[Senate Hearing 117-868]
[From the U.S. Government Publishing Office]
S. Hrg. 117-868
EXAMINING THE U.S. DEPARTMENT OF
AGRICULTURE'S RURAL HOUSING SERVICE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
HOUSING, TRANSPORTATION, AND COMMUNITY DEVELOPMENT
of the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE U.S. DEPARTMENT OF AGRICULTURE'S RURAL HOUSING SERVICE
__________
MAY 25, 2022
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
______
U.S. GOVERNMENT PUBLISHING OFFICE
55-961 PDF WASHINGTON : 2024
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey RICHARD C. SHELBY, Alabama
JON TESTER, Montana MIKE CRAPO, Idaho
MARK R. WARNER, Virginia TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
Laura Swanson, Staff Director
Brad Grantz, Republican Staff Director
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Hearing Clerk
______
Subcommittee on Housing, Transportation, and Community Development
TINA SMITH, Minnesota, Chair
MIKE ROUNDS, South Dakota, Ranking Republican Member
JACK REED, Rhode Island RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey MIKE CRAPO, Idaho
JON TESTER, Montana BILL HAGERTY, Tennessee
CATHERINE CORTEZ MASTO, Nevada CYNTHIA LUMMIS, Wyoming
CHRIS VAN HOLLEN, Maryland JERRY MORAN, Kansas
JON OSSOFF, Georgia KEVIN CRAMER, North Dakota
RAPHAEL WARNOCK, Georgia STEVE DAINES, Montana
Tim Everett, Subcommittee Staff Director
Kathleen Gayle, Republican Subcommittee Staff Director
(ii)
C O N T E N T S
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WEDNESDAY, MAY 25, 2022
Page
Opening statement of Chair Smith................................. 2
Opening statements, comments, or prepared statements of:
Chairman Brown................................................... 1
Senator Rounds................................................... 4
WITNESS
Xochitl Torres Small, Under Secretary for Rural Development,
Department of Agriculture...................................... 5
Prepared statement........................................... 16
Responses to written questions of:
Senator Cortez Masto..................................... 20
Senator Moran............................................ 22
Additional Material Supplied for the Record
Statement submitted by Jim King, CEO and President, Fahe......... 25
(iii)
EXAMINING THE U.S. DEPARTMENT OF
AGRICULTURE'S RURAL HOUSING SERVICE
----------
WEDNESDAY, MAY 25, 2022
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Subcommittee on Housing, Transportation, and Community
Development,
Washington, DC.
The Subcommittee met at 2:30 p.m., via Webex and in room
SD-538, Dirksen Senate Office Building, Hon. Tina Smith, Chair
of the Subcommittee, presiding.
Chair Smith. Good afternoon. The Subcommittee of Housing,
Transportation, and Community Development will come to order.
It is wonderful to have the Under Secretary here with us today.
We also have the Chair of the Banking and Housing Committee
joining us. We are in the midst of votes right now so we will
have to be flexible as we come and go, but I want to thank you
very much for being here, Ms. Torres Small.
And I will turn to Chair Brown for some remarks before he
goes to vote.
OPENING STATEMENT OF CHAIRMAN SHERROD BROWN
Chairman Brown. Some brief remarks. Thank you, Senator
Smith. And Senator Rounds, thank you for standing up for
Director Thompson today on the floor. And I did not know until
today that Senator Smith was left-handed as I am, but I hit the
gavel with the right hand so maybe I will upgrade.
And thank you for the relationship the two of you have, and
you have had one of the most cooperative relationships as Chair
and Ranking Member that I have seen in this body, so thank you
for that.
Under Secretary Torres Small, nice to see you again. Thank
you for your public service.
This Committee has held a number of hearings about housing
challenges. What we have heard is the shortage of good-quality,
affordable homes is not just a big-city problem. Too many
families in rural America also face the same housing crunch.
The programs in the Rural Housing Service (RHS) provide
important affordable rental housing to lower-income families
and agricultural workers in rural communities. They also help
rural families and seniors access affordable credit to become
homeowners, and grants and loans to make critical repairs that
help people stay safely in their homes. These programs create
stable housing for families. They help
seniors who want to stay there, age in place. They help rural
communities thrive by providing the housing they need to
attract and retain businesses.
As valuable as this housing is, we know it is under threat.
RHS multifamily rental properties face over $5 billion in
capital needs. Many homeowners obviously need help in
maintaining their own homes. It is clear we need to invest more
in these critical programs for homeowners and for renters, I
would add in rural areas.
I have to attend another meeting but I thank Senator Smith
again, Chair Smith, and Senator Rounds. I look forward to
working with both of you and with you, the Under Secretary.
Thanks again.
Chair Smith. Thank you, Chair Brown.
Senator Rounds and I will now make opening statements and
then we will have testimony from Under Secretary Torres Small,
and we will get going.
OPENING STATEMENT OF CHAIR TINA SMITH
Chair Smith. Good afternoon. I want to start by just
acknowledging something really important, which is that small
towns and rural places are creative, entrepreneurial, diverse,
and wonderful places to live and to work and to raise a family.
They produce our food and our energy. They are hubs of
manufacturing and small business and education, and also health
care and arts and culture.
And when I travel to rural communities in Minnesota I find
hard-working, passionate people who love their communities and
want to make them even better. And yet we know that housing
remains an impediment for many rural towns and communities that
are working to attracts new businesses and new residents and
new talent. Because the reality is if you do not have a safe,
affordable place to live, nothing else in your life, or your
community, works--not your job, not your education, not your
health.
Housing challenges can be about families trying to find a
place to live for disabled individuals or seniors who are
living in overcrowded conditions or even without a home at all.
In other cases, it could be workers who want to take a job at a
grain elevator or a meat processor or a manufacturing facility
but the closest home they can afford is 40 miles away. One
hiring manager in Minnesota told me about how they spend almost
half their time helping new employees find housing instead of
focusing on the hiring job itself.
In Minnesota, in Pipestone County and Rock County--both sit
on the border with South Dakota--the income limit for a family
of four to get a Section 504 rural housing service loan is
about $37,000 a year. So this is not about helping wealthy
families. This is about helping working families acquire or
even repair just good places to live.
And it is really needed. Consider that over the past 20
years the average price of a home has increased by 23 percent
in Pipestone County and 41 percent in Rock County, and incomes,
needless to say, have not increased at nearly the same pace. So
these are the challenges that I hope that we can take on in
this Subcommittee and make progress on addressing, and that is
why we are holding this hearing today.
Since 1949, the Rural Housing Service has been a key player
in developing housing in rural America. The U.S. Department of
Agriculture is a trusted and well-known agency in small towns
and rural places across the country, and because of that they
have a unique ability to serve our Nation's rural communities.
So today I am hopeful that this hearing will be an
opportunity for us to examine the Rural Housing Service's
programs, figure out what we can do to support that work. In
addition, I would like to see what we can do to best position
the Rural Housing Service to address the current housing
challenges that small towns and rural places face in Minnesota
and South Dakota and all across the country.
There are a few issues, in particular, that I am hoping we
can focus on. First, we should consider how to address the
Rural Housing Service's portfolio of about 533,000 affordable
housing units that are financed with mortgages through the
agency's Section 515 program. This program was established in
1963, and provided the financing for these critical housing
units all around the country. But the program ceased making new
mortgages years ago, and as those mortgages are paid off the
properties' rental restrictions also expire, leaving tenants
who have an average income of about $17,000 a year, leaving
them at risk of having their rents raised to unaffordable
levels.
Minnesota was an early adopter of this program, and we now
have one of the largest concentrations of these properties in
the Nation. In 2019, I worked with Senator Shaheen to introduce
legislation to provide a modernized solution to support the
tenants of these properties. And so I hope that we can work to
enact legislation that would address this challenge.
Notably, this is not just an issue of economics. It is also
an issue of equity. In Minnesota, about 11 percent of
residences in Section 515 properties are Black, five times the
Black population in rural Minnesota overall. Latino and Native
individuals are also overrepresented among residents of these
properties.
Second, I am hoping to see what updates we need to bring to
the Rural Housing Service's lending programs so that they are
in line with modern lending practices. I understand that there
are several areas where administrative reforms could help
streamline housing development with a goal of getting more
housing units available in communities where they are needed.
And third, I am looking forward to hearing from Under
Secretary Torres Small about her agency's pilot program to make
home mortgages available through Native Community Development
Financial Institutions. Earlier this year this Subcommittee
heard testimony from Lakota Vogel of the Four Banks Community
Fund in Eagle Butte, South Dakota, and she shared with us her
experience with the Rural Housing Service pilot program that
allowed her to significantly expand mortgage lending on tribal
lands, where residents previously had a difficult time
obtaining mortgages.
Senator Rounds and I have been working to make this pilot
program permanent, and I am hopeful that our bill on this topic
will be able to move soon.
It has been more than 10 years since this Committee has had
a U.S. Department of Agriculture witness before us, and with
the farm bill coming up next year I know that now is a good
time for us to be taking a look at the Rural Housing Service. I
also really want to thank Senator Rounds for working so
collaboratively with me on this hearing. I know that we are
both very interested in finding ways that we can strengthen the
Rural Housing Service and address the important housing
challenges the people face in small towns and rural places.
Senator Rounds, you are recognized.
OPENING STATEMENT OF SENATOR MIKE ROUNDS
Senator Rounds. Thank you, Madam Chair, and I appreciate
you working with my office to find an appropriate time that we
could actually put together the Committee hearing today. And
thank you, Madam Secretary Torres Small for being willing to
testify today on ways to update the Rural Housing Service.
According to the Economic Research Service, 46 million U.S.
residents were living in rural areas in 2020, and made up 14
percent of the U.S. population. Rural communities face unique
challenges when trying to develop affordable housing. It does
not generally occur on a large scale in rural areas, and
construction costs are often higher which reduces the
incentives for private investment.
Additionally, housing characteristics of rural communities
differ. Homeownership rates are higher. Single-family homes
make up a larger share of the housing stock. A higher
percentage of rental housing is single family and prices are
lower.
A dwindling housing supply in rural areas in South Dakota
and across a lot of what I would suspect would be western
Minnesota, and across a broad section of the rural part of the
country, are having a direct negative effect on communities.
Schools have received record amounts of funding but they are
unable to hire new teachers because these teachers have nowhere
to live.
We need to support increasing supply through the
construction of new units and the utilization of manufactured
housing. USDA should explore cutting red tape for developers to
further promote construction, rehabilitation, and preservation.
We also need to maintain current dwellings. By investing in
the restoration of its current housing stock, rural communities
can address preexisting housing repair needs. In South Dakota,
RHS has played a large role in supporting affordable home
ownership and rental housing for lower-income families.
However, as we consider the Federal housing programs, the
overlapping nature of RHS programs and the role they play in
relation to other Federal housing programs always enters the
conversation. Several RHS programs are structured similarly to
corresponding HUD programs. These other Federal housing
programs often serve a larger number of rural residents than
the relatively smaller RHS programs, and since USDA has a focus
and expertise on rural issues it has demonstrated it is
effective at reaching rural populations. It is important,
however, that these resources remain focused on rural
communities and not bleed into metropolitan areas.
However, even with these successes I believe we can
streamline and modernize RHS to more effectively serve
residents. Over the last several decades, the number of loans
made through the Section 502 Guaranteed Loan Program has
increased while the number of loans made to the Section 502
Direct Loan Program has declined. The Direct Loan Program, the
more expensive program that
exposes taxpayers to a greater risk, was failing to reach
communities, more specifically, members of tribal communities,
in a meaningful way.
In order to better serve Native American communities, USDA
launched a 502 Lending Pilot Program in 2018, where USDA
partnered with Native Community Development Financial
Institutions to help Native American families realize that
dream of home ownership. Chairman Smith and I have a bill to
expand this pilot program to the rest of the Nation, and we
will continue working to get that legislation signed into law.
USDA should be utilizing innovative strategies like this
through public-private partnerships to make certain funds reach
the communities that really need them across RHS. USDA should
also look at ways to streamlining regulatory requirements for
programs and increase flexibility for the smallest communities
as cumbersome processes have deterred nonprofits from utilizing
programs.
I see a real opportunity to work together to make
bipartisan, meaningful reforms to the Rural Housing Service,
and I cannot think of a better partner than the Chairwoman.
Again, thank you to the Chairwoman for holding this hearing,
and I look forward to hearing your testimony, Under Secretary
Torres Small.
Chair Smith. Thank you very much, Senator Rounds.
Our witness today is Under Secretary for Rural Development,
Xochitl Torres Small. Under Secretary Torres Small was
confirmed to her position in October by voice vote. As Under
Secretary for Rural Development she leads the USDA's Rural
Housing Service, which will be the focus of today's hearing.
In addition, she also leads a number of other programs at
Rural Development to improve the economy and quality of life in
rural America. And I quote, ``From economic development to
public safety to broadband expansion, her work at USDA Rural
Development touches nearly every aspect of rural communities
across the country.''
Prior to her current role she represented New Mexico's
Second Congressional District, one of the largest in the Nation
geographically, and she is the granddaughter of migrant farm
workers and practiced law prior to being elected to Congress.
Welcome, Under Secretary Torres Small. Thank you for your
willingness to speak with us today, and we look forward to your
testimony.
Before you begin your opening statements I just have a few
reminders. This hearing will be in hybrid format, so Senators
may appear either in person or via video. Under Secretary
Torres Small, you will have 5 minutes for your opening
statements, and your full written statement will also be made a
part of the record.
And with that I will turn it over to the Under Secretary.
STATEMENT OF XOCHITL TORRES SMALL, UNDER SECRETARY FOR RURAL
DEVELOPMENT, DEPARTMENT OF AGRICULTURE
Ms. Torres Small. Thank you, Chairwoman Smith, Ranking
Member Rounds, and Members of the Committee for this
opportunity to discuss rural housing. Before I do, I do want to
acknowledge the massacre in Uvalde. As we talk about homes
today it is clear that 21 people, including 19 kids, did not
get to come home last night, and Rural Development has an
office in Uvalde and so Rural Development employees, as well as
the entire Nation, are certainly mourning as we try to turn
pain into action.
When we talk about rural living it is often left unsaid
that housing is a cornerstone for a good life. Having a stable,
safe home is part of what makes kids want to stay in the places
they grew up, and on the other end of life, having housing
options gives older people the ability to continue living in
their beloved hometowns, even as their mobility decreases with
age. Having the right place to live enables families to live
every chapter of their lives in the places they want to call
home.
The time of this hearing is especially poignant for me as I
watch people in my home State of New Mexico lose their homes to
wildfire. I know all of you have shared the experience of
seeing people you serve suffer while Federal recovery
assistance can take too long to deliver. It reminds me
painfully of something Ranking Member Rounds, you brought up,
the importance of flexibility and modernization when it comes
to housing programs.
So I would like to start today's conversation by saying
something I know we can all agree on. Housing is a cornerstone
of rural development and rural prosperity, just as it is with
urban development and prosperity. And I think we can recognize
together that sometimes rural housing can be overlooked or left
out when housing is addressed generally in the Federal
Government. But with this opportunity to have this discussion
10 years in the making, I just want to thank you both for your
commitment to making sure that does not happen on our watch.
I want to recognize that that can be a tall order, because
sometimes the place where people want to live simply does not
have livable homes. Still, there are some hurdles we must clear
more quickly. I recently met a woman in Mississippi who wanted
to return to her hometown to be close to her family, but her
options were shockingly limited. She ended up buying a house
that did not have plumbing and it had a hole in the wall that
was letting in the air.
So she decided the sacrifice was worth it so she could be
near her family, and knowing she could not tackle both projects
at once she decided to address the hole in the wall first, and
the plumbing was going to have to wait. And she did, because
when she sought Federal assistance it took years to access the
support that she was qualified to receive. In spite of that
enormous frustration, she maintained hope and a belief that she
had made the right decision to be near her family.
Her love of home was a beautiful thing to see, but her
experience also reinforced a huge frustration of mine with how
the Federal Government's antiquated systems can slow down
critical support for people in need. When an individual, an
organization, or a community quality for Federal assistance
they should not have to wait for years to get it.
The Rural Housing Service operates on a 30-year-old system,
where applicants must fill out paper forms, and then a loan
officer has to use their time to enter that information into
the system, sometimes multiple times. I spoke to a loan officer
recently in Washington who said she is haunted by the thoughts
of the people in need waiting in line while she spends hours
each day doing data entry and not able to get to them. This
scenario is the result of decades of neglect.
So we are now in a place where we need to both address our
immediate challenges as we also look to engage in an overdue
revisioning of how the Rural Housing Service can have a real
role in thriving rural communities. My sincere hope is that
today will support that work, where we find ways to both
deliver resources to serve the poorest of the poor and we move
toward making more intentional investments.
For example, I hope for a future where the Rural Housing
Service can better work with local development professionals to
make sure there is enough housing to support economic
development projects. After all, the opening of a manufacturing
facility or other hub for jobs does not mean much where there
are not enough places for workers to live.
I will conclude today by saying we should not have to
choose between making housing units that support new jobs and
economic opportunity and making sure that the place where
someone's grandma has the ability to grow old in her hometown,
because both of these things are important when it comes to
making a town a place that feels like home for people at every
stage of life. Both are worth the investment.
Thank you so much, and I look forward to the conversation.
Chair Smith. Thank you very much, Under Secretary. We will
now turn to a round of 5-minute questions, and I am going to
call on Senator Ossoff, who I believe is joining us virtually,
to ask the first round of questions.
Senator Ossoff, are you there?
Senator Ossoff. Yes, I am, Madam Chair, and thank you for
kindly allowing me to ask my questions at the top of the
hearing. Under Secretary Torres Small, welcome. It is a delight
to see you. I wish that we could meet, and I hope we will soon,
and thank you for joining today to discuss these important
issues.
I want to begin on the subject of language access and the
housing market. It is a big issue in rural communities in my
State. I hear about it pretty regularly, for example, from
Latino constituents, Asian American constituents. Just to give
you a sense, for example, in Stewart County, Georgia, over 15
percent of the population face language barriers.
And so what I want to ask you is first of all to comment on
the steps that you intend to take and are taking to help
Americans who face language barriers to navigate the housing
market and the housing system, and then ask you to commit to
working with my office and on a future visit to Georgia sitting
down with leaders in the Latino community, the Asian American
community, other communities facing language barriers, to
discuss what steps we can take together to help ensure all
Americans can access safe, affordable housing.
Ms. Torres Small. Thank you, Senator Ossoff, for your
question and for looking at a truly important issue, which is
working with people. In all of Rural Development and the work
that we do, rural housing is where we have the most interaction
with the final recipient of the services that we get to
provide, and it is so crucial that there is a real partnership
there. And the most fundamental piece of that is language, is
communication.
I was recently in Arizona where this issue came up,
because, of course, Spanish language and the accessibility
there is crucial. So we do have the Civil Rights Office that
helps to make sure that the documents are translated and that
there is also translation services available, but also working
to make sure that we have technical assistance from our Rural
Development employees, so that they can be there.
Because the written language is one thing, but when you
look at a 504 repair loan, for example, and you are working
with an elderly woman who may only speak Spanish, makes less
than $15,000 a year, sometimes you also just need someone to
sit down and have a conversation with her. And the ability to
do that reinforces how crucial having staff on the ground, that
are from those communities, to be able to provide that service.
So I certainly appreciate your comment about the importance
of language accessibility, and would love to visit Georgia to
speak with stakeholders about that.
Senator Ossoff. Thank you. I appreciate that commitment,
Under Secretary, and it sounds like we see eye to eye on the
importance of addressing this issue.
I want to raise, for your attention, a particular concern
for affordable housing in Cordele, Georgia. And just for your
awareness, a community in Cordele was approved for funds to
establish more affordable farm labor housing through the USDA
514, 516 programs. That project was approved by USDA in 2018.
It was delayed in construction by the pandemic and some
processing changes at USDA. Since then, the estimated cost has
increased significantly.
I am going to follow up with you and get you the details.
More broadly, what I would like is a commitment from you that
on that future visit to Georgia you will engage with my office
and local leaders to address the specific matter of affordable
housing in Cordele, Georgia, and to have that broader
conversation about improving access to affordable housing
throughout rural Georgia.
Ms. Torres Small. Senator Ossoff, I really appreciate you
bringing up this issue. Although it is a specific one it is not
unique. Across the country we have heard from our partners who
are seeing increased construction costs and the supply chain.
And so we are responding to that in a few ways. We are seeing
it both in self-help and, to your example, in farm labor. And
for farm labor there is a very specific route that we are
trying to address it.
So with some construction projects they were awarded--and I
know I am about to run out of time--but they were awarded under
a NOFA that had a cap, a limit on how much we could award. So
the only way we could extend that is if we recompete. And so we
are working very closely with the stakeholders you mentioned to
identify the opportunity to recompete that, and we feel that
they will be very strongly situated to be able to make the case
for those additional cost overruns.
We are also encouraging them to find other partners as well
in that financing, but working very hard to partner with them
because all of us are suffering the impacts of the supply
chain.
So for that specific issue I want to make sure that our
teams are working together closely so that I am not weighing in
on an application process, but certainly would love to further
discuss the larger issue of housing in Georgia when I am able
to visit.
Senator Ossoff. That is great. I am looking forward to it,
and in places like Dooly, McIntosh, and Warren counties we are
seeing folks leaving those communities because housing is
becoming unaffordable. So looking forward to working with you
to address these concerns that my constituents raised with my
office and with me every single day, and I appreciate your
presence. I appreciate your leadership.
I yield back.
Chair Smith. Thank you, Senator Ossoff. Senator Rounds.
Senator Rounds. Thank you, Madam Chair, and Madam Under
Secretary, thanks for being here.
As I have talked with rural stakeholders back home that
help administer USDA programs a consistent complaint that has
been--it has really been the burdensome administrative process
and the lack of flexibility in these programs, to the point
that many have just stopped using them.
Could you discuss ways the USDA could increase flexibility
for our smallest communities to promote uptake of USDA RHS
programs?
Ms. Torres Small. I deeply appreciate the question and your
focus on how do we better serve rural America, because as we
talk about modernizing Rural Development it is about making
sure there is a Rural Development that America deserves. So
when I mentioned that employee from Washington State, she was
coming from the private sector, where they have the best tools
and the most recent whistles to serve a clientele. So the idea
of having someone have to hand fill out a paper application was
unique to her.
So the more we can find ways--for example, there, updating
the UniFi system so that there is not that burdensome process
both for the applicant as well as for the loan specialist. I
think that is one of the key places where we can really advance
our service there.
But we also see it on the servicing side. So if you do get
a loan with Rural Development right now there is not a way for
you to go in and check your balance online in all
circumstances. Instead you have to go through the Servicing
Center and wait on the phone, and sometimes wait for a long
time. So the Servicing Center is another place where we want to
break down some of those barriers and provide better service.
Senator Rounds. Thank you, and I want to get into it a
little bit more in terms of the efficiencies that could be
found, or at least the flexibility that could be found. But let
me run with that. In its annual reports on opportunities to
improve the efficiency and effectiveness of the Federal
Government, GAO has repeatedly identified the need for better
collaboration and coordination between housing and economic
development programs at HUD, USDA, and the Commerce Department.
How do you plan, or maybe it is not even on your radar
screen yet, but how would you plan to literally coordinate
between HUD, USDA, and the Department of Commerce to find a way
to work more effectively with other Federal agencies,
particularly HUD, to better meet the housing needs of America's
rural communities? Ever had the opportunity to sit down and try
to coordinate those or to look at the overlaps and so forth
between the different programs?
Ms. Torres Small. Coordination is such a crucial subject,
and specifically around housing I think there are a lot of
opportunities. I will just discuss two very briefly.
Actually, our Assistant Administrator for Rural Housing,
who works in multifamily housing, comes from HUD, so she has
been incredibly helpful in identifying potential ways to
leverage that relationship. One example is we have vouchers. If
a multifamily housing unit exits the program and is no longer
receiving the rental assistance that we are able to provide for
those programs we have issued Rural Development vouchers. But
that is creating a whole new program within Rural Development
to administer that, and it can be really cumbersome, and it is
actually just not a key thing we do all the time.
So in the President's 2023 budget we have talked about for
new vouchers actually working with HUD, for HUD to administer
those vouchers, because they already have a program set up that
is far more efficient, that is far more robust.
The other example is actually in the decoupling, as an
opportunity there. So as we look for how the rental units might
access more funding to, as you mentioned, just the crucial part
for renovation and rehabilitation of rental unit projects, if
we are able to decouple rental assistance they can keep their
rental assistance and apply for the tax incentives that can be
achieved to further finance those preservation projects. And so
it is another way we can continue to work better with the
Treasury, or even State programs, for tax-based incentives for
that preservation.
Senator Rounds. OK. This kind of leads me into another
question that we have got with regard to households that are in
rural areas are often excluded from accessing Federal housing
assistance, including USDA resources, because of how area
median incomes and associated program eligibilities are
calculated. If an individual already lives in a low-income
community, oftentimes only the lowest of the low-income group
can qualify. It seems kind of strange, low income to begin
with, and then you have got to be in that lowest band to
qualify.
Now USDA has started to work to correct the disparities
that these rules and calculations create using a policy known
as income banding, which allows households of various sizes to
qualify for programs as if they were larger households.
Is there a more permanent and holistic solution to make
certain that USDA and other Federal housing programs more
efficiently and fairly reach the most disadvantaged households
and communities in these rural areas?
Ms. Torres Small. Thank you for the question, and I would
love to follow up with you and make sure that my staff is
following up with you on this. Across the board, median area
income has been--it does not always exactly capture the
picture. And so as you have ideas or questions about what might
capture that picture better we would love to provide technical
assistance.
Senator Rounds. Yeah, and my time has expired. In fact, I
am past it. But I just want to say thank you for that, and I
will take you up on that, because I think that is one of those
items nobody thought about that as being a problem but
apparently it is, and it is one thing that perhaps we could
work together on and find a path forward.
Thank you, Madam Chair.
Chair Smith. Thank you very much, Senator Rounds.
Is Senator Tester online? No? OK.
I want to just follow up on your line of questions. I think
that there is just a lot of common ground here as we think
about modernization and streamlining and making these programs
actually work the way everybody wants them to work. So let me
just follow up on this a little bit.
You are talking about some of the frustrations that people
have trying to get good service, and I also understand that one
of the problems is that the Rural Housing Service is using
software that in some cases is decades old. In fact, sometimes
there is not even really technology. You cannot even really
support the technology that exists anymore. So of course it is
no surprise that you end up with kind of workarounds like you
described, and like I have heard from my constituents in
Minnesota.
But I also know that the solution is not always just new
technology because you need, at the same time, to rework the
underlying work processes so that you are not just putting new
technology on old work processes that are extremely cumbersome
and need to be modernized and then you are just sort of
speeding up what is already not a very efficient process.
So, Under Secretary, could you address that issue, and how
much of this is around technology and how much of it is around
really addressing the underlying work process that needs to be
streamlined and improved and made more efficient?
Ms. Torres Small. They are both crucial issues, and in some
places they are connected. So if you look at the 502 Single-
Family Housing Direct Loan Program, in order to address the
work processes we need the technology to do that, because right
now there are inefficient work processes that are built to
compensate for that old technology.
In other places there is, I think, an opportunity to
address work processes now, also recognizing that new
technology answers may be in the future, a few years maybe, and
so finding workarounds for now that are better processes that
can then easily move to a different technology in the future
makes sense. And I think there are a few places where that
might be an option. I would be happy to have more discussion
with you about that, specifically in the preservation
conversation. One of the challenges is making sure we have
enough staff to administer the enormous investment that we need
when it comes to preservation, and part of that is having
efficient work processes to make that work.
Chair Smith. And I know that Senator Rounds and I are very
interested in understanding like what part of this do you
already have administrative authority to accomplish on your own
and then where do you need support and where specifically do we
need to do something legislatively to give you the authorities
or what you need in order to get work done that you need to be
able to get done. So we can follow up on that as we think about
what work we want to do legislatively.
I want to ask about the Section 515 program. As I said in
my opening statements, this is 16,000, I think, rural rental
properties, translating to about 533,000 affordable units that
have been financed through the Rural Housing Service's Section
515 program. And as loans for these properties are maturing,
more affordable units are existing the program, and then they
are losing affordability protections for tenants. And existing
properties may lose rental assistance funding, and some
properties are just no longer required to keep rents
affordable, meaning that residents could face pretty serious
dislocation.
So, Under Secretary, could you talk to us about what
incentives can Rural Development and the Rural Housing Service
offer property owners to remain in the 515 program, and what
are you thinking about to address the large number of 515
properties that are projected to exit the program soon as their
mortgages mature?
Ms. Torres Small. I am so grateful that you are bringing
this up, because as I look at the sustainability of the Rural
Housing Service this is one of the key things that keeps me up
at night. We are at a break in terms of the path that we are
currently on, and if we continue down that path we could lose
three-quarters of our housing stock by 2050. Right now 68
percent of our housing stock is over 30-years old, and that 30-
year-old mortgage is what impacts the ability for them to stay
in the program.
So thankfully there has already been in an investment in
the preservation program, and I really appreciate your efforts
to look at permanently authorizing that, recognizing that right
now it is a pilot. Maybe it is something that needs to extend
log into the future. And so I am happy to provide technical
assistance on that. It is a crucial component, and the
importance of it was recognized in the Build Back Better
legislation.
We also need to look at decoupling in order to provide
other opportunities for preservation, through other financing,
as well as new construction, recognizing that even if we kept
all the housing units we have right now it does not fill the
housing need in rural America.
Chair Smith. Great. Thank you. Thank you so much.
So, Senator Rounds, Senator Tester is going to be here in
just a few minutes, and I know the vote started about 7 or 8
minutes ago. Would you like to ask another couple of questions
while I wait for Senator Tester?
Senator Rounds. I have just a couple of thoughts, and you
have answered the questions that I had prepared, but it does
bring up the 502 program, which, and under the direct or using
contract agreements, we did the pilot program, and what we
found was the pilot program seemed to work fairly well, and
using independent organizations that understood their
communities, particularly in tribal areas, when people need a
loan or they are looking at the possibility of different loans,
the availability to have somebody right there locally who can
help them work through, help with the paperwork, help put
everything together, cut through the red tape, and to do it in
an ongoing fashion so they know it because they do lots of
them, appears to us to be a really good model to really expand
on.
I am not sure if you are familiar with the program, but
could you talk a little bit about what might be good about it
and what you might see as some challenges if we were to go
nationwide with it?
Ms. Torres Small. It is a really exciting opportunity, and
what I love about it is it focuses on something that Rural
Development has long been interested but is really working to
prioritize, and that is local partnerships. How do we invest
more with those trusted partners on the ground who have
existing relationships with people, who otherwise do not
necessarily know about Rural Development, or maybe do not feel
comfortable interacting with the Federal Government? And having
that partnership on the ground is a great just voucher for
them.
I know when my husband and I bought our first house we
asked our friend, who had bought a house before us, ``Who
should we talk to, to finance it?'' And so having someone that
you trust is really important, and we are seeing that impact.
Nineteen families now have homes because of that pilot project
in South Dakota. It is very exciting.
We are in the process now where we are going to start
receiving the loan payments, so we will keep you abreast of how
that part is working. We are very optimistic, and just want to
make sure, as we look to the other opportunities to extend the
program, how that part works. But we are very optimistic.
The other thing I will say is RHS is where a lot of those
partners get their start, where those nonprofits or other local
partners are able to work with Rural Development and receive
the funding that is necessary to serve their communities. And
by investing in Native CDFIs you are also creating a financial
partner, where a lot of Indian Country does not have access to
a local bank or a local financing partner. So it is a really
exciting investment, and we look forward to continuing to work
with you on it.
Senator Rounds. And I thank you for that. I think the other
part of this that sometimes gets missed is these organizations
at the local level are looking to find whatever avenue is
available for these families. Not one single program fits
everybody's plans, but to be able to access this particular
program, using local representation, clearly has a future in
our opinion.
The other thing is that on a community-by-community basis,
in many cases for these rural areas that have a real lack of
housing--and I am talking about the tribal lands, in
particular--a lot of the homes are going to be put on tribal
trust, where the ownership of that particular thing may not
start out in the name of the individual that has the actual
home itself. So these local organizations know how to work
through that to make that happen, to coordinate, to get the
appropriate title so that they can access the 502 program. And
I think that is a really important part of this that has held
up development in some of our Native American locations across
the country, particularly with the treaty tribes, which are
some of the highest-poverty reservations in the entire Nation.
So I would just encourage that, you know, whatever it takes
to be able to access this is going to really improve the
economic outlook for families that, in some cases, it may be a
single grandmother who is making the application but she will
end up with, perhaps, several different generations living with
her, in a home, and it may be the best home that two or three
generations could have access to. So I really encourage that we
find a path forward across the country for these types of
developments.
Ms. Torres Small. Thank you for that, and it reinforces for
me that this should also be a learning partnership. So as
Native CDFIs find ways to deal with some of the tribal trust
issues that we can also learn from that and do it better on our
end as well.
Senator Rounds. Thank you. Thank you, Madam Chair.
Chair Smith. Thank you, Senator Rounds.
Senator Tester has been waylaid so I am going to ask one
more question and then we will wrap up, unless there are any
other Senators who wish to ask questions. And I want to just
follow up in this interaction between HUD and RHS that Senator
Rounds brought up initially.
You know, in my conversations with housing advocates in
rural places they share with me the frustrations with delays
they have encountered with working with RHS, and this is
especially around transitioning properties from private
ownership to nonprofit entities that needs to happen. The
Southwest Minnesota Housing Partnership, for example, has been
attempting to transfer properties since 2016.
So it is my understanding that HUD actually has some
systems in place that would help streamline these processes. So
my questions are this. What authorities does RHS have that
mirrors--or should have--what authorities should RHS have to
mirror what HUD can do, and do you have any recommendations to
this Subcommittee on what RHS needs to do that could expedite
this process?
Ms. Torres Small. I would love to follow up and make sure
my staff follows up with your staff, specifically on transfer
from commercial to nonprofit. That is not actually an issue I
am familiar with in terms of our authorities versus HUD, but I
think that is wonderful. And the more that we can have an
engagement on the types of authorities that HUD has that we do
not, with your partners, I think the better we will be able to
respond to this work because I think it is a crucial one.
Another example where we are seeing authorities in HUD that
we do not have is with foreclosures, and it can actually impact
our ability to have a quick transition to return that housing
stock to the rural marketplace, whereas HUD has that authority.
So I think we should continue to identify these places
where we could potentially work together and provide that
technical assistance to better do our job in the future.
Chair Smith. I think that would be very helpful. We will
figure out how to follow up on that. We want to make sure that
these programs are working well together. There is a unique
capacity that USDA has as a trusted source in rural communities
that we want to take advantage of for providing improved
service, but looking for ways where there could be better
collaboration is good.
Thank you very much.
And Senator Rounds, unless you have further questions I
want to thank you very much, Under Secretary Torres Small, for
being with us here today and providing your testimony. Before
we adjourn I would like to enter into the record a statement
from the Bipartisan Policy Center.
Without objection, so ordered.
For Senators who wish to submit questions for the record
those questions will be due 1 week from today, which will be on
Wednesday, June 1st, and for our witness you will have 45 days
to respond to any questions for the record.
Thank you again, and with that this hearing is adjourned.
[Whereupon, at 3:33 p.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF XOCHITL TORRES SMALL
Under Secretary for Rural Development, Department of Agriculture
May 25, 2022
Chair Smith, Ranking Member Rounds, and Members of the
Subcommittee, thank you for the opportunity to come before you today to
discuss the state of the Rural Housing Service (RHS) and its role in
supporting housing in rural America. Well-built, affordable housing is
essential to the vitality of communities in rural America--it allows
generations of families to live their lives in the place they want to
call home. The Biden-Harris administration has been clear about its
commitment to a sustainable and prosperous rural America, and at the
U.S. Department of Agriculture's (USDA) Rural Development mission area
and Rural Housing Service in particular, we are working to do our part.
Rural housing faces unique challenges with respect to
affordability, preservation, and modernization. Large-scale rural
housing developments aren't often supported by private industry,
populations are not aggregated enough to sustain high-volume units, and
construction and maintenance costs are higher than in urban areas. \1\
For many Americans, home ownership is a lifetime goal, and a home is a
generational asset. Home ownership is closely tied to the ability of
Americans to build wealth and security, and deeply rooted in the fabric
of rural communities. Access to a safe home can reduce adverse health
outcomes, \2\ help to mitigate food insecurity, \3\ and bolster
financial well-being.
---------------------------------------------------------------------------
\1\ https://nlihc.org/sites/default/files/Housing-Needs-in-Rural-
America.pdf
\2\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7725589/
\3\ https://equityhealthj.biomedcentral.com/articles/10.1186/
s12939-019-1114-z
---------------------------------------------------------------------------
The Rural Housing Service's core programs and authorities are
incredibly impactful. But our programs are rooted in the title V of the
Rural Housing Act of 1949 and infrequently adjusted or updated, and
rarely are they considered holistically and with a comprehensive view
of what it will take to keep affordable and safe housing in rural and
Tribal communities. This hearing presents an opportunity to take that
wider view and ensure the Rural Housing Service is the transformational
partner rural and Tribal communities need today.
The Rural Housing Service works to support people in their pursuit
to make this American dream a reality. The Rural Housing Service offers
a suite of programs to help support rural housing needs in rural
America. Single-Family Housing Programs give families and individuals
the opportunity to buy, build, or repair affordable homes located in
rural areas. Through its Multi-Family Housing Programs, the Rural
Housing Service provides affordable multifamily rental housing in rural
areas by financing projects geared for low-income, elderly, and
disabled individuals and families as well as domestic farm laborers.
Multifamily 515 construction loans are coupled with Rental
Assistance to provide low-income tenant-based housing. The number of
515 direct loans have fallen over the past two decades, as tenant
rental assistance has grown. The cost of maintaining the RA contracts
and funding them annually increases over time and consumes the majority
of USDA RHS funding--resulting in the erosion of funds available for
new housing and preservation at historically static levels. This has
been true even as loan subsidy costs have come down over the last 10
years, and is exacerbated by the increase in housing costs and building
materials. Meanwhile, the need for low-income housing in rural areas
continues to be an issue.
The Biden-Harris administration is committed to changing this by
supporting rural housing and the Rural Housing Service's portfolio and
mission. The proposed Fiscal Year 2023 budget includes Significant
investments in the Rural Housing Service, including $1.773 billion for
USDA Multifamily Housing Programs, an increase of $256 million over the
2022 enacted level. This significant investment would help address
housing insecurity and rent burdens in rural communities. This funding
will be prioritized for projects that improve energy or water
efficiency or facilitate climate resilience. Additionally, the Budget
proposes $1.5 billion in loan level for low-income single-family
housing loans, an increase of $250 million, and proposes a critical
increase of $204 million for Rural Development to revitalize its
staffing and technological capacity.
When appropriately resourced and given the tools needed to
modernize, improve customer service, and allow for much-needed
flexibility, the Rural Housing Service can be an invaluable resource
for rural communities struggling with affordable, safe, and energy
efficient housing. I look forward to working to tackle these issues and
partnering with Congress to keep people in your communities.
Flexibility
The Rural Housing Service's Multi-Family Housing Program provides
affordable multifamily rental housing in rural areas, supporting low-
income and elderly individuals. We extend our reach by guaranteeing
loans for affordable rental housing designed for low- to moderate-
income residents in rural areas and towns. As a cornerstone of our
approach to affordability, we subsidize rents for low-income tenants in
our projects who cannot afford to pay their full rent
We aim to preserve our portfolio by restructuring loans for
existing rural rental housing and off-farm labor housing projects to
allow for sufficient reserves to meet major repairs and improvements
over the lifetime of the property. On a yearly basis we also provide
grants to sponsoring organizations to repair or rehabilitate housing
for needy families.
However, there is an imminent need to both more aggressively
preserve Multi-Family Housing's existing portfolio and build new stock.
RHS Multi-Family data indicates that $10 billion in Multi-Family
Preservation and Revitalization funding will be needed by 2033 to
preserve 137,000 units. The Rural Housing Service currently has
approximately 400,000 units within its portfolio and in the absence of
robust funding for Multi-Family Preservation and Revitalization, we
will lose 333,780 units by 2050.
Moreover, as more Rural Housing Service-financed property mortgages
mature and exit the portfolio in the coming years, owners will no
longer be required to meet affordability standards or maintain the
property to USDA standards. That's why it is critical that the Rural
Housing Service also be afforded the resources to build its housing
stock to ensure that there is equitable access to safe and affordable
housing in rural areas
Last, Rental Assistance plays a role in maintaining good
partnerships with existing properties and new investments. By
decoupling rental assistance from property debt, the Rural Housing
Service can maintain affordable housing opportunities, even as Multi-
Family Housing loans are paid off, and provide more flexibility for
Multi-Family Housing Preservation and Rehabilitation funds.
President Biden's Fiscal Year 2023 budget sets a strong course for
these solutions. The FY23 Budget includes an authorization to decouple
section 515 and section 514 from the Rental Assistance program. Because
the Section 515 Rural Rental and 514 Farm Labor Housing portfolios are
aging, mortgage maturities will accelerate significantly from 2027
through 2041, and RA support will also be lost. There is an urgent need
to find solutions to allow these properties to recapitalize, perform
needed rehabilitation and repairs, and be preserved as quality
affordable housing assets for many years to come.
Current statute requires a property to have a USDA mortgage to
receive Rental Assistance (RA). If the mortgage is paid off through
prepayment or maturity the property can no longer receive RA. Because
keeping RA in place requires keeping the USDA mortgage in place,
utilizing new private debt or equity to recapitalize and preserve these
properties is very difficult, costly and requires complicated
subordination agreements.
Allowing the USDA debt to be paid off while keeping the RA in place
is essential to facilitate preservation at scale across the Multifamily
housing portfolio. RA is a critical component underlying all modern-day
affordable housing platforms and is needed to achieve rents that will
support recapitalization. RA is often included in State housing finance
agency prioritization for receipt of low-income housing tax credits and
other local resources. When the Section 515 mortgage matures or
prepays, the debt load of the property is reduced, allowing borrowers
to take on additional third-party debt to facilitate recapitalization.
The budget also includes a proposal to permanently authorize Multi-
Family Preservation and Rehabilitation, which has been a demonstration
program since 2006. The multifamily housing preservation and
revitalization program is an effective tool to RD's existing
multifamily housing portfolio. The average age of rental housing in the
section 515 portfolio is 28 years and in need of revitalization, but
many projects do not have sufficient reserves to fund ongoing
rehabilitation. Permanently authorizing these financing tools will show
the Government's commitment to low-income rental housing preservation
in rural America.
Rural housing challenges across the country are unique, and the
task of preserving and building rural housing stock is steep--a
challenge that benefits from statutory flexibility to deploy resources
and tailor unique solutions.
Customer Service
The Rural Housing Service's Single-Family Housing Programs support
the ability of rural families and individuals to repair, purchase and
construct homes. These programs offer qualifying individuals and
families the opportunity to purchase or build a new single-family home
with no money down, to repair their existing home, or to refinance
their current mortgage under certain qualifying circumstances. There
are also programs to assist nonprofit entities in their efforts to
provide new homes or home repair to qualifying individuals and
families.
The Section 504 Home Repair program provides loans to very-low-
income homeowners to repair, improve or modernize their homes or grants
to elderly very-low-income homeowners to remove health and safety
hazards. The Section 502 Direct Loan Program assists low- and very-low-
income applicants obtain safe and sanitary housing in eligible rural
areas by providing payment assistance to increase an applicant's
repayment ability. Payment assistance is a type of subsidy that reduces
the mortgage payment for a short time. The amount of assistance is
determined by the adjusted family income.
In Fiscal Year 2021, the most common Section 504 applicant
composition was a single, elderly female with no dependents making
$15,700 per year. The most common Section 502 applicant was a single
female with two dependents making $38,190 per year. These represent
some of the country's most vulnerable populations and need the most
support in accessing Rural Housing Service Programs. These are also
populations that often reside in historically underserved communities
and can be most positively impacted by Rural Housing Service technical
assistance to ensure that they have access to our programs.
In a colonia in the Rio Grande Valley in Texas, I saw the value of
this technical assistance in action. I met an elderly couple who had
applied for and secured a Section 504 grant to repair damage to their
roof. They were only able to apply for and secure a Section 504 grant
because a Rural Development employee took the time to sit down and help
them with the application. Their application had a ripple effect--they
told their neighbors, and soon the whole neighborhood had taken
advantage of the program and were improving living conditions within
their neighborhood. This tells a powerful story, but one that is only
possible when Rural Housing Service is adequately staffed and
resourced.
Our Single-Family Housing and Multi-Family Housing staff are
dedicated to our mission and customers. However, employees are unable
to keep up with demand due to inadequate resources which result in
delays and lost opportunities for our customers. Single-Family Direct
programs have suffered staffing losses across State offices over the
past several years and many States have lost their most experienced
staff to retirement and outside opportunities. On average there are
only 15 Single-Family Housing Full-Time Employees (FTEs) per State with
staff leveling ranging from 3 to 44 FTEs. Multi-Family has an average
of only 7 FTEs per State.
Customer demand remains strong, yet States are often either unable
to meet demand or do so in a timely manner because of inadequate
resources. Rural Housing Service needs more resources and flexibility
to fully deliver the wide variety of complex programs appropriated by
Congress. To achieve that, we are hoping to secure permanent authority
for the Rural Partnership Program that would give RD the ability to
work with rural communities through third-party technical assistance
providers to develop comprehensive economic development plans and then
implement such plans in a one-stop-shop approach. Further the grants
portion of this program will help with building the capacity of third-
party technical assistance providers who can help other rural
communities outside of the program. In addition, as we ramp up the
Rural Partners Network to shore up capacity and outreach from within
the RD field staff, funding flexibility is needed to fully realize this
interagency network of Federal staff whose job is to work directly with
communities. As the Federal entity charged with coordinating rural
policy, RD is well positioned to serve as the hub for this network, but
it will need to work in partnership with other Federal agencies and in
certain cases transfer funds to those agencies so they have right staff
to support this network. Legislative language is needed to ensure
transfer of funds for the Rural Partners Network to other Federal
agencies is authorized.
In addition, for servicing our inventory property, it would be
useful if we could contract with a National Servicer, but the program
loan requirement hinders our ability to achieve that efficiency. If RHS
could get authorization to facilitate the sales of Real Estate Owned
(REO) properties by eliminating the distinction between program and
nonprogram REO properties that use up administrative resources and
creates inefficiencies in liquidation of these properties; and revise/
remove the priority to program eligible borrowers. Determining whether
potential buyers are eligible for program loans significantly burdens
administrative resources, the historical data shows that the increased
expense results in very few REO properties ending up with program
borrowers (about 10 out of 1000 REO sales annually).
Modernization
The Rural Housing Service supports community infrastructure and
builds safe and affordable housing across rural America. One of the
strengths of Rural Development and the Rural Housing Service is that
unlike many other Federal agencies, we have a presence in the
communities we serve through our State and area offices. With over
4,600 ``boots on the ground,'' Rural Development identifies and
provides rural assistance that reflects the needs of local communities.
Congress recognizes this special relationship and has entrusted the
Rural Housing Service to invest in rural communities by increasing
program levels each year. We are grateful to Congress for its trust in
our highly effective stewardship of the funding and authorities they
have entrusted to us.
The Rural Housing Service has a wide range of tools and
authorities, but there are ways that these programs and authorities are
dated, cumbersome and can make it so that working with Rural
Development is harder for communities than it should be. From providing
technical assistance to helping communities employ proven development
strategies and finance methods, Rural Development could be an even
better partner to rural and Tribal housing customers. To that end, I am
eager to work with Congress to ensure that the Rural Housing Service is
a modern, customer-oriented organization with the programs, tools, and
skills that ensures we can meet communities where they are and offer
the full scope of expertise and support rural communities' housing
needs today.
A perfect example of how, when adequately resourced and staffed,
the Rural Housing Service can be a partner in transformation is the
Emergency Rural Health Care Grant Program. Congress and President Biden
provided $500 million through the American Rescue Plan for USDA to
create the Emergency Rural Health Care Grant Program. The program
provides $350 million to help rural hospitals and local communities
increase access to COVID-19 vaccines and testing, medical supplies,
telehealth, and food assistance, and support the construction or
renovation of rural healthcare facilities. It also provides recovery
funds that compensate for lost revenue or staffing expenses due to
COVID-19. In addition, the program provides up to $125 million in
grants to plan and implement models that help improve the long-term
viability of rural healthcare providers, including healthcare networks
that allow rural providers to collectively address community challenges
and develop innovative solutions. The interest for this new grant
program speaks directly to the tremendous need for this support from
rural healthcare providers.
The Emergency Rural Health Care Grants also represent an
administrative success for the Rural Housing Service. The American
Rescue Plan provided a five percent set aside for staffing, technology,
and technical assistance for applicants. This has allowed the Rural
Housing Service to hire industry-specific staff, create a user-friendly
application portal, and provide technical assistance for our customers
to apply in record time. This allowed the Rural Housing Service to
temporarily hire much-needed staff, access modern technology systems,
and provide technical assistance to ensure that this program reached
historically underserved communities without the capacity to leverage
these resources. While some Federal programs of this scope often take
years to stand up, the Rural Housing Service understood the urgency of
supporting rural hospitals immediately. We stood up a brand-new
approach to healthcare support in less than 6 months, speaking to the
possibilities when programs are appropriately resourced and given the
capacity to administer them.
Conclusion
Housing is the cornerstone of rural America--it is not just the way
to keep a roof over rural Americans' heads but is also an economic
driver and support system for our rural communities.
The Rural Housing Service has the tools to be a partner with these
communities--helping an elderly individual repair a family home,
supporting a family to purchase their first home, or providing
affordable farm labor housing in agricultural communities. These tools
cannot be fully deployed without additional resources and authorities
to modernize the Rural Housing Service, support staffing to ensure that
we are providing top-tier customer service and providing flexibility to
allow the agency to adapt in the face of unique challenges.
I am deeply grateful to the Chair and Ranking Member for holding
this hearing--it shows how critical the need is in rural areas, and how
eager Congress is to be a partner in supporting affordable and safe
rural housing. I ask that as Congress deliberates solutions to the
American housing crisis, rural America--and the Rural Housing Service--
remain a part of the conversation. I look forward to working with this
Subcommittee to support our rural communities.
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM XOCHITL TORRES SMALL
Q.1. In 2013, USDA, under the Single-Family Home (SFH) program,
funded 860 guaranteed loans and 53 direct loans. In 2021 USDA
SFH program showed a total of 428 loan transactions. Is this
decrease due to a decrease in demand or due to other factors,
like Senator Rounds referenced at the hearing--USDA's Rural
Housing Service entails such a burdensome administrative
process and lacks flexibility in programs that communities stop
using them. What specific steps are you taking to address the
issues in the administrative process?
A.1. While Nevada's (NV) obligations decreased between fiscal
years (FY) 2013 and 2021, this was not reflective Nationally.
Historically, the Section 502 Direct program is oversubscribed.
All USDA SFH Direct appropriated funds were obligated during
the 2013-2021 period, with FY 2013-2014 being Nevada's highest
obligation years.
The declining obligations in NV were largely due to
staffing challenges and leadership changes. The absence of
sufficient staff limited the State's ability to timely process
applications and market programs to vital stakeholders (such as
real estate agents, lenders, nonprofits, prospective
homeowners). Staffing issues were exacerbated by COVID-19,
which also took a national toll on the traditionally in-person,
field-based delivery of Section 502 and 504 programs.
Despite COVID-19, NV made significant strides in addressing
resource gaps. In 2019, a new SFH Program Director was
selected, new staff were onboarded, and an aggressive marketing
strategy was deployed to promote both 502 and 504 Direct
Programs. Rural Development in NV, however, remains optimistic
that improved marketing will lead to an increase in
applications/obligations. As an earlier indicator of marketing
efficacy, Rural Development in NV also experienced a FY 2021
increase in Section 504 loan and grant program utilization.
Section 504 programs serve our largest rural population(s) of
elderly and under-resourced communities of color.
Additionally, SFH implemented a nationwide modernization
effort to reevaluate and redefined each State's administrative
and operational needs. The modernization effort seeks to update
organizational structures and will replace outdated
technology--including an overhaul a 30-year-old legacy loan
origination system (UniFi). Essentially, modernizing SFH's
staffing framework and origination technology, will replace
burdensome administrative processes and manual workarounds to
fully automate and streamline the Direct Program. Staffing is a
top priority for USDA leadership and the agency will continue
to address burdensome administrative processes that create
delays in serving borrowers.
Q.2. All servicing and loan-making for multifamily housing has
been regionalized at USDA RHS. As a result Nevada's Rural
Housing Authority has to work with outsiders located in other
States who know little to nothing about rural Nevada's market
and projects. The Nevada Rural Housing Authority stated that
for a single project with USDA's RHS, their team had to work
with a loan officer in one location, an architect in another,
an engineer in another, and an appraiser in yet another
location. With each of these specialists located in different
places, information was funneled through a loan processor who
had to interpret back-and-forth between these specialists and
staff at the Nevada Rural Housing Authority. After this
laborious and circuitous process, all this was sent to
underwriting in DC, and, again, each staffer who worked on this
request had to get re-acquainted with the project from scratch.
What changes can you make to increase efficiency?
Would you consider unconsolidating/changing the
current regional model?
What resources would you need to implement this
change?
A.2. RHS leadership holds customer service and communication as
top priorities for the agency. As of June of 2022, RHS
leadership directed the Multi-Family Housing Division to begin
the process of hiring 35 additional Full-time Employees (FTEs).
The prioritization of Multi-Family Housing staff, which
includes staff that are field-based, will serve as a critical
step in increasing efficiency in the Multi-Family Housing
portfolio as well as communication with Multi-Family housing
stakeholders. Additionally, RHS will continue to improve
communication processes between Rural Development State and
national office employees and identify opportunities to improve
the customer experience and identify burdensome processes. RHS
leadership will continue to strengthen relationships with State
Housing Finance Agencies (HFAs) to identify potential
collaborations. Most HFAs currently participate in both RHS
Single-Family and Multi-Family Programs, and the agency plans
to continue dialogue with HFA leaders to identify new
opportunities to increase efficiencies in workflow and develop
and preserve more affordable housing.
Q.3. Following up on Senator Ossoff's questions on language
access, can you please share how Nevadans who face language
barriers can access and navigate Rural Housing program
services? Please share how many bilingual staff or translators
are able to assist with inquiries in the Nevada service area.
A.3. RHS utilizes multiple sources to ensure individuals facing
language barriers can access and navigate Rural Housing Service
Programs. These sources include translated Single-Family and
Multi-Family Housing documents that are available online and
located at RD State Offices. RHS works to ensure compliance
with the Limited English Proficiency Guidance from the
Department of Justice and works with USDA's Office of Civil
Rights frequently on issues related to language barriers.
Q.4. The Administration has capitalized on the requirement for
an interagency Rural Council through its new Rural Partners
Network pilot program to coincide the significant opportunity
we have today with various investments in infrastructure in our
country.
Will this interagency coordinating council be working to
cooperate on housing challenges across all agencies, as
intended?
A.4. The Rural Partners Network (RPN) will serve as a vital
resource in connecting rural Americans to Federal programs and
resources. RPN will amplify key housing programs and sources
available under the Rural Housing Service (RHS).
Q.5. How has, or could, the Department utilized the bipartisan
Rural Broadband Integration Working Group in the Farm Bill
ensure we're closing the digital divide by leveraging multiple
Federal funding streams and agencies between these two priority
areas?
A.5. The Department is working to bridge the digital divide by
coordinating closely with Federal partners to ensure funding
streams are leveraged to the greatest extent possible and to
ensure Federal broadband programs and policies are
complementary to one another.
The Agricultural Improvement Act of 2018 (Farm Bill) and
language in successive Appropriations Acts directed the
Department to coordinate and work in collaboration with other
Federal broadband funding agencies, including the National
Telecommunications Information Administration (NTIA), the
Federal Communications Commissions (FCC), and the Department of
Treasury (Treasury). In response, the Department entered into a
Memorandum of Understanding (MOU) with NTIA, FCC, and Treasury
to ensure program coordination through consultation and sharing
of information about existing or planned projects that receive
broadband funding. This includes sharing information regarding
entities providing broadband service in a specified geographic
area; the levels of broadband service in that area, including
broadband speeds and technologies deployed; the geographic
scope of broadband service in that area, and identifying each
entity in that area that has or will receive funds from these
programs.
Additionally, USDA serves as Cochair, alongside NTIA, on
the American Broadband Initiative (ABI) Federal Funding
Workstream (FFWS). The ABI FFWS is tasked with ensuring Federal
funding for broadband targets areas of greatest need, creating
resources that allow stakeholders to easily identify Federal
broadband funding and digital inclusion opportunities,
promoting consistent policies and procedures across Federal
broadband programs, promoting collaboration at Federal
broadband outreach events, and leveraging State and local
policies and programs to ensure Federal funding is being
utilized efficiently and effectively. The ABI FFWS consists of
nearly two dozen Federal agencies including the Economic
Development Administration (EDA), FirstNet, Appalachian
Regional Commissions (ARC), Delta Regional Authority,
Department of Education, FCC, Health Resources and Service
Administration (HRSA), Housing and Urban Development (HUD),
Institute of Museum and Library Services (IMLS), Department of
Interior (DOI), Department of Labor (DOL), Small Business
Administration (SBA), Treasury, Denali Commission, Indian
Health Service (IHS) and Northern Border Regional Commission
(NBRC). The ABI FFWS meets regularly to discuss collaboration
opportunities and share updates about each agency's respective
programs.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
FROM XOCHITL TORRES SMALL
Q.1. Sterling, Kansas, a town of only 2,200 people, is home to
thousands of job openings from new industrial projects. But
high homebuilding costs and the difficulty of development has
stagnated the housing supply in this rural community. The lack
of housing in Sterling has forced many who work there to
commute from nearly 2 hours outside of town.
Part of the issue is the difficulty of securing land for
low-income housing to be built on. Section 523 rural housing
site loans provide a way for nonprofits, Tribal, and local
governments to acquire sites for housing. Unfortunately, the
last time a Section 523 loan was funded was in 2016. The 2-year
restrictions on these loans has limited the usage of Section
523 programs for developers that likely need more time to
complete the projects.
Would your department consider altering the terms of these
loans to increase flexibility and encourage their usage?
A.1. RD recognizes the difficulty placed on recipients due to
the terms of Section 523 and 524 site loans. As currently
written, the Housing Act of 1949, as amended (Housing Act)
(authorizing statute) requires Section 523 and 524 Site Land
Development loans be repaid within 2 years from closing. This
2-year term typically does not allow sufficient time for
borrower organizations to complete the necessary development
and marketing of home sites in rural areas resulting in
delinquent loans. The short loan repayment term offsets the
other benefits of this loan program, severely limiting its use
by eligible organizations that serve the housing needs of low-
income rural Americans.
Since the loan terms are a statutory requirement, it is not
currently within USDA control to alter the repayment period.
However, if the authorizing statute found at 42 U.S.C. 1490c
(b)(1)(B) is amended to allow a longer term, the change would
promote construction of new, affordable housing in rural
communities for low-income rural Americans.
Q.2. The Section 538 program is a cost-effective, private-
public partnership program for developing and preserving rental
housing for rural Americans of modest means. The
Administration's budget and the Appropriations Committee have
dramatically increased the commitment authority for the program
to provide for increased utilization, and to give more such
rural families a chance for decent housing.
Is there enough staff in place today to handle this
increase?
If not, how is RHS going to quickly provide the necessary
staffing to ensure that the program's goals (of developing and
preserving more multifamily rural housing) are met?
A.2. As of June of 2022, RHS leadership directed the Multi-
Family Housing Division to begin the process of hiring 35
additional Full-time Employees (FTEs). The increase in Multi-
Family Housing FTE levels will improve and strengthen the
service provided to Section 538 borrowers. The Section 538
program is a critical resource in the development of affordable
Multi-Family Housing. In early March of 2022, RHS published a
new guaranteed fee structure, which ultimately makes the
program easier to use and may incentivize lenders to
participate in more new construction activities.
Q.3. What Rural Housing Service programs in particular would
most benefit from an increase in funding through the
appropriations process?
A.3. USDA's Multi-Family Housing Portfolio includes
approximately 400,000 units at approximately 14,000 properties.
RHS programs that would most benefit from an increase in
funding through the appropriations process include the Section
515 Rural Rental Housing Program, Section 521 Rental Assistance
Program, Section 538 Guaranteed Program, and the Multi-Family
Preservation and Revitalization (MPR) Program. These programs
serve as vital resources to develop affordable housing, ensure
affordable rent for tenants, and preserve maturing properties
in rural America.
Additional Material Supplied for the Record
STATEMENT SUBMITTED BY JIM KING, CEO AND PRESIDENT, FAHE
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]