The physical vastness and cultural diversity of the United States can make the country seem more inherently different than it is similar.
But what’s broadly true of America in rural and urban areas alike is the persistent shortage of affordable housing. A new analysis by Stateline paints a stark picture of the renewed rental burdens chipping away at the incomes of working- and middle-class Americans in rural communities.
“The housing system isn’t working on behalf of a lot of rural residents,” says David Lipsetz, CEO of the Housing Assistance Council (HAC), a nationwide nonprofit dedicated to helping build affordable rural housing.
Nearly a quarter of the nation’s most rural counties have seen a “sizable increase” in the percentage of residents spending more than half their income on housing, a scenario the federal government calls “severely cost-burdened.”
It’s tempting, but simplistic, to say that rural America’s surfeit of space and relatively low cost of living have allowed it to sidestep the affordability crisis hitting the rest of the country. In many ways, the crisis in rural areas is just as serious as the one in the country’s largest cities.
According to HAC stats, there were 6.6 million rural rental units in the country in 2016; 81.7 percent of those units cost less than $1,000 a month. But thanks to low and stagnant incomes—as well as policy decisions that limit affordable housing construction—roughly 47 percent of rural renters, or 2.6 million Americans, were “cost-burdened,” meaning they pay a third or more of their income in rent. The percentage of urban renters facing similar challenges, 51.1, is only slightly higher.
“Cost-burden rates are higher in urban areas mostly because wealthier families are willing to spend more on housing,” says John Cromartie, a housing research expert for the U.S. Department of Agriculture (USDA), which oversees the government’s rural-housing programs. “If you compare the burdens of renters making under $20,000 in both urban and rural areas, the rates are pretty much the same.”
The perception of rural challenges
While the affordability challenges in urban and rural areas impact a similar percentage of the population, the federal response to the crisis differs considerably. For all the recent news coverage of the various economic problems buffeting smaller rural communities, the federal government hasn’t invested in those areas’ affordable housing needs.
Traditionally, members of rural communities have favored homeownership over renting. But the forces of change reshaping these areas’ economies have made rental housing crucially important, and at a time when the federal government isn’t merely refusing to add more units, but proposing deep, significant cuts to existing programs.
As part of the Trump’s administration most recent federal budget proposal, the plan for rural housing assistance is, essentially, to end it, thus zeroing out nearly every program. Lipsetz says these cuts would “devastate” communities.
A web of demographic transformations—aging populations, young adults moving in search of opportunity, slow recovery after the Great Recession, the influx of immigrants, and the persistence of rural poverty in the wake of the urban concentration of jobs—means these regions of the country need more, not less, rental assistance and housing. And declining populations in many pockets of rural America means fewer tradespeople, construction workers, and stores with the supplies necessary to build new housing, which adds more time and money to any building-based solutions.
Small changes have outsize impacts on rural economies
Tackling the issue of affordable rural housing means trying to surmount the challenge of size and density. By their very nature, rural communities, and their spread-out populations, make building tall, dense apartment buildings less appealing.
Rural housing markets are both incredibly local—and incredibly sensitive to change.
“It only takes a small change to have an effect in rural communities,” says Corianne Scally, who studies affordable housing at the Urban Institute. “Size works against the idea of scaling up housing solutions.”
This reality presents challenges in good and bad times. When a rural manufacturing plant closes, or a coal mine shuts down in Appalachia, an oversized portion of the population suddenly loses a paycheck, and the flood of new renters can’t be accommodated. But that inelasticity in the market also presents a challenge in the face of good economic news: When new jobs and opportunities come, like a new meatpacking plant in Georgia, or fracking or wind farms in west Texas suddenly need new labor, the overnight demand for housing can cause a rent spike.
The recent jump in cost-burdened renters in rural America comes after these areas were bruised by the Great Recession, says Cromartie. Between 2005 and 2012, the number of rental households in rural areas grew by 300,000. That’s close to a 6 percent increase at a time when total household growth just inched up by 0.3 percent.
At the same time, the housing safety net, and federal investments in housing support and affordable housing construction, have been concentrated in suburban and urban areas, according to Lipsetz. No new USDA direct-financed rental housing has been developed in years.
Take the Mortgage Interest Tax Deduction, arguably the nation’s biggest expense when it comes to supporting housing and homeownership, which cost the government $72.4 billion in 2018. Due to housing values in rural America, a relatively minuscule amount of that benefit flows outside of cities and suburbs.
The rental program that’s set to disappear
If those pressures aren’t enough, one of the nation’s biggest rural-housing success stories may soon come to an end without new federal action. Section 515, a USDA program created in 1963, subsidizes the creation of affordable rural rental housing by giving construction loans and continued support to landlords. The program has resulted in the construction of 28,000 properties, totaling some half-million units across the country, mostly in the Midwest and South. It’s a backbone of the rural housing stock, but the existing properties within the program are increasingly losing their affordability provisions.
The program guaranteed support until the mortgage for each property was paid off and matures, typically within 30 years. Then, landlords can raise rents to match what the market will bear. As HAC has detailed in a series of reports, Section 515 will lose 1,500 units a year over the next few decades, as the map above illustrates, a loss that will slowly accelerate as the number of eligible units hitting their 30th birthday increases. In a decade, tens of thousands of affordable units will be lost every year. Lipsetz and others are testifying in front of Congress on Tuesday, April 2, to try and spur action to save these units.
“It’s a big monster wave, but we have enough time to do something about it and avoid it,” says Lipsetz.
Finding the will to invest in new housing
While advocates push for additional housing assistance and renewed support for Section 515 from the federal government, the bigger goal may be attracting more investment from the private sector. (Previous congressional responses to Trump administration budget proposals suggest the draconian cuts won’t come to pass.)
Rural areas have been hard-hit by increased economic concentration on all fronts, from jobs shifting to cities to the consolidation of banking and financial services, creating “financial deserts” with fewer rural branches and less access to capital for new construction projects. While housing assistance can make a big difference, the government can create a more positive cycle by enacting policy that brings back more investment. “We believe the best way to have a functioning market is competition,” says Lipsetz.
While the situation can look dire, Lipsetz believes more awareness can begin to shift perceptions—and policy. Awareness of poverty and its impacts have led to a number of programs, and investments, meant to help neighborhoods succeed. He believes the same can happen in rural America.
“It took a lot of knowledge and awareness of the forces at play for us as a nation to begin focusing on the recovery of wealth and opportunity for areas that were deeply poor,” says Lipsetz. “I’m hoping for that awareness and sensitivity.”