There is an unprecedented affordable housing crisis in rural America. Often thought of as a metropolitan and suburban concern, acute shortages of affordable housing are increasingly affecting families in rural areas, some of which are among the nation’s poorest. The Low-Income Housing Tax Credit (Housing Credit) is the federal government’s most potent tool for the production and preservation of affordable rental housing across the nation and is vital to meeting the housing needs of low-income rural Americans. The Housing Credit supports over 25% of the multifamily housing market in rural counties; more than double the national rate. Despite this substantial support, challenges, such as low median household incomes and the deteriorating condition of existing housing stocks, further exacerbate the struggle to ensure an adequate supply of affordable housing in rural settings.
To address the formidable barriers in affordable housing production and preservation, the AHTCC advocates for proposals in Congress aimed at expanding and strengthening the Housing Credit.
Initiatives to expand and strengthen the Housing Credit found in the Affordable Housing Credit Improvement Act (S. 1557/H.R. 3238) as well as the Tax Relief for American Families and Workers Act of 2023 would provide essential resources to address the unique challenges facing affordable housing in rural areas head-on. Given the indispensable role that the Housing Credit plays in mitigating rural America’s affordable housing crisis, key changes to the program hold immense potential in ensuring that individuals earning the lowest incomes— including veterans, seniors, Native Americans, and other low-income households— have access to safe, stable, and dignified housing.
The Rural Affordable Housing Crisis
Largely defined by low population density and stretches of widely available land, rural America has an affordable housing crisis that differs in nature from that of the metropolitan regions. Unlike in urban and suburban areas, the demand for affordable housing is less concentrated, which can increase the difficulty of leasing up denser properties. Additionally, median household incomes in these regions are considerably lower than in metropolitan areas, requiring lower rents to achieve affordability. This inevitably reduces the revenue potential for such properties and deters the development of properties that would provide affordable options to rural residents.
The economic characteristics of rural areas pose stark barriers to affordable housing production while paradoxically underscoring the urgent need. For example, according to a study done by Freddie Mac, the rural poverty rate of 15.4% is higher than the national rate of 14.1%, and among U.S. counties where high rates of poverty have been historically persistent, the rural poverty rate is nearly double the national rate. Overall, 80% of the nation’s high poverty counties are in rural areas. Despite the immense need, there are only 44 physically adequate affordable rental homes available and accessible for every 100 renter households with extremely low-incomes in rural areas. These statistics illustrate the challenges faced by rural communities: persistent poverty, limited access to quality, affordable housing, and scarce economic resources despite the urgent need for investment. The Department of Housing and Urban Development’s Section 515 rural housing program supplies affordable housing to over 380,000 low-income households; however, inadequate funding, physical deterioration, and loss of affordability threatened by the maturity of most Section 515 loans render the program alone an insufficient solution.
A Supply-Side Solution
The Housing Credit is the nation’s largest rental housing subsidy program and often serves as the sole economically viable avenue for financing the development of affordable rental housing in rural areas. Since its inception in 1986, the program has supported the production or preservation of 3.85 million affordable rental homes.
Expanding and strengthening the Housing Credit would allow for the sorely needed development of more homes in rural areas. In January 2024, the Tax Relief for American Families and Workers Act was passed by the House of Representatives. The bill includes would restore a 12.5% increase in the Housing Credit state allocation that expired in 2021, and would reduce the amount of private activity bond financing required to access four percent credits. Together, these provisions have the potential to finance the production or preservation of over 200,000 additional affordable rental homes – the biggest investment in affordable housing in over two decades. These changes are sorely needed to increase the production of affordable housing in rural, urban, and suburban communities alike.
Other proposals included in the bipartisan Affordable Housing Credit Improvement Act (AHCIA) aim to amplify the Housing Credit’s impact in rural areas. A 30 percent basis boost for all developments in rural areas would provide critically needed equity capital to these properties, making many more financially feasible. This strategic measure is projected to support financing of tens of thousands of additional affordable rental homes in rural areas. Another provision would modify rural income limits to make more properties pencil out considering the prevalence of extremely low incomes in rural areas. Additionally, AHCIA proposals that would provide more financial resources for affordable housing targeted to Native American communities, most of which are in rural areas, as well as housing targeted for extremely low-income (ELI) individuals, would complement efforts to address rural America’s housing needs.
According to Joshua Yurek of the Midwest Housing Equity Group, an AHTCC member organization whose affordable housing investments are primarily in rural areas, “rural America faces massive affordable housing challenges, not least of which is attracting investment capital. The Housing Credit is the largest affordable housing development program for these communities – but it needs investment capital to function properly. Most rural communities don’t need $20-$30 million transactions. It’s the $2, $3, $5 and $7 million transactions that move the needle when it comes to rural investment.”
“Unfortunately, the affordable housing crisis has taken a heavy toll on rural areas, making it all the more important that we enhance the Housing Credit program through the Affordable Housing Credit Improvement Act to make it even more effective at serving rural communities,” says Chris Neary of Cinnaire, an AHTCC member organization which has created or preserved nearly 14,000 quality, safe homes in rural markets in the Midwest and Mid-Atlantic. The organization was the recipient of the AHTCC’s 2023 Charles L. Edson Tax Credit Excellence Award in the rural area category.
The Affordable Housing Tax Credit Coalition (AHTCC) remains steadfast in its advocacy efforts for the passage of the Housing Credit provisions in the Tax Relief for Americans Families and Workers Act and the other provisions in the Affordable Housing Credit Improvement Act, recognizing their critical significance in addressing the pressing housing needs of rural communities.
Written by Andrew Lozano, AHTCC Senior Policy Manager with contributions from Lauren Nixon, AHTCC Research and Communications Intern
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