[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                 THE AFFORDABLE HOUSING CRISIS IN RURAL
                AMERICA: ASSESSING THE FEDERAL RESPONSE

=======================================================================

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HOUSING,
                         COMMUNITY DEVELOPMENT,
                             AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 2, 2019

                               __________

       Printed for the use of the Committee on Financial Services    
                
                           Serial No. 116-13
                           
                           
 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

      
      
         Available via the World Wide Web: http://www.govinfo.gov
                    
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
37-396 PDF                  WASHINGTON : 2019                     
          
--------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].                              
                           
                          

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                  Subcommittee on Housing, Community 
                       Development, and Insurance

                   WM. LACY CLAY, Missouri, Chairman

NYDIA M. VELAZQUEZ, New York         SEAN P. DUFFY, Wisconsin, Ranking 
EMANUEL CLEAVER, Missouri                Member
BRAD SHERMAN, California             BLAINE LUETKEMEYER, Missouri
JOYCE BEATTY, Ohio                   BILL HUIZENGA, Michigan
AL GREEN, Texas                      SCOTT TIPTON, Colorado
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
CAROLYN B. MALONEY, New York         DAVID KUSTOFF, Tennessee
DENNY HECK, Washington               ANTHONY GONZALEZ, Ohio
JUAN VARGAS, California              JOHN ROSE, Tennessee
AL LAWSON, Florida                   BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas, Vice Ranking 
CINDY AXNE, Iowa                         Member
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 2, 2019................................................     1
Appendix:
    April 2, 2019................................................    27

                               WITNESSES
                         Tuesday, April 2, 2019

Anders, Gideon, Senior Attorney, National Housing Law Project....     5
Eastwood, Tanya, President, Council for Affordable and Rural 
  Housing........................................................    11
Keasling, Stan, President, National Rural Housing Coalition......     7
Lipsetz, David, Chief Executive Officer, Housing Assistance 
  Council........................................................     8
Saavedra, Andres, Senior Program Officer, Local Initiatives 
  Support Corporation............................................    10

                                APPENDIX

Prepared statements:
    Cleaver, Hon. Emanuel........................................    28
    Anders, Gideon...............................................    29
    Eastwood, Tanya..............................................    43
    Keasling, Stan...............................................    56
    Lipsetz, David,..............................................    66
    Saavedra, Andres.............................................    75

              Additional Material Submitted for the Record

Heck, Hon. Denny:
    Written responses to questions for the record from Tanya 
      Eastwood...................................................    80
    Written responses to questions for the record from David 
      Lipsetz....................................................    85
    Written responses to questions for the record from Andres 
      Saavedra...................................................    91

 
                     THE AFFORDABLE HOUSING CRISIS
                    IN RURAL AMERICA: ASSESSING THE.
                            FEDERAL RESPONSE

                              ----------                              


                         Tuesday, April 2, 2019

             U.S. House of Representatives,
                           Subcommittee on Housing,
                             Community Development,
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:07 p.m., in 
room 2128, Rayburn House Office Building, Hon. Wm. Lacy Clay 
[chairman of the subcommittee] presiding.
    Members present: Representatives Clay, Sherman, Gonzalez of 
Texas, Maloney, Heck, Vargas, Axne; Duffy, Luetkemeyer, 
Huizenga, Tipton, Zeldin, Gonzalez of Ohio, Steil, and Gooden.
    Ex officio present: Representatives Waters and McHenry.
    Chairman  Clay. The Subcommittee on Housing, Community 
Development, and Insurance will come to order. Without 
objection, the Chair is authorized to declare a recess of the 
subcommittee at any time. Also, without objection, members of 
the full Financial Services Committee who are not members of 
the subcommittee are authorized to participate in today's 
hearing.
    Today's hearing is entitled, ``The Affordable Housing 
Crisis in Rural America: Assessing the Federal Response.'' I 
now recognize myself for 5 minutes to give an opening 
statement. And subsequently, we will recognize the ranking 
member.
    I would like to start by welcoming everyone to the first 
hearing of the Subcommittee on Housing, Community Development, 
and Insurance in the 116th Congress. I am honored to serve as 
the Chair of the subcommittee, and I look forward to working 
with Ranking Member Duffy and all of the distinguished members 
of this subcommittee on both sides of the aisle. There are a 
number of issues that I am hopeful that we can work on in a 
bipartisan way, and rural housing is one of those issues.
    Although my congressional district is not considered rural, 
the State of Missouri certainly is, and in many ways is 
symbolic of rural States and communities across this great 
nation. And though we are not considered rural, USDA's National 
Financial and Accounting Operations Center and Customer Service 
Center are housed at the Goodfellow Federal Center, which is 
squarely within my district.
    Also, I know how critical it is to understand the distinct 
housing needs of rural communities and the importance of USDA 
rural housing programs in meeting those needs. Unfortunately, 
there is a serious and growing crisis with regard to Section 
515 Rural Rental Housing loans and Section 514 Farm Labor 
Housing loans and the rental assistance contracts tied to those 
loans.
    As the loans mature or are prepaid, the rental assistance 
terminates, leaving residents at immediate risk of 
displacement. We shall hear more from our witnesses about this 
problem.
    Also, the foreclosure crisis has been very harmful in rural 
areas, and the Missouri Farm Bureau has stated that this 
Administration's tariffs are hurting soybean farmers and that 
estimates are at $600 million in lost trade revenue. There has 
yet to be a comprehensive strategy by the USDA or Congress to 
address this crisis.
    In fact, we do not even have sufficient data to fully 
understand the scope of this issue. That is why I have released 
a discussion draft that would be a first step towards 
addressing this crisis. It would require USDA to come up with a 
strategy for preservation and prevention of tenant 
displacement.
    It would also set up an advisory council of key 
stakeholders to advise USDA on this plan. And it would require 
USDA to regularly and publicly report detailed information 
about these properties.
    As chairman, I fully intend to ensure that the subcommittee 
engages in the housing issues facing Americans. Remember, if 
you ask most Americans what is their most prized possession, 
persistent goal, and cherished dream, it is home ownership. And 
that is why the American lexicon is filled with metaphors about 
homes, housing, and the proverbial ``roof over our heads.''
    My mission is to promote sound policies through smart 
legislation, intelligent collaboration, and sound policy to 
actually help make that dream a reality again. And I am really 
looking forward to working closely with you as we fight to 
reform the housing finance system to ensure that underserved 
borrowers in our more challenged neighborhoods have access to 
mortgages, insurance, and fair appraisals to give them a real 
chance at home ownership.
    I look forward to hearing from the witnesses today about 
this discussion draft as well as other legislative proposals to 
address this and other rural housing issues.
    And at this time, I will recognize the ranking member of 
the subcommittee, the gentleman from Wisconsin, Mr. Duffy, for 
5 minutes.
    Mr.  Duffy. I want to thank Chairman Clay for hosting 
today's hearing. I also look forward to working with him on 
these important issues. Although he comes from a more urban 
district, and I come from a rural district, he recognizes that 
this is an important issue for so many Americans.
    I also want to highlight to my colleagues that I am 
circulating a letter that Members can sign onto that would help 
fund the Multi-Family Preservation and Revitalization Program, 
so I ask you to take a look at that and, hopefully, sign on.
    Under Sections 514 and 515 of the U.S. Housing Act, we 
created a loan program that helped provide housing options for 
domestic farm laborers, low-income families, elderly persons, 
and persons with disabilities in rural parts of the country. 
Those loans will be maturing in the next decade.
    The multifamily developers and owners of those properties 
will have fulfilled their contracts and will then be able to 
rent those properties as they see fit; they won't be under 
contract. So, according to the GAO, there are north of 14,000 
of these properties and as many as 427,000 units that could be 
impacted.
    According to the Housing Assistance Council's testimony, we 
have 109 Section 15 properties with 2,200-plus occupied units 
in my district. And by 2030, 29 of those properties with 471 
occupied units will have exited the program, which will have a 
real impact on our community. We also ran some numbers for the 
State of Wisconsin, and we have 370 properties with over 6,500 
units that would also exit the program. Again, significant.
    Some of the people living in these units also participate 
in the Section 521 rental assistance program in which residents 
pay a maximum of 30 percent of their income towards their rent 
and the government then subsidizes the rest. We also have 
public housing stock that has gotten so much into a state of 
disrepair that they are being demolished.
    In, I think it is Cairo, Missouri, 200 families were forced 
to uproot their lives and move to a different city because of 
the sad state of public housing stock. A recent HUD IG report 
stated that over 50 other public housing authorities have been 
designated as troubled.
    Housing regulations continue to hamper new development. A 
study by the National Multifamily Housing Council and the 
National Association of Home Builders found that regulation 
from the government accounts for an average of 32.1 percent of 
the multifamily development cost, 32.1 percent of the cost from 
regulation. An average of 7 percent of the costs come from 
building codes that have changed over the past 10 years.
    Suburban sprawl has also contributed to the cost of buying 
a home in rural America. If you bought your home 20 years ago 
on the edge of a city, more than likely you now live in the 
city. We are now seeing record low unemployment levels and yet 
we still see a struggle to find housing options.
    We have just highlighted some of the problems with rural 
housing and it is meant to highlight that there isn't one 
single solution, and I think our panel will agree on that. But 
I do think we need to see what happens in the demonstration 
program that was included in the appropriations bill earlier 
this year.
    There is a bill that is part of this hearing that would 
decouple the rental assistant contracts from the multifamily 
contracts and I think we should explore that further. I think 
that is probably a pretty good idea. But I do have some 
trepidation about other language in some of the other bills 
that we will be discussing.
    The most concerning for me is the language that seems to 
force an owner to continue to take housing vouchers when they 
are no longer under contract. That should concern us all in a 
country that believes in the rule of law. I believe if you 
fulfilled your contract, the government should no longer be 
able to place requirements on you as an owner.
    This was also mentioned in testimony from the Council for 
Affordable and Rural Housing, and I fully agree, when they 
said, ``They cannot support any bill that would require 
obligations of a borrower in a mortgage program to follow that 
owner or that property ad infinitum.'' It has a little 
something to do, I think, with property rights. We should all 
support those.
    We should also think about incentives for owners to 
continue to provide housing to our farmers, low-income, 
elderly, and our disabled, and I am looking forward to hearing 
from our panel on how we do that.
    Maybe we should look at how we can streamline and 
consolidate who is actually handling these loans. Is HUD the 
most appropriate agency? We recently streamlined the family 
self-sufficiency program and consolidated oversight at HUD. We 
potentially could do the same here.
    I think we have areas in the housing realm that we can work 
on together. And I appreciate, again, Mr. Clay holding this 
hearing and his willingness to work together. This is a 
problem. that I think all of us recognize, and we have to work 
together to resolve the problem. And I look forward to the 
panel discussing the best solutions on how this Congress can 
move forward to resolve this issue in rural America.
    I yield back.
    Chairman  Clay. I thank my colleague from Wisconsin, and I 
ask unanimous consent to allow 1 minute per side for additional 
opening statements.
    Without objection, I want to recognize the chairwoman of 
the full Financial Services Committee, Ms. Waters of 
California, for 1 minute.
    Chairwoman  Waters. Thank you very much, Chairman Clay. I 
am very pleased that you are focusing on rural housing as the 
first hearing held by this subcommittee. It is one of the many 
housing issues that has been overlooked for far too long, and 
it is an issue that I am hopeful we can work on in a bipartisan 
way.
    We know rural Americans are more likely to live in poverty 
and are more likely to live in moderately or severely 
substandard housing. The need for investment in rural housing 
is clear, particularly when it comes to preservation of the 
aging stock of affordable housing. But Federal investment in 
rural housing programs is insufficient and the Federal response 
to the growing preservation issues with USDA housing has been 
wholly inadequate.
    In particular, there are 400,000 families living in 
properties backed by USDA Sections 515 and 514 loans who could 
be at risk of displacement in the coming years if we do not 
figure out a strategy for preserving these properties and 
preventing displacement. These are rural families with an 
average income of $13,000, the majority of whom are elderly or 
disabled, and they deserve better from us in Washington.
    Mr. Chairman, the Housing Subcommittee today is taking an 
important step towards creating the conditions for a broadly-
shared American renaissance, both in rural areas and urban 
areas. Thank you for holding this hearing, and I look forward 
to hearing from the witnesses.
    Chairman  Clay. Thank you so much.
    Chairwoman  Waters. I yield back.
    Chairman  Clay. I now recognize the ranking member of the 
full Financial Services Committee, Mr. McHenry from North 
Carolina, for 1 minute.
    Mr.  McHenry. Well, thank you, Chairman Clay, and thank you 
for having this as your first subcommittee hearing.
    I thank the ranking member of the subcommittee as well for 
his leadership in this policy area.
    I would like to highlight an important point of this 
discussion on rural housing. As we look at this issue, we have 
to be aware of housing shortages generally in rural areas, 
particularly for families living below the poverty line. But it 
doesn't stop there. Middle- and lower-middle-income families 
also are experiencing housing shortages in rural areas.
    For example, there is a shortage of workforce housing in 
rural areas. This is an issue of concern in my district, in my 
State, and across the United States. And industries are 
questioning whether or not they can even locate in rural areas 
because of this shortfall in housing. So, as we look at 
solutions, I would also raise this as part of a comprehensive 
approach to rural housing.
    I thank you all for being here on the panel, and I think 
the chairman and the ranking member of the subcommittee.
    Chairman  Clay. Thank you.
    Today, we welcome the testimony of Gideon Anders, senior 
attorney of the National Housing Law Project; Stan Keasling, 
president of the National Rural Housing Coalition; David 
Lipsetz, CEO of the Housing Assistance Council; Andres 
Saavedra, senior program officer of the Local Initiatives 
Support Corporation; and Tanya Eastwood, president of the 
Council for Affordable and Rural Housing.
    Witnesses are reminded that your oral testimony will be 
limited to 5 minutes. And without objection, your written 
statements will be made a part of the record.
    Mr. Anders, you are now recognized for 5 minutes to give an 
oral presentation of your testimony.

 STATEMENT OF GIDEON ANDERS, SENIOR ATTORNEY, NATIONAL HOUSING 
                          LAW PROJECT

    Mr.  Anders. Thank you, Mr. Chairman, and Ranking Member 
Duffy.
    I am Gideon Anders, a senior attorney with the National 
Housing Law Project (NHLP) and I am honored to have this 
opportunity to present this brief overview of the 14-page 
statement that we have submitted to the subcommittee.
    In the 50 years that the National Housing Law Project has 
been operating, we have advanced the housing rights and 
interests of low- and very-low-income households through policy 
advocacy, litigation, technical assistance, and training. My 
tenure at NHLP has focused exclusively on the Rural Housing 
Service (RHS) housing programs, which are the subject of 
today's hearing.
    Let me start by urging the subcommittee to hold oversight 
hearings on RHS's administration of the rental housing 
prepayment process and of the voucher program. The Emergency 
Low-Income Housing and Preservation Act of 1987, commonly known 
as ELIHPA, was intended to preserve RD rental housing and 
protect its residents from displacement. RD is simply not 
meeting either one of these objectives because it is not 
following ELIHPA. It is allowing many prepayments in clear 
violation of the Act.
    It is also not running the voucher program consistent with 
ELIHPA. It allows owners to raise rents after prepayments and 
tells residents that vouchers are the only way that they can be 
protected, even when a prepayment is subject to use 
restrictions. This is wrong.
    ELIHPA use restrictions were intended to protect residents 
against displacement. Vouchers were intended to protect 
residents when use restrictions were not made a condition of 
the prepayment. We estimate that about 60 percent of the 
residents receiving vouchers don't need them. RD's practice is 
encouraging prepayments.
    Over 545,000 units of housing have been financed subsidized 
by 515 and the 514, 16 programs at a substantial multibillion-
dollar Federal investment. Unfortunately, over 100,000 of these 
units have already been lost. By 2050, the entire RHS housing 
stock will be gone.
    NHLP supports the draft bills that are before you because 
they address the RHS prepayment and maturing mortgage crisis.
    First, we endorse the proposal to decouple the rental 
assistance subsidy from the RD loan programs when mortgages 
mature. It will give RHS authority to continue to subsidize the 
housing after the loans are paid off. HUD has been doing this 
for years and the GAO recently recommended that RHS do the same 
thing.
    The additional cost of the program will average only about 
$15 million for the first 5 years. Yes, it will cost more after 
2028 when a large number of RD properties mature, but there is 
no better way to protect residents in RD rental housing and 
preserve the investment that has been made in rural housing and 
communities.
    No one that I have talked to has suggested an alternative. 
What do we do? Do we simply abandon 413,000 housing units and 
allow for the displacement of mostly elderly persons who occupy 
these units? I say no.
    Second, rental assistance contracts should be extended from 
their current one-year term to a 20-year term that is subject 
to annual appropriations. This will enable owners to secure 
private and tax credit financing to rehabilitate an aging 
inventory. HUD does it under the Project-Based Section 8 
Program and it works there.
    Third, until a decoupling program is in place, eligibility 
for RD vouchers must be extended to cover residents and 
developments with maturing mortgages and residents of famer 
labor housing. Moreover, the program should be made permanent 
and allow RD to adjust voucher subsidies to meet increased 
rents and respond to changes in household income or size. This 
will not increase the program cost if RHS stops issuing 
vouchers to people who don't need them.
    Fourth, RD must formulate and adopt the plan--as you 
suggested, Mr. Chairman--for preserving its housing stock. A 
draft bill before you proposes that and requires RD to present 
it to Congress and to report annually and measure the successes 
or failures that the agency has made in meeting that plan.
    Fifth, we also support Representative Panetta's bills to 
permit nonprofit sponsors of famer labor housing to access low-
income housing tax credit programs, and a bill that requires 
the voucher program to be subject to the Violence Against Women 
Act.
    Chairman  Clay. Mr. Anders, your 5 minutes has expired.
    Mr.  Anders. Thank you.
    [The prepared statement of Mr. Anders can be found on page 
29 of the appendix,]
    Chairman  Clay. Mr. Keasling, please observe the 5-minute 
rule. You may proceed.

 STATEMENT OF STAN KEASLING, PRESIDENT, NATIONAL RURAL HOUSING 
                           COALITION

    Mr.  Keasling. Thank you, Mr. Chairman. My name is Stan 
Keasling. I am president of the National Rural Housing 
Coalition and it is a pleasure to be here to testify before you 
today. I am also the CEO of the Rural Community Assistance 
Corporation, which is a nonprofit working across the western 
United States to support the development of rural communities 
and the sustaining of rural communities.
    Rural America is in need of more housing. The declining 
investment in the renovation of existing housing and in the 
construction of new homes in our small towns has had a critical 
impact on housing in rural America.
    The census data shows that, between 1999 and 2008, the 
average annual production of new single-family homes in non-
metro areas totaled 221,000 units. In the last 10 years, that 
same number was only 68,000 units, a two-thirds reduction in 
the amount of new housing being constructed in rural America.
    In addition, of the 25 million units located in rural and 
small communities, over 5 percent, or 1.5 million units, are 
considered to be either moderately or severely substandard. As 
a result, in many rural communities, economic growth is impeded 
not by the lack of jobs but by the lack of housing where 
workers can live.
    USDA's Rural Housing Programs also provide much-needed 
access to affordable rental housing. Today, approximately 
422,000 units exist in the Section 515 portfolio. The average 
age of that portfolio is now 34 years and, as a result, the 
increasing costs of preserving that portfolio continue to rise 
with an estimated 20-year replacement and repair cost today of 
over $5.6 billion.
    For these reasons, we urge you to reject the 
Administration's Fiscal Year 2020 budget proposal and to reject 
the staff reductions that are included in that budget proposal. 
The proposal to reduce staffing by 25 percent again this year 
is just unacceptable, and we hope that you will not move 
forward in accepting that budget.
    We also think that it is important to provide and support 
the single-family housing programs of USDA, both the Section 
502 Direct Loan Program in addition to the guarantee program 
and the Self-Help Housing Program. Combined, 502 Direct and 
Self-Help Housing provide housing opportunities for the lowest-
income families in rural America and an opportunity to live the 
American dream and to obtain home ownership.
    Renovating and preserving the existing stock of rental 
housing financed by USDA and the rising tide of maturing 
mortgages documented by HAC research is a dual challenge for 
USDA. It is important to note that extending or deferring an 
existing loan through the MPR program or providing a subsequent 
loan through 514 and 515 has the added and important benefit of 
making it possible to extend rental assistance throughout the 
loan term.
    For this reason, we support a substantial appropriation of 
$75 million for the MPR program and $200 million for the 
Section 515 loan program. We support efforts included in 
Chairwoman Waters' and Chairman Clay's proposal to encourage 
the transfer of properties to nonprofit owners that will keep 
the properties affordable for their useful life. We support the 
chairman's draft bill, the Strategy and Investment in Rural 
Housing Preservation Act, to provide incentives to owners to 
keep their properties affordable for the long term.
    We think that the demand for farmworker housing in rural 
America is significant and requires additional contributions. 
In Texas, the shortfall is over 28,000 units today. We support 
Congressman Panetta's bill to modernize and make USDA decision-
making more transparent on farmworker housing under Sections 
514 and 516.
    We also support Representative Gonzalez's bill to include 
rural housing vouchers as a covered program under VAWA. We also 
support current funding levels for small grant programs like 
RCDI and REDI, both of which are critical. Thank you.
    [The prepared statement of Mr. Keasling can be found on 
page 56 of the appendix.]
    Chairman  Clay. Thank you.
    Mr. Lipsetz, you are recognized for 5 minutes

 STATEMENT OF DAVID LIPSETZ, CHIEF EXECUTIVE OFFICER, HOUSING 
                       ASSISTANCE COUNCIL

    Mr.  Lipsetz. Chairman Clay, Ranking Member Duffy, Mr. 
Luetkemeyer, and members of the subcommittee, it gives me great 
hope that the subcommittee's first hearing in the 116th 
Congress calls us together to assess the Federal response to a 
housing crisis in rural America, our small towns and rural 
regions.
    My name is David Lipsetz. I am the CEO of the Housing 
Assistance Council, often referred to here as HAC. HAC is a 
nonprofit intermediary, founded in 1971, that works in all 50 
States to build and sustain local housing and community 
development organizations. We provide technical assistance and 
training, information and research, and below-market financing 
as a certified community development financial institution.
    For policymakers like yourselves and the public, HAC is 
often referred to as the information backbone for rural 
America. We remain independent and strictly nonpartisan, and 
regularly respond to congressional committees and member 
offices that want to know how a program or policy impacts 
America's smallest towns. We stand ready to help you, providing 
research and information, and are honored to be here today in 
that capacity.
    My colleagues are presenting extraordinary detail on USDA's 
programs, so let me pull back for a moment and talk about the 
broader context in which housing exists. It is no secret that 
in recent decades public policy and private markets have pushed 
opportunity and wealth to a select number of metropolitan 
regions, mainly along our coasts.
    This consolidation has stripped many rural regions of their 
economic engines, financial establishments, and anchor 
institutions. It has forced a generation of rural kids to seek 
opportunity elsewhere. Small towns, frontier communities, and 
rural regions stretch across every State and nearly every 
congressional district in America. And it is in these places 
where you are going to find, if you take a good look, the more 
persistent and deepest poverty our nation faces.
    You asked us here today to assess the Federal response to a 
rural housing crisis. I suggest to you the response has been 
modest at best and the Federal policy may actually be a driver 
of parts of rural America's decline.
    To cite but one example, the mortgage interest deduction is 
the nation's largest housing program. It is not a subsidy 
program, it is not a rental housing program. Mortgage interest 
deduction is the nation's largest housing program and provides 
six times more subsidy than all other affordable rental housing 
programs provide combined.
    I am not here to argue whether the deduction is good or bad 
policy, only to point out that less than 10 percent of rural 
home owners can take advantage of this program. And the vast 
majority, the estimated $46 billion in subsidy we put to this 
deduction, go to suburban and urban households. Repeat that 
imbalance over the several generations in which we have had a 
mortgage interest deduction in place and Federal policy's 
response has given cities and suburbs a trillion-dollar head 
start toward prosperity.
    One issue that demands our immediate attention today 
involves the young families, singles, elderly, and disabled in 
small towns who are most likely to rent an apartment and least 
likely to be served by private market housing. Congress 
addressed this market failure several decades ago with USDA 
Section 515 Rural Rental Housing.
    The program generated more than 540,000 privately-owned 
apartments that are affordable to low-income renters. The 
remaining 400,000-plus apartments are at risk of aging out of 
this system, as you have heard from my colleagues.
    HAC produced the most detailed report on this topic to-
date, which shows there are 1,800 units to mature every single 
year for the next 8 years. Following that, we are going to 
enter an era in which nearly 16,000 apartments in the rural 
areas that you represent will disappear from the program.
    The good news is that we know what to do to address 
persistent poverty and reinvigorate communities. The power of 
capacity building and access to capital cannot be overstated. 
For capacity-building housing and urban development programs, 
such as Section 4, Continuum of Care and others are helping us 
solve problems that are predominantly urban and suburban. We 
can do the same for rural communities.
    In conclusion, we are a stronger and more cohesive nation 
when all of us are productive, when all of us have the basic 
necessities to contribute to the success of the whole. Reform 
to our housing programs and most especially to our housing 
finance system will address these needs.
    Thank you for your time. I look forward to answering your 
questions.
    [The prepared statement of Mr. Lipsetz can be found on page 
66 of the appendix.]
    Chairman  Clay. Thank you.
    The Chair recognizes Mr. Saavedra for 5 minutes.

  STATEMENT OF ANDRES SAAVEDRA, SENIOR PROGRAM OFFICER, LOCAL 
                INITIATIVES SUPPORT CORPORATION

    Mr.  Saavedra. Chairman Clay, Ranking Member Duffy, and 
members of the subcommittee, my name is Andy Saavedra, and I am 
a senior program officer with the Local Initiatives Support 
Corporation's Rural LISC Program. Established in 1979, LISC is 
a national nonprofit housing and community development 
organization that is dedicated to helping community residents 
transform distressed neighborhoods into healthy and sustainable 
communities of choice and opportunity.
    In 1995, LISC launched Rural LISC, a national program 
created to expand LISC's reach beyond urban areas to include 
rural communities. Today, Rural LISC partners with 87 rural 
community-based organizations in more than 2,000 counties 
across 44 States.
    Thank you for the opportunity to testify today on 
affordable rural housing. I have spent my entire career 
supporting nonprofit affordable housing organizations, working 
to improve rural housing conditions for the poor, including 14 
years living and working in the Mississippi Delta region.
    Eighty-five percent of persistently poor communities, those 
with 20 percent of the population being at or below the poverty 
level for 3 decades, are in rural areas with geographic 
concentrations in Central Appalachia, the Mississippi Delta, 
Border Colonias, Native American lands, and southeastern 
communities. LISC works with community-based organizations and 
we have seen how resources can rebuild communities when they 
have sufficient capacity and resources.
    Two of the most important Federal capacity-building tools 
are the USDA Rural Community Development Initiative, and the 
HUD Section 4 Capacity Building for Community Development and 
Affordable Housing program.
    For example, Lake Region Community Developers of Laconia, 
New Hampshire, used Section 4 to build their capacity to build 
Gilford Village Knolls, an affordable senior rental housing 
development, which is the first multifamily building in New 
Hampshire to be passive house certified for energy efficiency.
    Tunica County CDC used RCDI funds to help develop Cypress 
Manor Subdivision in Tunica, Mississippi. Groups like that are 
often the only groups in rural communities working to improve 
housing conditions and modest capacity-building investments 
from the Federal Government can achieve transformational 
results.
    HUD and the U.S. Department of the Treasury also administer 
other important affordable housing and community development 
programs benefiting low-income rural communities through CDBG 
and HOME. Many public housing and HUD-financed and assisted 
properties are in rural communities. Treasury administers the 
low-income housing tax credit, which is the largest rental 
housing finance subsidy source. Around 22 percent of all 
exiting LIHTC-financed projects are in rural communities.
    Lastly, Treasury's Community Development Financial 
Institutions Fund, CDFI, administers important programs for 
nonprofit developers and mission-based lenders, such as the 
Capital Magnet Fund, which provides resources for production 
and preservation of affordable single-family and rental 
housing.
    On rental housing preservation, LISC has helped preserve 
515 housing and understands the complexity of closing those 
transactions. An example of this is in Garrett County, 
Maryland, where Garrett County Community Action Committee 
renovated two aging 515 elderly projects along with new 
construction to provide 90 units of affordable housing for 
seniors in western Maryland. There is a great need to develop 
legislative solutions to improve rural housing conditions and 
help USDA address 515 preservation challenges.
    LISC supports Representative Clay's legislation, which 
would direct USDA to submit a plan for preserving their rural 
rental housing stock, create an advisory committee to inform 
the department on rural preservation, and provide the public 
the needed data on the characteristics of the portfolio. This 
data will help LISC and other stakeholders better identify 
preservation opportunities and inform future legislative and 
policy recommendations around this important issue.
    We support Congressman Panetta's legislation to align USDA 
farmworker housing programs with the low-income housing tax 
credit amongst other important reforms. LISC supports 
Representative Gonzalez's proposal to include the Section 542 
voucher program as a covered program under the Violence Against 
Women Act (VAWA) and proposals to broaden voucher assistance to 
tenants in properties with maturing USDA mortgages. Those bills 
provide sorely needed tenant protections.
    We also support proposals to test out new models for 
preserving USDA rental housing stock and believe USDA should 
receive additional resources for existing programs that help 
preserve USDA-financed rental housing legislation, including 
515 and multifamily preservation program.
    Affordable housing needs on Native American lands are some 
of the most important and severe in the country and the 
toughest to solve. In 2018, USDA announced a 502 relending 
pilot program to help families living on tribal lands in South 
Dakota and North Dakota receive a home mortgage. LISC is 
working to assist--
    Chairman  Clay. Your 5 minutes has expired, Mr. Saavedra.
    [The prepared statement of Mr. Saavedra can be found on 
page 75 of the appendix.]
    Chairman  Clay. At this time, we will recognize Ms. 
Eastwood for 5 minutes.

STATEMENT OF TANYA EASTWOOD, PRESIDENT, COUNCIL FOR AFFORDABLE 
                       AND RURAL HOUSING

    Ms.  Eastwood. Thank you. Good afternoon, Chairman Clay, 
Ranking Member Duffy, and members of the subcommittee.
    I am Tanya Eastwood, the chairman of the board and the past 
president of the Council for Affordable and Rural Housing, more 
commonly known as CARH.
    For those of you who are not familiar with us, we are a 
national industry trade association, representing the 
professional interests of both for-profit and nonprofit owners, 
operators, developers, builders, and other suppliers of the 
affordable housing industry, but specifically those focused in 
the rural communities.
    I am also the current Chair of Fannie Mae's Rural Duty to 
Serve Advisory Council. And for the past 14 years, I have had 
the honor to serve as the president and CEO of Greystone's 
Affordable Development division based out of Raleigh, North 
Carolina. While Greystone is primarily an FHA and agency 
lender, my team's focus is primarily on affordable housing 
development, specifically with the preservation of Section 515 
properties.
    In fact, Greystone consistently ranks as a top rural 
affordable developer in the country and we have preserved over 
13,000 Section 515 units in multiple States. And we currently 
have about another 3,500 units that are underway. I appreciate 
the opportunity to speak before you today with our firsthand 
real-world experience, recognizing RD's preservation policies, 
what works, areas of efficiencies and improvements that are 
needed, as well as some of the current challenges that we face.
    It is important to note that both CARH and Greystone have 
excellent relationships with RD's national teams, and we are 
very pleased with some of the recent process improvements and 
commitments that we are now seeing. But collectively, we all 
must do more as, indeed, affordable housing is in crisis and 
affordable rural housing is an absolute necessity. We see rural 
renters are more than twice as likely to live in substandard 
housing compared to people who own their own homes.
    In many communities, the Section 515 housing is the only 
safe and decent and affordable housing option in those 
communities, and 515 communities have already started to 
drastically decline since the program's inception. 
Specifically, according to RD's most recent report that was 
just published a month or so ago, there are now just over 
375,000 remaining 515 properties down from its peak of 533,000.
    I mean, stop and think about that for a minute. Thirty 
percent of the housing that was originally constructed using 
515 financing is no longer in the program. I just find that 
staggering. And to compound the issue, RD confirms that they 
have not financed any new properties in the rural community 
since 2011. That is 8 years with no new housing.
    And to compound the issue even further, maturing mortgages 
have now become the most pressing issue of our time. According 
to that same published report by RD in February, almost 10,000 
units, 10,000 homes of the most vulnerable populations, were 
removed from the program in the past 2 years alone. As you have 
heard today already, that loss is projected to only climb 
annually until the program is effectively eliminated in 2050, 
unless something changes.
    You know, most celebrate when a mortgage is prepaid or 
paid-off. But when a 515 mortgage ends, whether through either 
prepayment or maturity, the associated project-based assistance 
that supports those low-income residents also ends. This 
necessity exposes these residents to higher market rents, or 
worse, the project is converted to another use altogether, 
eliminating the housing.
    But neither the private nor the public sector can produce 
or preserve affordable rural housing independently of each 
other. This must be a partnership so that the housing and the 
infrastructure needs of rural America can successfully be met. 
CARH members believe there are several areas within the rural 
housing arena that Congress and the Administration should 
consider as priorities in order to chart a better course.
    For starters, we strongly support decoupling of the Section 
521 Rental Assistance for mortgages upon prepayment as well as 
termination and maturity. Second, we recommend that Congress 
adequately fund specific preservation RA as well as give clear 
direction to RD to use it for that purpose.
    We encourage Congress to modernize the 4 percent housing 
credit and we would also like Congress to instruct RD to allow 
income averaging, as included in the recent Tax Cuts and Jobs 
Act. And finally, we request tax relief for older properties 
and older owners that never caught up after the 1986 Tax Reform 
Act so that they can sell and preserve these properties without 
a large exit tax bill, avoiding the alternative of holding onto 
the aging asset until they die.
    The current draft legislation proposals presented with this 
hearing certainly are a great start, but with some strongly 
recommended modifications. I thank you for the opportunity 
today, and I welcome any questions that you may have.
    [The prepared statement of Ms. Eastwood can be found on 
page 43 of the appendix.]
    Chairman  Clay. Thank you, Ms. Eastwood, and the entire 
panel for your testimony. We will now enter into the Q&A 
segment of this hearing, and I will begin by recognizing myself 
for 5 minutes.
    This first question is to all of the witnesses, or any of 
you can chime in. While we have some data on the maturation and 
prepayment of Section 515 and 514 mortgages so far and in the 
coming year, there are still several unanswered questions in 
terms of the scope of this issue.
    For example, the effect that this has had on tenants so far 
is unclear. Has USDA adequately shared information with owners 
and the industry about properties nearing mortgage maturity and 
options available to preserve affordability? We will start with 
Mr. Anders and move down.
    Has USDA adequately shared information with--
    Mr.  Anders. No. The short answer is no.
    Chairman  Clay. Okay.
    Mr.  Anders. We do not know exactly the extent to which 
various State offices are dealing with maturing mortgages. We 
do not know how many mortgages are being extended. We don't 
know how many rental assistance contracts are being extended. 
And I think we need to ask RD to provide that information.
    Chairman  Clay. Anyone else?
    So, Mr. Anders, it means that they need to be more 
transparent?
    Mr.  Anders. Yes.
    Chairman  Clay. They need to be more upfront to the owners 
and the stakeholders in this process?
    Mr.  Anders. Definitely. Generally, to the public, yes.
    Chairman  Clay. Mr. Keasling?
    Mr.  Keasling. Not to disagree with my friend, Gideon, but 
I am not sure that the department actually knows the answer 
themselves. And much of the information is stored at the State 
offices and is not easily collected and reported out. So, 
obviously, they could use better processes.
    Chairman  Clay. Let me ask, the National Housing Law 
Project has sued the USDA, alleging that it is violating 
existing statutes that place certain restrictions on owners 
seeking to prepay their Section 515 or 514 loans and thereby 
accelerating the loss of affordable housing in rural areas.
    Specifically, USDA appears to be incentivizing owners to 
prepay their loans by offering rural development vouchers to 
residents who should be protected by use restriction. Would you 
walk us through your concerns with USDA's actions?
    Mr.  Anders. Sure. The problem is that RD, at least 
currently because of, I believe, staff changes, does not 
understand the interplay between ELIHPA and the Rural 
Development Voucher Program. And what they are doing is, 
whenever an owner asks permission to prepay a loan, they are 
telling the owners and they are also telling the residents that 
the project can be prepaid and, yes, they will put use 
restrictions on the project, however, ``We will provide all of 
the residents in the development with vouchers.''
    The use restrictions, which were adopted by ELIHPA, were 
supposed to protect residents without their requiring any 
vouchers. That was a disincentive that Congress put into the 
Emergency Low-Income Housing and Preservation Act of 1987 so 
that owners would have to calculate the rents of residents 
after prepayment the same way that they were calculated before.
    And what RD is doing now is basically providing vouchers to 
owners and it is basically telling the owners, you can convert 
the housing from subsidized housing to nonsubsidized housing 
while you get a cashflow from the vouchers that you are going 
to get, which you wouldn't have gotten under the ELIHPA 
program. And that is how it is encouraging prepayments.
    It is also not properly evaluating whether prepayments will 
have a major impact on minority housing opportunities. The 
agency has to then take into position that instead of looking 
at the impact of minority housing opportunities, we will look 
at whether or not the impact is disproportionate, and that is a 
different standard than looking simply at the impact upon low-
income minority residents.
    And in doing so, what I have seen is the State offices are 
saying, ``No, there is no disproportional standard because all 
of the residents are being displaced.'' Or, ``No, there is no 
disproportional standard because they are all going to get 
vouchers.'' That was not the intent of the Emergency Low-Income 
Housing and Preservation Act.
    Chairman  Clay. And, Mr. Anders, it sounds as though that 
contributes to the number of lost units--
    Mr.  Anders. It definitely does.
    Chairman  Clay. Also by incentivizing it through the--
    Mr.  Anders. Yes. In fact--
    Chairman  Clay. Thank you.
    Mr.  Anders. In one of the cases we are involved in, in 
Oregon, we challenged the RD decision because they made the 
wrong decision. And after we challenged them, they immediately 
went back and came up with a new decision.
    In the first decision, they said, ``We will allow the owner 
to prepay subject to use restrictions.'' After going back and 
looking at the data, they went back and said, ``No. We will not 
allow the owner to prepay. We will require the owner to market 
the property to nonprofit and public agencies.''
    Chairman  Clay. Thank you, Mr. Anders, for your--my time 
has expired.
    I recognize the ranking member of the subcommittee for 5 
minutes.
    Mr.  Duffy. I appreciate the chairman for yielding.
    To the panel, is the Rural Housing Service a well-run 
agency? Mr. Anders? And we will go down the line.
    Mr.  Lipsetz. Mr. Duffy, I am happy to address that in that 
I, at one point, was the Associate Administrator of the Rural 
Housing Service. It is an organization that does tremendous 
work with very few resources. If we are going to have something 
that functions well, we need to pay for it. We need to pay for 
the systems and the staff to be able to do it.
    And the reason why we have a significant amount of staff 
and some very challenging systems issues at Rural Housing 
Service is because the model for delivering affordable housing 
in nonfunctioning markets where we cannot get private market 
debt on these properties in a way that serves the community, 
necessitates government intervention.
    There aren't many places where we would make that argument. 
But in this case, where you have credit elsewhere issues, we 
would suggest that you will need that much staff, and more, to 
get the job done.
    Mr.  Duffy. I appreciate the rationale, but you are 
somewhat skirting the issue. You tell me why it maybe doesn't 
work well. You don't have the money, you don't have the 
resources. By the way you have answered the question, you are 
ceding the point that it does not work well, whatever the 
reason might be. I mean, the staff, the money, the skillset. 
Fair enough? It doesn't work well right now?
    Mr.  Anders. It has been set up to fail by the funding 
levels that it gets.
    Mr.  Duffy. And I just want to make--does anyone disagree 
with that, that it doesn't work well?
    Mr.  Saavedra. May I?
    Mr.  Duffy. Yes.
    Mr.  Saavedra. I will say this about USDA as somebody who 
lived in a small town of 7,000 people and worked with the USDA 
and HUD. My old boss used to say HUD works critically, but HUD 
works with programs, whereas USDA works with people.
    I mean, having USDA staff locally, regionally, was very 
important in terms of me doing my work, whereas my HUD field 
office at the time was in Shreveport and couldn't really do 
that much for me. So, structurally, there are good people out 
there doing some good work, some criticisms aside. It is a 
gray--
    Mr.  Duffy. I really meant that question to be a quick 
answer and I appreciate the insight that you all gave me.
    [laughter]
    And I guess the point is, we all agree there is a problem. 
I notice we have a problem on our hands or on our horizon. And 
I guess my point is, before we dump more money to fix the 
problem, we have to probably fix the agency that is going to be 
responsible for fixing the problem, right?
    Fix the agency or decide who is going to fix the problem 
and make sure it is well-functioning and then put money into 
it. Would anyone disagree with that assessment? No one is 
telling me I should put money in first and then say, okay, how 
do I make the agency function well? No disagreement?
    Mr.  Lipsetz. Sure. I would fundamentally disagree that, if 
you are going to get a car to drive faster on really old tires, 
one of the first things you should do is replace the tires.
    Mr.  Duffy. Right. But I am not talking about investing--we 
are talking about a lot of units that are about to expire. 
Before I give you money ans say, how do I fix that, I should 
make sure the agency works well. We are talking about two 
different silos of money.
    Mr.  Lipsetz. And one of the ways in which I think you fix 
it--because this program has been an extraordinary private 
market, public partnership. And these are private owners. And 
to keep private owners in the program, incentivize them to stay 
in. There is not a market incentive right now to do so.
    Mr.  Duffy. I get that, but I guess my point is, if we are 
going to put--this is going to take dollars and I want to put 
money into a program that I know is--an agency that I know is 
going to work. And if we need to have a conversation about how 
we make the agency work better or who should be responsible for 
administering these dollars, that is a conversation I am 
willing to have.
    But you are going to find it hard-pressed to get me to put 
a lot of money into an agency that doesn't have a great track 
record thus far. And you might give me reasons why it doesn't 
have a good track record, but that is one concern I have 
upfront.
    I only have 40 seconds left. I want to get to some of the 
bills that have come up. Does anybody--
    Okay. Does anybody have the viewpoint that we should force 
owners into extending their contracts after those contracts 
legally expire?
    Ms.  Eastwood. Quite the--
    Mr.  Duffy. Ms. Eastwood?
    Ms.  Eastwood. Quite the opposite. I think that is punitive 
for the owners that they have done their--they have kept their 
commitment based on the contract that they entered into 20, 30 
years ago. They have honored those commitments and should have 
the right to then have their property rights returned to them.
    Mr.  Duffy. Does--
    Ms.  Eastwood. Are there things that we can do to 
incentivize them to stay in the program and to continue under 
those restrictions? Absolutely. But straight-out continuing 
just in exchange for vouchers, no.
    Mr.  Duffy. Does anybody disagree with that?
    Mr.  Anders. Well, I don't believe any of the bills that 
are in front of you require owners to extend their contracts. 
All of the proposals before you are voluntary.
    Mr.  Duffy. You don't disagree with the concept, though? 
Because I think that the problem becomes if you enter into an 
agreement with the government and you don't want the government 
at some point to later change that agreement, and I think that 
would be a prohibitor of--
    Mr.  Anders. Yes. But none of the proposals that are before 
you, in fact, encourage--
    Mr.  Duffy. And does everyone agree that we should decouple 
the rental assistance contracts from the multifamily contracts? 
Is that a good thought process for us?
    Ms.  Eastwood. Absolutely.
    Mr.  Anders. I definitely believe so, yes. I think it is 
the only way in which--
    Mr.  Duffy. Does anyone disagree? If I could just for one--
this is a space that we have to deal with, and we all know we 
have to spend some money here. But to get your best advice as 
we go through the process would be welcome. We have great minds 
and a willingness in the Congress to make this work. And thank 
you for your testimony and insight today.
    Chairman  Clay. All right. I thank the gentleman from 
Wisconsin. It sounds like it is an area we are going to work 
together on.
    Mr.  Duffy. I hope so.
    Chairman  Clay. Yes. I recognize the gentleman from Texas, 
Mr. Gonzalez, for 5 minutes.
    Mr.  Gonzalez of Texas. Thank you, Mr. Chairman. And I 
would like to thank the panel for being here on such an 
important issue that is impacting America.
    An astounding 92 percent of homeless women have experienced 
severe physical or sexual violence while almost 50 percent of 
all homeless women report that domestic violence was the 
immediate cause of their homelessness. Additionally, upwards of 
25 percent of women in rural areas live more than 40 miles from 
programs that can provide that type of assistance.
    I want to, first of all, take the time to thank 
Congresswoman Wagner and Congresswoman Sylvia Garcia and 
Congressman Trey Hollingsworth for their support and hard work 
on the VAWA Protections for Rural Women Act of 2019. 
Unfortunately, the Rural Housing Voucher Program was not 
originally included under the VAWA, leaving individuals holding 
these vouchers extremely vulnerable to homelessness, and 
without help that might be available in other settings.
    This legislation is designed to fill the gap in housing 
support for rural victims. All other rural housing programs are 
currently included as covered housing programs under VAWA, 
programs such as HUD's rental assistance programs and low-
income housing tax credit programs.
    My first question is for the panel at mass, if anyone 
thinks that applying the Rural Housing Voucher to VAWA 
Protection is a bad idea. Well, that is good to hear.
    [laughter]
    Mr.  Anders. Mr. Gonzalez, I believe it was simply an 
oversight because the voucher program is not technically 
authorized by the Housing Act of 1949. It was authorized, at 
least the way it is operating now, under an Appropriations Act. 
And I think it was an oversight and I clearly believe that it 
should be extended.
    I should also point out that right now RD is using HUD 
documents, which, in fact, enforced VAWA in the context of the 
voucher program.
    Mr.  Gonzalez of Texas. Thank you.
    Mr.  Anders. It is a question of continuing it.
    Mr.  Gonzalez of Texas. Mr. Anders, can you tell me how 
VAWA and housing programs intersect?
    Mr.  Anders. Sure. There are some people who are much more 
expert than I am in that. But basically what happens is there 
are questions of what happens when you have women who are 
victims of domestic violence, or men for that matter, that 
there are ways of allowing them to move to another unit, that 
they get away from the person who is an abuser, allowing them 
to break their leases, and various protections which allow the 
person to take advantage of all the protections that are 
included in VAWA.
    Mr.  Gonzalez of Texas. Thank you. And what kind of 
challenges have you seen in rural areas that are more 
pronounced or different than challenges that you face in urban 
settings?
    Mr.  Anders. I, unfortunately, do not have any experience 
in it. And I could get back to you with one of my colleagues 
who really works in the area more so than I do.
    Mr.  Gonzalez of Texas. Perfect. Thank you. I yield back.
    Chairman  Clay. The gentleman has yielded back. And I 
recognize the gentleman from Missouri, Mr. Luetkemeyer, for 5 
minutes.
    Mr.  Luetkemeyer. Thank you, Mr. Chairman. I come from a 
rural area. My town is 336 people when you count the dogs, 
cats, and pregnant ladies twice.
    [laughter]
    So, I think I can qualify as somebody who probably 
understands what you are talking about when you are talking 
about rural housing. So, just to try and talk about--I think, 
Ms. Eastwood, you were talking a while ago in your testimony 
about something with regards to incentivizing the property 
owners to extend. I take it that when you say you are losing 
units these people are not extending their contracts or not 
continuing to rent to individuals that normally they would be 
renting to. Is that correct?
    Ms.  Eastwood. That is right. One of the main challenges is 
really getting our arms around what is happening with these 
units is really the complexity of the data. It is not just as 
simple as the mortgage maturing. And those units--
    Mr.  Luetkemeyer. So, these units are not being torn down?
    Ms.  Eastwood. They are not being torn down.
    Mr.  Luetkemeyer. The owner is continuing to rent them, but 
not necessarily to people who--is he throwing all the folks out 
or is he continuing to rent sometimes to the people who have 
been renting previously?
    Ms.  Eastwood. In most cases, the housing stays, and it has 
continued to rent. But then those residents who have rental 
assistance are exposed to their rents going up to market rent. 
There are maybe situations where communities used to be rural 
that are now no longer rural, that that owner may decide that 
that use is better for some other purpose other than housing.
    Mr.  Luetkemeyer. Okay. So, how do you want to incent folks 
to continue in the program?
    Mr.  Anders. Most owners, I think, that go into affordable 
housing go in for the mission, right? But it has has to make 
financial sense. And so, these properties are old, and they 
need to be rehabbed. And really the main tool in today's 
environment to do that is the Low-Income Housing Tax Credit.
    That is really tough in the rural communities. They can't 
compete very well QAPs. They score very well. So, how do you go 
about doing that? And if there are things like the preservation 
RA that has been discussed in some of the proposals. If there 
are ways that you can incentivize that. Funding the MPR program 
at $75 million is critical.
    We do a lot of preservation and there are owners and 
investors who are very motivated to keep the housing, but they 
have to make financial sense. And I think our biggest barrier 
is just the resources to do just that.
    Mr.  Luetkemeyer. One of the statistics that was on the 
screen a while ago was that there is 16.4 percent rural 
poverty, which is 3 percent greater than urban poverty. In one 
of the testimonies I think I saw, or maybe it was on the screen 
here a minute ago, that one in four in the rural area, 50 
percent or more are paid their income in rental assistance.
    What is the number for urban? Do any of you know off the 
top of your head? Does that compete? Is that similar? So, one 
in four people pay 50 percent or more of their income on rent. 
Is that roughly the same in urban areas as well or is it higher 
in--don't know? Okay. That is fine.
    Let me talk a little bit about something a little bit 
different, but I think it has an impact here. How many of you 
have heard of Current Expected Credit Losses (CECL), sort of a 
new accounting standard called CECL? Okay. I hope you get up to 
speed on it because this is what it is about.
    It is about anybody who lends in the home mortgage space--
in fact, it affects credit card companies and securities 
companies as well--to have on their balance sheet a better 
reflection of the risk in their mortgage portfolio. And you are 
asked to reserve more money. As a result of that, you are 
probably going to see the people in the financial services 
industry have to put more money into reserves, which means they 
are going to have to probably charge more.
    For instance, the GSEs, we are working with them right now. 
They have a $5 trillion portfolio. If they have to put a whole 
lot more money in their portfolio, that means they are going to 
have to raise the guarantee fees in order to be able to afford 
to do that, which means people are going to have to pay more 
for their loans.
    When that happens, home builders, if you look on our 
website when they had the--in this committee, we had testimony 
back in December, every thousand dollars increase in home in 
the cost of a loan means 100,000 people no longer have access 
to credit. That is kind of a dramatic effect whether it is in 
urban areas, suburbs, or whether it is in rural areas.
    So, you all need to be aware that this is coming. Maybe 
work with your financing folks. Understand they are going to 
have to--understand how to reserve for this because it can have 
a dramatic effect on what you are doing. And when you get done 
with your studies, please let me know because I need to have 
some numbers for me to be able to do this.
    Mr. Keasling, I have 20 seconds left here. But you said 
from, I guess, earlier in the early 2000s, we had 221,000 homes 
that were purchased or built. And in the 10 years after the 
crash, we had 68. Was that all due to the recession or is that 
just normal ebb and flow of the cycle?
    Mr.  Keasling. Well, I think it is too dramatic just to be 
the normal ebb and flow. And actually, both of those numbers 
were the average production for the 10-year span. So, the 
average before the crash was 221,000. The average after the 
crash for 10 years was 68,000. And it is just a very dramatic 
reduction, I think, in access to credit. And the challenges 
that rural communities have in being able to--
    Mr.  Luetkemeyer. Okay. Perfect. Thank you. I yield back.
    Chairman  Clay. The gentleman yields back. I recognize the 
gentlewoman from Iowa, Mrs. Axne, for 5 minutes.
    Mrs.  Axne. Thank you, Mr. Chairman, and thank you to the 
witnesses for being here today. I appreciate it. I was looking 
through some of the Section 515 and Section 514 properties in 
Iowa and noticed that very few of them had been built in the 
last 25 years. In fact, none since, I believe, 2011. And that 
over the next 15 years, Iowa is projected to lose more than 
2,500 units, or approximately 40 percent of this housing.
    Mr. Lipsetz, in particular, do you think the lack of new 
construction in rural areas is causing some of the population 
declines that we are seeing in particular rural areas?
    Mr.  Lipsetz. Thank you. That is an excellent question. 
Anecdotally, yes, in that a driver of household formation is 
the quality of house and the amenities it is surrounded by. And 
absent a new stock or vibrant stock, you are going to see a 
younger generation leave without those things. That is 
anecdotally around household formation. Our numbers look very 
similar to what you described for loss of property in Iowa.
    Mrs.  Axne. Thank you. And to follow-up on that, I am sure 
you are probably aware of our recent flooding that we have had 
in Iowa. And my district was hurt the worst as a result of 
that. We have towns that are irreparable at this point. They 
are completely underwater.
    And of course, we have been working hard to get FEMA there 
and get people moved into temporary rental areas. But to follow 
up on this, I know that FEMA makes use of local rental housing 
after disasters. And my question is, do you think a shortage of 
affordable rural housing makes it more difficult for areas 
experiencing disaster to recover? And if so, is that 
exacerbating our problem of our rural communities, you know, 
quite honestly, being left behind and people moving to urban 
areas?
    Mr.  Lipsetz. Again, an excellent question. I do note that 
the way in which disaster recovery occurs usually is focused on 
an urban center and deploying FEMA forces to that center and 
distributing the two different kinds of assistance. And often 
times you will find the outlying areas without the capacity, 
without the infrastructure to be able to respond to FEMA 
recovery or any of the Stafford Fund distribution and delivery.
    And that is, to us, an issue that runs across many 
different programs or disaster and other things like that, that 
if you don't take the time to build the capacity of local 
organizations to be able to address disaster or the rural 
rental housing crisis or anything of those things, then you are 
not going to have boots on the ground to be able to respond in 
the time of real need.
    Mrs.  Axne. Thank you. Mr. Keasling, a question for you. I 
was wondering if we could talk a little bit more about the 
Administration's plans for the rural housing programs. And 
considering that 2 million rural households pay over 50 percent 
of their income in rent, and all of the testimony we have heard 
today leads us to understand that, do you believe that it is 
appropriate for the Trump Administration's budgets to have 
proposed drastic cuts, as much as 25 percent, to the staff of 
the Rural Housing Service?
    Mr.  Keasling. So, definitely, we do not support that and 
think that it will have an extremely adverse effect on the 
delivery of the programs. There is also a shift that is 
happening between the allocation of staff in the State offices 
and in the local area offices to national office functions, and 
that is also further exacerbating the problem.
    So, the combination of the cuts and the redirection of 
staff is just--I think it is a huge problem that is going to 
make correcting the agency and helping the agency to get a 
handle on all the problems that it is trying to deal with even 
more difficult.
    Mrs.  Axne. Thank you. And as a member of the House 
Agriculture Committee as well, I just want to let you all know 
I am looking forward to engaging more with Secretary Perdue to 
ensure that the programs that we are discussing here today are 
implemented and that our rural areas have access to the housing 
that they need. Thank you.
    I yield my time back, Mr. Chairman.
    Chairman  Clay. Thank you. I now recognize the gentleman 
from Ohio, Mr. Gonzalez, for 5 minutes.
    Mr.  Gonzalez of Ohio. Thank you, Mr. Chairman, for holding 
this hearing and for recognizing us. Thank you to the witnesses 
for all the time that you put into today's hearing. I have the 
privilege of representing Ohio's 16th Congressional District. 
And as part of that, I have one of my favorite counties in the 
world, which is Wayne County. And Wayne is home of J.M. 
Smucker's and is our most rural county.
    One of the things that we have been talking about with 
local elected officials is precisely rural housing shortages 
and homelessness in Wayne County. Kind of building off of the 
ranking member's questions earlier, I want to start by 
basically trying to think through how efficiently we are 
managing our dollar and, quite frankly, whether the USDA is 
even the right place for RHS.
    So, I will start with a statement, which is that the 2018 
fiscal year budget for RHS was $244 million out of a $22.5 
billion total, so roughly 1 percent of the USDA's total budget.
    When you hear that, Mr. Lipsetz, in particular, you 
mentioned, hey, we are not funded well. And I hear you, but at 
the same time I wonder, if we are only spending 1 percent of 
the budget, how big of a priority is this inside of the USDA in 
your estimation?
    Mr.  Lipsetz. As an Ohio native myself, it is great to see 
you here. And in direct answer to your question, I not only 
worked at USDA, I was at HUD for awhile. And I may be one of 
the only people in the room, or maybe the city, who has had 
those two distinct experiences.
    And what I might suggest that it taught me is you grapple 
with fundamentally different policy issues in the two places. 
That understanding the function of a rural market is 
significantly different than what you need to do as a 
policymaker to provide housing in an urban market and a 
suburban market.
    We are a suburban nation, right? We have a population where 
52 percent of America now lives in suburban environments. We 
are pulling folks out of rural places to populate that. And if 
you expect to be able to function in a rural market with what 
is left, you need a different delivery model than HUD has.
    HUD has--I am sure someone could help me here--7,000 or 
8,000 staff. Rural Development has nearly 5,000.
    Mr.  Gonzalez of Ohio. But they are not working, though, 
right? I mean, that is the--
    Mr.  Lipsetz. They work very differently.
    Mr.  Gonzalez of Ohio. I don't mean to interrupt, but I 
guess my challenge is, I think we have all kind of come to the 
realization that RHS--and again, thank you for your work, this 
is not a criticism of your work or anybody's work. But it is 
just not working the way that it needs to. The programs aren't 
delivering the way that they need to.
    And I guess in my head, I think one of the biggest problems 
we have in this town is we have a million programs for a 
million different things, and they are all well-intentioned. I 
think folks generally are all trying to do the best that they 
can. But when you have so much duplication, I am just concerned 
that we are--I hear you. They are different markets.
    But if you understand urban housing, surely you could 
develop inside of HUD a similar expertise. Although, you are 
suggesting no, so.
    Mr.  Lipsetz. Yes. I mean, it is the Housing and Urban 
Development Department to its core.
    Mr.  Gonzalez of Ohio. Yes.
    Mr.  Lipsetz. And what I would suggest is that we think 
about moving HUD programs over to USDA or at least use the USDA 
model. Look, when we talk about efficiencies, we are also 
putting consolidation in front of competition.
    I am a market person who appreciates the way in which we 
have to have private finance in the delivery of our housing 
system. If we are consolidating for efficiency and efficiency 
alone, the competition and the way to drive resources to 
different types of geographies is going to exist in several 
different places in our big company, the Federal Government.
    Mr.  Anders. Mr. Gonzalez?
    Mr.  Gonzalez of Ohio. Yes. Go ahead.
    Mr.  Anders. If I can just--
    Mr.  Gonzalez of Ohio. I am curious for this. I want to--
yes. So, anybody, please.
    Mr.  Anders. Personally, I believe that if you move the RD 
programs over to HUD, they are going to be basically stopped.
    Mr.  Gonzalez of Ohio. But isn't that what is happening 
now?
    Mr.  Anders. HUD does not have the capacity to deal 
directly with borrowers. It has never done that, with one 
exception, which is the 202 Program. It deals with 
intermediaries in every case. RD does not do that. And it has a 
totally different outlook in terms of how you serve rural 
communities than does HUD.
    The RD offices at one time had 1,800 offices throughout the 
nation. Unfortunately, that has been cut to about 700, so that 
has to deal with the staffing issue. And if you keep cutting 
the staffing issues, yes, the agency's going to centralize and 
it is not going to be serving as well as it has in the past.
    Chairman  Clay. The gentleman from Ohio's time has expired.
    We now go to the gentleman from California, Mr. Sherman. 
You are recognized for 5 minutes.
    Mr.  Sherman. Why, thank you. I want to focus on the role 
that manufactured housing can play in providing housing to 
rural Americans. I am told 22 million people live in 
manufactured housing in our country. That the average price is 
under $72,000, without the land of course. Some 76 percent of 
manufactured homes are titled as personal property. Two-thirds 
of the manufactured homes are in rural areas, hence the reason 
I am focusing on that here in this hearing. And that 75 percent 
of all new homes sold for under $150,000 are manufactured 
housing.
    Now, we have the Section 502 program. The question is, why 
doesn't 502 support chattel financing, which is the method most 
often used for mobile homes? And so, I will ask Ms. Eastwood to 
comment on this and then we will see if anybody else wants to 
comment.
    Ms.  Eastwood. So, we primarily focus on the multifamily 
side, not on the single-family side.
    Mr.  Sherman. Okay. We will see if anybody else is--
    Mr.  Keasling. I would like to stick my foot in that water.
    [laughter]
    It seems to me that it is even more important that we not 
have mobile homes--manufactured housing financed as chattel. 
That, in fact, figuring out ways--I mean, the housing is most 
durable if it is on a permanent foundation. And if you put it 
on a permanent foundation, then you can get a conventional 
mortgage. So, there are real advantages, it seems to me, to 
constructing it and placing it in places in that--
    Mr.  Sherman. But, at least in my district, the tendency is 
for the owner of the manufactured housing not to own the land. 
You rent the land. That is not all that different from being a 
homeowner subject to a community association that you have to 
pay money to every month. In fact, some homeowners' 
associations charge more than you sometimes pay to accommodate 
a mobile home.
    Now, I know that there are two pilot projects under Section 
502: one that is exclusively for those who own a fee simple 
interest in the underlying real estate; and the second pilot 
project allows homes in a land-lease community, that is to say 
chattel. Are any of the witnesses familiar with these two pilot 
programs?
    Mr.  Keasling. I thought that the second model was actually 
for resident-owned cooperatives where basically, the residents 
of the mobile home owned, in common, the land. And therefore, 
the tenant had the ability to place their home on a permanent 
foundation again, which allows them to finance without--
    Mr.  Sherman. You are still, under the second program, a 
chattel mortgage because the individual homeowner doesn't own 
and fee simple the underlying real estate. But I gather from 
your testimony that what we need to be focusing on here is that 
permanent foundation. How expensive is it to attach a home to a 
permanent foundation?
    Mr.  Keasling. Well, it is somewhat more expensive than to 
leave it on just blocks or piers. But, as I say, I think the 
long-term costs are a substantial advantage to placing it on 
that permanent foundation. The second thing that I would say 
is--
    Mr.  Sherman. Yes. But I will point out there are some 
situations where you may want to move the home. Especially if 
there is an oil boom or something in a particular town, 
construction boom, that may only employ you there for a couple 
of years. So, there will be times when you don't want the 
permanent foundation but times when you do.
    In either way, we need a program that will allow you the 
flexibility to either have it not on a permanent foundation, on 
a permanent foundation but you don't own the land, or on a 
permanent foundation and you do own the land. With that, my 
time has expired now.
    Chairman  Clay. I thank the gentleman for his observance of 
time.
    Let me now go to the gentleman from Colorado, Mr. Tipton. 
You are recognized for 5 minutes.
    Mr.  Tipton. Thank you, Mr. Chairman, and I thank the panel 
for taking the time to be here. Sorry. I had to step out for 
another committee meeting.
    But I just wanted to bring up something that we are facing 
currently in Colorado in my district. We have been becoming 
keenly aware that there is a need for affordable housing, 
particularly in our smaller communities. And I believe that is 
true across the country.
    And when I talked to some of the housing advocates back at 
home, a theme that comes up often is the need to be able to 
provide affordable housing for growing senior populations. In 
Colorado, as an example, the population of folks who are age 65 
and over is projected to increase by a little better than half 
a million by the year 2030.
    Many of these people will, obviously, need to be able to 
have affordable housing and they are going to be seeking it 
out, probably, in some of the rural areas, simply because of 
the costs in the urbans areas, seek out more affordable 
housing, and it is just a dollar amount that they are going to 
have to try and address.
    Also, we have seen evidence in Colorado that people who are 
nearing retirement age are also going to have a real difference 
in terms of the amount that they have saved, and we are seeing 
the same problem with Baby Boomers as well when it comes to 
having resources as the population does age.
    When we talk about national initiatives on housing, like 
the ones that are being advanced by our colleagues across the 
aisle, we ought to be able to make sure that we are taking into 
account the needs of rural Americans as well and also taking 
into account that for senior citizen populations who will need 
affordable housing.
    So, I have a general question that maybe each one of you on 
the panel would like to address: What are some of the 
challenges that communities are going to face in providing that 
affordable housing for seniors in rural places, especially as 
that demographic continues to grow?
    Mr. Anders, would you have some short comments on that?
    Mr.  Anders. Sure. You have to realize that the 515 program 
is currently serving-- over 60 percent of the residents of 515 
housing are elderly people or people with disabilities. And the 
real problem has been that Congress has basically starved the 
515 program. In 1994, the program was funded at about $1 
billion annually. It is currently being funded at about $35 
million, and that is a major problem.
    Congress has actually dealt with it in the 202 program 
recently, where it has pumped more money into the 202 program 
for the first time in years. It put about $105 million into the 
program in the last 2 years. It has not done the same thing for 
the 515 program, and that needs to be done at this point.
    Mr.  Tipton. Great.
    Mr.  Anders. The appropriations for the program just need 
to grow.
    Mr.  Tipton. Okay. Any other comments on that?
    Mr.  Keasling. I would just say that the program needs 
those appropriations in order to build new housing. And new 
housing is definitely a need in rural areas, and that is the 
only way you are going to respond. And frankly, the 515 program 
is a very cost-effective way of doing that.
    Ms.  Eastwood. And I would echo that. With the aging 
population in places, like he said, 67 percent are the elderly. 
And to get new construction, new development that is out there, 
you know, the numbers have to work. And the 515 program, it is 
very hard to compete in today's financial environment with that 
1 percent, you know, 50-year AM.
    And those smaller communities that we are talking about 
here today, there are smaller properties that are being built, 
so you don't get those economies of scale. And so, to attract 
that, you have have toget either favorable financing of some 
form or fashion. And it is starving.
    On the deals that we do, we spend an average of about $1.1 
million of new debt, and these are all in recapitalization 
reservations. So, on a a program that is currently only being 
funded at $40 million, I mean, you do the math. It is not going 
very far at all.
    Mr.  Tipton. Well, Ms. Eastwood, that kind of brings up a 
question in regards to some of the multifamily properties in 
Rural Housing Service, should we retain all of those? Are there 
some we shouldn't retain? What are you thoughts on--
    Ms.  Eastwood. There are some that are ready to come out of 
the program. There is either alternate housing, they are now in 
the suburban areas. There is some that the market has--it is no 
longer needed, you know? The area has dried up, the out-
migration has certainly happened. But I say that is more the 
abnormal. There is certainly a built-up need for housing in 
these rural markets and we are just not meeting that need with 
the supply.
    From the homeowners back in the day--people are going from 
home ownership into rentals. There are demographic changes 
where people are not buying their first home as early as they 
did back in prior generations. So, that pressure, even with 
out-migration, is putting a strain on the housing options that 
are available in these communities.
    Mr.  Tipton. Great. Thank you.
    My time has expired, Mr. Chairman. I appreciate it.
    Chairman  Clay. Yes. Thank you. And let me thank all of the 
witnesses for your testimony today. You have certainly shared 
what the possibilities are to this subcommittee and really 
educated me on some of the aspects of rural housing that I was 
not aware of, so I appreciate that. And hopefully, we can 
hammer out something that is beneficial to the rural community 
in this country.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is adjourned.
    [Whereupon, at 3:33 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             April 2, 2019
                             
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                   [all]