(c) Housing Assistance Council, July 1998

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II.  THE HOME PROGRAM: NATIONAL DATA

When ranked by USDA’s rural-urban continuum codes, 65.3 percent of U.S. counties are coded rural and 34.7 percent are coded urban. Remote rural counties, those with less than 2,500 urban population, make up 24.9 percent of all counties and 38 percent of rural counties.

According to 1990 Census data, 86 percent of the U.S. population lived in urban counties and 14 percent lived in rural counties. Occupied housing units had the same geographical distribution, with 86 percent in urban counties and 14 percent in rural counties. Remote rural counties had 2.4 percent of the 1990 U.S. population, and 17.3 percent of the rural population. Remote rural counties had 2.5 percent of all occupied housing units, which comprised 17.5 percent of rural occupied units.

Distribution of HOME Funds and Units

Nonstate PJs account for very little rural HOME activity. Nationally, 99.9 percent of nonstate PJ HOME funds have gone to urban counties, while only 0.1 percent have gone to rural counties. Only 0.1 percent of nonstate HOME-supported housing units are in rural counties. Coded records for nonstate PJs encompass a total of $1.8 billion awarded and over 124,000 units supported from 1992 through 1996.

State PJs awarded 29.7 percent of their HOME funds to rural counties, and 70.3 percent to urban counties. Rural counties have 25.6 percent of the HOME units supported by state PJs, while urban counties have 74.4 percent of state HOME units. Coded records for state PJs show $1.4 billion awarded and 86,248 units supported since 1992.

The HOME program database does not indicate whether funds from state affordable housing programs have been used in conjunction with particular HOME awards. It is thus not possible to use the HOME data to estimate the amount of other state funds invested in HOME projects.

When state and local PJ activity is combined, rural counties have received 12.2 percent of all HOME funds and urban counties have received 87.8 percent (see Figure 1). Of all units supported by the HOME program nationwide, 10.6 percent are located in rural counties and 89.4 percent are in urban counties.

Remote rural areas have received 0.02 percent of nonstate HOME awards and 6.05 percent of state PJ funds. These remote rural counties have received 2.5 percent of all state and nonstate PJ HOME funds. The distribution of HOME units in remote rural areas follows a similar pattern. Among HOME units supported by nonstate PJs, 0.02 percent of units are in remote rural counties, while among state PJ HOME units, 4.78 percent are in remote rural counties.

Because state PJs are the source of HOME funds for areas outside the jurisdiction of local PJs, they have been the primary investors of HOME in remote rural areas. While only a small amount of overall HOME activity has occurred in remote rural counties, remote rural HOME funds and units comprise a significant amount of state PJ awards to rural areas as a whole. HOME-supported units in remote rural counties represent 18.7 percent of state PJ rural HOME units nationwide, and state PJ awards to remote areas comprise 20.3 percent of state PJ rural funding.

Since most nonstate PJs are located in large population centers, and over 70 percent of their HOME awards and units are located in the most heavily populated counties, the greatest portion of total HOME activity is naturally concentrated in these highly urbanized areas when state awards are also considered. While state PJs have a more even distribution of their funds and units across the different county classifications, they make significant contributions to the HOME activity in the most populous counties. State PJs have awarded a total of 18.5 percent of their funds to central counties of metro areas with more than 1 million population (see Table 2 below). The largest portion of state PJ awards, 19.3 percent, goes to counties in metro areas with urban

Figure 1

populations between 250,000 and 1 million. An even larger percentage of state PJ HOME units, 22.5 percent, has been awarded in metro areas with over 1 million population. Almost 43 percent of state HOME funds go to counties with an urban population greater than 250,000, and 48 percent of state-sponsored HOME units are in these counties. If metro counties with an urban population up to 250,000 are included, 56 percent of state PJ funds and almost 62 percent of state HOME units are found in counties with large urban populations.

Urban counties have received a percentage of HOME funds and units slightly larger than their percentage share of the nation’s population and occupied housing, while rural counties have received a percentage of HOME funding and units slightly less than their share of population and housing. In addition, the percentage of the nation’s population below poverty living in rural areas is larger than the percentage of rural HOME funds and units. This is also the case with substandard housing, with the percentage of the nation’s substandard units higher in rural areas than the HOME awards and units received by these counties (see Figure 1 and Table 3).³

Rural counties have 19.1 percent of the poverty population, and 13.3 percent of substandard housing units. Remote rural counties have 3.7 percent of the poverty population and 2.8 percent of substandard housing units. Rural counties receive 12.2 percent of all HOME awards and 10.6 percent of all HOME-sponsored units. Remote rural counties receive 2.5 percent of all HOME awards and 2.0 percent of all HOME-funded units (see Figure 1 and Table 3). While rural and remote rural county HOME awards correspond with their share of overall population, the percentage of all HOME funds awarded to rural counties falls below their share of the poverty population and substandard housing units.

Many remote rural areas experience concentrated poverty and substandard housing. Poverty and substandard housing rates suggest the great need present in many of these counties. Remote rural counties have the nation’s highest poverty rates and some of the most significant rates of substandard housing in relation to their percentage of the overall number of substandard housing units. The poverty rates in remote rural counties are almost twice those in metro counties with over 1 million population. While remote rural counties contain only 3.7 percent of the poverty population, these counties have a poverty rate of 20.6 percent. This contrasts with a poverty rate of 11.4 percent for the most populous counties, which have 40.9 percent of the poverty population. While remote rural counties have 2.8 percent of all substandard housing units, substandard housing constitutes 6.1 percent of the occupied housing units in these counties (see Table 3). Within many rural counties, then, there is evidence of concentrated poverty and housing problems on a par with the need evident in many inner city urban areas.⁴

A final note needs to be made concerning the geographic distribution of HOME activity. Tenant based rental assistance accounts for most of the uncoded records (81 percent). Rural areas generally have more limited rental markets than do urban areas. Logically, rental assistance is more likely to be awarded to counties with greater amounts of rental housing available. Almost 46 percent of rental assistance is provided by nonstate PJs (13,621 units supported). State PJs provide rental assistance to support 16,046 units, only 1 percent of which are geo-coded (152 units). Since so few rental assistance records are geo-coded, it is difficult to determine the location of these uncoded state HOME-supported units.

Some general inferences can be made, however, about the distribution of rental assistance. Three states and the District of Columbia, out of 31 state-level jurisdictions providing rental assistance through HOME, have few or no rural counties. These are Connecticut, the District of Columbia, Massachusetts and New Jersey. These jurisdictions account for more than 16 percent of the uncoded rental assistance units.

Additionally, calls were made to state HOME program staff in some of the states that made the greatest use of HOME for rental assistance, each having supported more than 500 units through rental assistance. States responding to inquiries about their use of HOME for rental assistance included Arkansas, Kansas, North Dakota, Ohio, Oregon and Texas. These states are among the top ten in use of HOME for tenant-based rental assistance. In Arkansas, approximately 45 to 50 percent of rental assistance funds have been awarded to urban counties. In Kansas, state HOME program staff estimated that approximately 40 percent of state rental assistance has been awarded to urban counties. Program staff in North Dakota estimated that most rental assistance awarded is used in or near the population centers of Fargo, Bismarck and Grand Forks. Ohio has awarded 75 percent of its rental assistance to urban counties. In Oregon, 72 percent of rental assistance has been awarded to urban counties. Texas has awarded all of its rental assistance to urban counties.

In conjunction with the four very urban state-level jurisdictions providing rental assistance through the HOME program, information from the calls to state HOME program staff suggest that it is likely that more than half of the state rental assistance nationwide is being awarded to counties with larger urban populations. When combined with rental assistance awards by local PJs, it appears that more rental assistance is used in urban counties than in rural counties. Since rental assistance was left out of the tabulations for the distribution of HOME funds because of the lack of geo-coding, the estimates for the use of HOME funds in urban counties are probably more understated than rural HOME activity.

Discussion of rural HOME activity will focus on data from state PJs. A number of areas will be examined to show how the HOME program has been used in rural areas. Funding and units supported through the program have changed somewhat in the different types of rural counties since the program’s inception. The HOME database also allows an examination of the types of projects that have received awards and their distribution among different types of rural counties. Additionally, the ownership of different project types is recorded in the database. Examining awards to special needs populations and CHDO-sponsored projects will also contribute to the portrait of rural HOME use.

As is the case with overall HOME activity, the distribution of rural HOME funds and HOME-supported units closely corresponds to the proportion of population and occupied housing units found in the different types of rural counties (see Table 4). Within rural areas, counties with an urban population less than 20,000 (county codes 6 and 7) have received a slightly lower percentage of HOME funds and units in comparison to their percentage of the rural population and occupied housing units. Remote rural counties with urban populations less than 2,500 (county codes 8 and 9) have received a slightly larger percentage of HOME funds and units than their percentage of population and occupied housing.

There are some significant differences in the types of projects that are funded in rural areas as opposed to the national distribution of HOME funds across different project types. Nationally, moderate rehabilitation⁵ is the most common activity, accounting for 33 percent of HOME-supported units and 29 percent of HOME funds. New construction is also prominent, with about 22 percent of units and 33 percent of funds associated with this activity. Substantial rehabilitation accounts for a significant portion of HOME funds, 22 percent, but for only about 13 percent of HOME units (see Figure 2).

Moderate rehabilitation is also a common HOME activity, especially in rural areas. Moderate rehabilitation accounts for approximately 40 percent of rural HOME funds and almost 60

Figure 2

percent of rural HOME units. Substantial rehabilitation accounts for 21 percent of rural HOME funds, but only about 14 percent of rural HOME units, which reflects the higher per unit HOME cost of substantial rehabilitation projects. Funding for new construction in rural areas is similar to what this activity receives nationally, about 33 percent of rural HOME funds, but new construction accounts for a larger share of rural HOME units than is true nationally. Approximately 27 percent of rural HOME units are new construction. Remote rural counties, those with less than 2,500 urban population, have a distribution of project types similar to rural areas as a whole.

The patterns of tenure among the units assisted through the HOME program mirror distinctions found between urban and rural areas generally, with rural areas in the U.S. having higher rates of homeownership and more limited rental markets.⁶ Rental units make up approximately 41 percent of households served by the HOME program nationwide. Homebuyer units comprise about 28 percent of HOME-assisted households, while homeowners using the program for rehabilitation make up about 30 percent of the program’s assisted units. In rural counties, only about 35 percent of assisted units are rental units, whereas approximately 15 percent are homebuyer units and 50 percent are owner rehabilitation units. In the rural counties with the smallest population, there are even fewer rental units and more homebuyer and homeowner rehabilitation units. In remote rural counties with fewer than 2,500 urban population, 30 percent are rental units, 19 percent are homebuyer units and 51 percent are owner rehabilitation units.

Rural areas show higher per unit costs for some HOME activities than in urban areas, and lower per unit costs in others (see Table 5). Acquisition and rehabilitation of rental units have similar per unit costs in rural and urban areas. However, per unit costs for homebuyer acquisition are higher in rural areas, while rehabilitation costs are lower in rural areas. Differences in homebuyer acquisition costs are probably related to differences in housing markets and in the nature of different state and local PJ acquisition assistance programs. The greater per unit rehabilitation costs in urban areas probably reflects the greater number and percentage of units undergoing substantial rehabilitation in urban areas, since substantial rehabilitation necessarily requires greater per unit costs. For example, only 19.2 percent of rural units rehabilitated through HOME received substantial rehabilitation, while 38.9 percent of urban rehabilitation units underwent substantial rehabilitation.

The per unit HOME cost for new construction of rental units is much higher in rural areas than the costs experienced in urban areas, as is new construction of single-family units for new homebuyers. This may be due to greater need for infrastructure development in rural projects, where many communities do not have public water and sewer systems. Additionally, it may be that rural homebuyer and rental construction projects are smaller and do not receive cost savings through economies of scale, or costs may be higher because of increased costs for transporting materials in remote rural areas.

One of the most interesting characteristics of rural HOME use involves project ownership in remote rural counties (see Table 6). Nationwide, approximately 60 percent of HOME units are owned by individuals. Nonprofit corporations own 16 percent of HOME units. Rural areas have a greater number of HOME units owned by individuals, 69 percent, than is the case nationwide. Nonprofits own a smaller proportion of HOME units in rural counties as a whole when compared with national data, with ownership of only 13 percent of rural HOME units. Individual ownership of HOME units is somewhat greater in remote rural counties, with individuals owning approximately 70 percent of remote rural HOME units. However, while nonprofits own a smaller proportion of HOME units in rural counties than is seen nationwide, nonprofits own more than 18 percent of HOME units in remote rural counties.

Especially in the most rural areas, nonprofits have generally played a large ownership role in the HOME program, whether in single-family homebuyer or multifamily rental housing development. Nationally, nonprofits own 35 percent of HOME rental units, but in rural areas nonprofits own 32 percent. However, in remote rural counties, nonprofits own 46 percent of HOME-funded rental units. Since many rural areas have limited rental markets, the ownership of HOME-funded rental units by nonprofits highlights the significant role they play in their affordable housing markets. Nonprofits also play a larger ownership role with rural homebuyer units than is the case nationwide. Nationally, 9 percent of homebuyer units are owned by nonprofits, while in rural areas nonprofits own 13 percent of the homebuyer units, and 25 percent of these units in remote rural counties.

The role played by nonprofits is even greater in remote rural counties when the distribution of HOME funds is examined. Nationally, nonprofit owners have received almost 23 percent of HOME awards. In rural areas, though, nonprofit owners have received only about 19 percent of HOME funds. But nonprofit owners have received approximately 25 percent of HOME awards in remote rural counties. Remote rural areas generally have fewer financial and corporate institutions, so it is possible that nonprofits are often the most viable organizations for sponsorship of HOME initiatives in sparsely settled rural counties.

Information provided by the National Council of State Housing Agencies (NCSHA) indicates that low-income rural residents were recognized as a special needs population in at least 26 states as of FY1995. This often means that HOME applications for projects serving the rural poor will receive some form of additional consideration in a state’s application process, such as additional points in the project rating system. Data compiled by NCSHA shows that in FY1995, $140,289,115 in funds were awarded to projects serving rural special needs populations, or slightly less than 10 percent of the HOME program’s allocations that fiscal year.⁷ These awards have generated 7,882 HOME-assisted units in rural areas. Migrant farmworkers are another special needs population prevalent in rural areas. At least three states, Idaho, Oregon, and South Carolina, used HOME to support projects serving this special population in FY1995.⁸ These projects received $2,132,339 in HOME awards, yielding 85 HOME-assisted units.

While rural and remote rural counties nationally have received smaller percentages of HOME awards than their percentage of the poverty population and substandard housing units, a number of states have awarded a large percentage of their HOME funds to rural counties. The case studies that follow profile four states where a large percentage of state HOME funds have been awarded to address rural housing needs. The case study states represent diverse rural housing markets with distinct needs. The states have adopted different approaches to improving rural housing conditions. These case studies also illustrate a variety of ways states have increased the capacity of rural housing organizations to use the HOME program.

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