural housing programs to HUD, and expand the rural definition to accommodate population growth in California and include small towns with a rural character.

At the state level, the introduction of SB 1220, the Housing Opportunities and Market Stabilization Act (HOMeS Act), offers one of the most hopeful attempts to create a dedicated, recurring source or sources of revenue to capitalize a State Housing Trust Fund for supporting existing and new programs delivering a variety of affordable housing activities. Right now, the main source identified is a recordation fee tied to real estate transactions, such as sales and refinancing, which could yield as much as $400 to $900 million annually. It will be an uphill battle to achieve the two-thirds vote threshold needed in each house for passage. CCRH will be leading efforts in Rural California to convince key constituencies that smaller towns and rural places will benefit enormously from housing market stabilization, reinvestment, and resurgence of home buying, selling, and building.

Additionally, advocates are pushing for preservation of existing redevelopment agency housing funds and recreation of a new redevelopmentlike vehicle for generating new housing dollars from local property tax collections in the future. While outlines of this vehicle are still quite undefined, legislative leaders have expressed some interest in this idea for truly blighted areas that would support public purpose activities, like affordable housing and community facilities, and avoid the pitfalls that led to the demise of redevelopment.

Maintaining and growing the rural housing program in the coming years will be extremely difficult and some rural housing developers will teeter on the edge of financial survival. However, the rural housing sector has weathered previous hits and the renewed sense of urgency may yet yield new opportunities.

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Since 1993, Dr. Robert Wiener has been a lecturer in the Department of Human and Community Development, where he teaches in the area of housing and social policy and conducts a summer abroad course on Housing and Community Development in Barcelona, Spain. In 2004, Dr. Wiener was recognized as a “Distinguished Educator” by the UCD student government. In addition, he has been the Executive Director of the California Coalition for Rural Housing (CCRH), one of the oldest state low-income housing coalitions in the country, for 27 years Under his leadership, CCRH has played a major role in federal and state housing policy and program efforts in rural housing, farm labor housing, housing preservation, and other areas of housing provision. In 1999, he co-edited and -wrote a landmark book on Housing in Rural America and is currently working on another book on affordable housing practice in California. He has a doctorate in urban and regional planning from UCLA. In 2006, he was honored as the “Inspirational Nonprofit Housing Leader of the Year” by the Nonprofit Housing Association of Northern California and as a “Housing Hero” by the Cabrillo Economic Development Association.

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