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(c) Housing Assistance Council, July 1998 Permission is granted ONLY to nonprofit community-based organizations to reproduce and/or adapt this document, and only for their own use. I. INTRODUCTION The Home Investment Partnerships program (HOME) provides federal block grants to states and localities for community and housing development that serves the needs of low-income households. The program is overseen by the U.S. Department of Housing and Urban Development (HUD), and administered by state and local Participating Jurisdictions (PJs). Outside of metropolitan areas, this program is administered primarily by state agencies. This study examines the primary uses of HOME funds in rural areas, analyzing data on the distribution of program resources in rural counties. The study highlights what kinds of rural areas are receiving HOME awards, what kinds of projects are being funded, and how many housing units are supported through HOME in rural areas. Table 1
In addition, four states that have used a large portion of state PJ HOME funds in rural areas were selected for case studies. In each state, interviews were done with state program administrators and one rural housing organization that has had success accessing and using HOME. When requesting program data from interview subjects, information was only sought for FY1994 through FY1996, the most recent three fiscal years at the time this research was conducted. This posed less burden on interview subjects, and focused the interviews on recent trends within the state programs. These interviews illustrate some of the different approaches states have taken to target HOME to high need rural areas, and some of the creative uses of program funds developed by rural Community Housing Development Organizations (CHDOs). HUD’s database of HOME project information was geo-coded and then matched with the U.S. Department of Agriculture’s (USDA) Rural-Urban Continuum Codes (also referred to as the "Beale Codes"). This system assigns an urban-rurality rank to all metropolitan and nonmetropolitan counties in the United States, based on 1990 Census population data. Lower rankings denote more urbanized counties with large urban populations, while the higher rankings represent remote rural counties with small urban populations. In this report, counties with a classification between zero and five are referred to as urban counties, while counties with a classification between six and nine are rural counties (see Table 1 for the population criteria used to determine these codes). "Urban population" refers to population concentrated in a city, which means, for example, that a rural county may have a population larger than 20,000, as long as this population is not concentrated in urbanized centers. On the other hand, a rural county may still have an "urban population," as long as the urban population is below 20,000. This definition more closely captures the use of HOME in rural areas than does a distinction between nonmetropolitan and metropolitan counties. For example, many nonmetropolitan counties have large population centers, and many counties that are part of metropolitan statistical areas (MSAs) have large rural tracts comprised of small townships and open countryside. Also, rural counties with urban populations less than 2,500, those with Beale Codes of eight or nine, will be referred to as "remote" rural counties to distinguish them from rural counties with larger population centers, even though these remote rural counties may be adjacent to a metropolitan area. The HOME Program The HOME program’s block grant structure has allowed states to use federal housing dollars within programs tailored to each state’s affordable housing needs. The program is a significant housing resource that may be used by states to assist housing groups serving the rural poor. The HOME program was established in the 1990 National Affordable Housing Act, and it is managed through HUD’s Community Planning and Development (CPD) office. HOME is a block grant program, and it provides funds to states and local governments for acquisition, rehabilitation and new construction of housing for renters or owners, tenant-based rental assistance, and assistance to new homebuyers. Housing developed with HOME funds must serve low- and very low-income persons. The key administrators of the HOME program are called Participating Jurisdictions (PJs), and state governments most often perform this role for rural and nonmetropolitan areas. State PJs administer the HOME funds available for the balance of the state not served by local PJs, although state PJs may make awards to projects within the jurisdiction of a local PJ. Local governments of larger communities may also be designated as PJs. These local PJs receive HOME allocations directly from HUD through a formula allocation. State agencies administering HOME in rural areas disburse the HOME funds either directly to nonprofit or for-profit housing developers or to units of local government which select the developers, usually either by formula or through a competitive grant process. Also, some local housing organizations receive additional attention in the HOME program. These are Community Housing Development Organizations (CHDOs), and they are special nonprofit housing groups certified by the PJ. In order to be certified, CHDOs must be community-based, as demonstrated by community representation in the board of directors’ composition. CHDOs must also have a demonstrated capacity to meet local housing needs, as well as meet other requirements. Because of this special status, 15 percent of HOME funding is reserved for their use. They may also compete for the remaining 85 percent of HOME funds. The program requires a match of the HOME dollars awarded for projects. In most cases, these funds are obtained through state government financing programs or through noncash contributions. Some states have incorporated their HOME allocation into their state housing trust funds, thereby matching the HOME funds before they are disbursed, and limiting the amount of local work required to secure a match. Other states match the HOME dollars with other state housing resources, reducing the match requirement for local groups through another avenue. The matching requirement thus conceivably promotes interactions between many parties with interests in developing affordable housing. States with severe or significant poverty and housing needs may receive an exemption from HUD which reduces or eliminates their requirement to secure matching funds. The flexibility of the program’s match requirements has allowed states to stretch state programs further by using these resources in conjunction with HOME.1 Local PJs may form consortia that include rural areas within their service boundaries. However, almost all HOME activity in rural areas nationwide has been administered by state PJs. Therefore, unless otherwise noted, all data presented in this study relates to state PJ activity. The HOME program’s budget has remained relatively constant over the last few fiscal years. The FY1992 appropriation was $1.46 billion. In FY1993, the program was appropriated $988 million, which increased in FY1994 to an appropriation of $1.215 billion. HOME experienced a slight increase in its appropriation for FY1995, reaching $1.339 billion, and has remained near $1.3 billion in FY1996 and FY1997. Program funding was increased to $1.5 billion for FY1998. HOME awards have served to leverage other sources of affordable housing financing, which has allowed the program to produce a sizable number of units and serve a large number of clients since only 1992. Approximately $4.2 billion committed to the production or rehabilitation of affordable units has generated $7.4 billion leveraged from non-HOME sources. This sizeable investment in affordable housing efforts has produced a wide array of initiatives among the states. The information available in the HOME program database captures the most significant patterns of HOME use nationwide. HOME Program Database The HOME program database contains records that allow analysis of state and national program activity. At the time this research was conducted, the database noted the funds awarded by each PJ from 1992, the program’s inception year, to 1996. The number of affordable units supported by the program from 1992 to 1996 is available in the records, whether by production, rehabilitation or rental assistance. In addition to noting the total number of HOME-supported units, the database records also note the specific types of projects that have been funded, the tenure of households served by each project, and the ownership of projects. Additionally, geo-coding the database allows analysis of the records by project location. All of these items may be cross-tabulated, so that more specific analysis may be performed. For example, it is possible to determine the number of HOME units produced by project type, in rural counties, from 1992 to 1996. HOME project types are classified as "acquisition," "moderate rehabilitation," "substantial rehabilitation," "new construction" or "tenant based rental assistance." These categories correspond to the types of projects eligible for HOME funding in the program statute. The tenure types for households served by the program are recorded in the database as "rental," "homebuyer," and "homeowner rehabilitation." The project ownership classifications are "individual," "partnership," "corporation," "not-for-profit," "publicly owned," and "other." In addition to their use in coding the HOME program database, USDA’s rural-urban continuum codes have also been cross-referenced with 1990 Census data. This allows rural-urban comparisons in the different types of counties of population, percentage distribution of the poverty population, occupied housing units, and percentage distribution of substandard housing units. The Census data is used in this report to show the poverty and housing need the HOME program targets. The distribution of the poverty population and substandard units across different types of urban and rural counties is supplemented by poverty rates and substandard housing rates within each type of county in order to capture the concentration of substandard housing and poverty found in many rural counties. For example, of the 200 counties in 1990 with more than 30 percent of the population living below the poverty level, all but seven were nonmetro counties.2 Areas such as Appalachia, the Lower Mississippi Delta, Native American reservations and the border colonias are characterized by high rates of poverty. While rural counties in a given state may hold a relatively small percentage of the state’s poverty population, a large percentage of residents within these rural counties may be living in poverty. For this reason, poverty and substandard housing rates for different county types will be listed in addition to the percent distribution of the poverty population and substandard housing units across the different types of counties. The combination of these types of poverty and substandard housing measures should produce a more complete portrait of the poverty and housing need in rural areas. Geo-coding the HOME database by project location posed some difficulty, since a number of records did not have a specified address. Uncoded records make up 8.3 percent of the nonstate PJ database, while 11.3 percent of the state PJ records are uncoded. Tenant based rental assistance accounts for 81 percent of the uncoded units in the state PJ database. Often, either rental assistance programs are administered on a statewide basis, or rental assistance awards are granted to awardees that serve multiple counties. Additionally, recipients may in some cases use their rental assistance outside of the county in which the assistance was issued. These kinds of rental assistance administration issues make it more difficult to geo-code the units where tenants may be using their rental assistance. Unless otherwise noted, aggregate figures used in this report will include only geo-coded data. This analysis of HOME use in rural areas will focus on program activity between FY1992 and FY1995, unless otherwise noted. In addition to uncoded records, funding levels recorded in the database are well below the national HOME appropriation for FY1996. This is most likely because complete FY1996 records had not been entered into the HOME program database at the time the data was made available for this report. Consequently, the number of HOME-supported units shown for FY1996 is also well below the number recorded for FY1995, a year with a similar program budget. Despite the presence of uncoded records and limited data for FY1996, the HOME database nonetheless shows most of the affordable housing activity that has been supported by the program from its inception to this report’s analysis of HOME data in July 1997.
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