Ways of Providing a Fairer Share of Federal Housing Support to Rural Areas

CED-80-1: Published: Mar 28, 1980. Publicly Released: Mar 28, 1980.

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GAO evaluated the accomplishments and shortcomings of Federal housing programs in rural America, particularly in the past 10 years. Areas of special concern included the geographic distribution of housing assistance, gaps in program benefits, and ways to improve the programs' effectiveness in providing opportunities for rural families to obtain decent homes. Eighteen counties in six States were selected for study because they contain one or more typical rural housing problems, such as high percentages of substandard homes, a high percentage of rural poor, large areas remote from metropolitan service areas, or high construction costs.

Although the condition of rural housing has significantly improved over the last 30 years, many rural families remain in substandard housing. Rural areas have about one-third of the Nation's population and one-half of the substandard housing. The distribution of Federal housing support between rural and urban areas has not been consistent with the relative need. Department of Housing and Urban Development (HUD) programs have been less successful in rural areas because the major programs were designed for urban areas and are often beyond rural financial or administrative resources. The Farmers Home Administration (FmHA) has provided significant support for rural housing, but much of the housing was constructed near urban areas because program management was demand oriented and relied on builders and realtors to refer clients rather than seeking the more remote areas which had the greatest need. Single family housing support by the Veterans Administration (VA) has been more successful because the agency is authorized to make direct loans in credit deficient areas. Rural families in outlying areas have inadequate access to home mortgage credit. Rural banks are small and reluctant to make long-term housng loans, and savings and loan associations are scarce in rural areas. Neither rural banks nor savings and loan associations make much use of Federal mortgage insurance or guarantee programs.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should direct the FmHa Administrator to: establish a loan referral or clearinghouse procedure through the guarantee program for families in outlying areas who cannot obtain local loans even with an FmHA guarantee; revise the guaranteed loan program to permit variable interest rate loans needed to obtain home loans from Federal Land Banks; test graduated loan repayment plans for moderate-income families; and propose to Congress legislation to amend section 524 of the Housing Act of 1949 to allow small, profit-oriented builders to participate in the FmHA rural site development program. The Secretary of Agriculture should further direct the Administrator of FmHA to require: field offices to develop county level plans which target housing resources to outlying areas with the greatest need; county offices to reach out to remote areas to identify families with great needs and explain how FmHA programs can help; and housing program results to be compared with planned goals. The Secretary of HUD, in connection with the 2-year study of methods to improve HUD program accessibility in rural areas, should devise and test incentives to increase the use of HUD home mortgage insurance programs by rural financial institutions and expand the operations of urban financial institutions. In order to take advantage of the direct access to urban money markets available to the Federal land bank system, the Federal Farm Credit Board of the Farm Credit Administration should emphasize to Federal Land Banks the importance of adequate home mortgage credit to orderly development and to the well-being of all rural residents.

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