Income Analysis of Farmers Home Administration Subsidized Rural Homebuyers in 1983

In response to a congressional request, GAO analyzed the incomes of the rural households who purchased homes under the Farmers Home Administration (FmHA) home-ownership program in fiscal year 1983 to determine the effect that new targeting provisions and income limits enacted by Congress in 1983 would have had on the eligibility of those assisted in 1983.

The FmHA program provides low interest rate subsidized loans to eligible households who earn less than 80 percent of area median income with certain adjustments for family size. The Rural Housing Amendments of 1983 stated that, nationwide, not less than 40 percent of the loans could be made to households whose incomes did not exceed 50 percent of the area median income with adjustments for family size. Not less than 30 percent of the loans in each State are to be provided to very low-income households. Of 53,466 household files which GAO analyzed, 84 percent of the households would have qualified for assistance had the new eligibility criteria been in effect in 1983. GAO also found that about 24 percent of all borrowers would have been classified as very low income in 1983 under the new rules. If the households who would not have qualified under the new rules were excluded from the calculations, then 28 percent of qualified borrowers would have had very low incomes in 1983. Only two States would have exceeded the 40-percent requirement for very low-income households, while six States would have exceeded the 30 percent minimum for individual States. There has been substantial variation from region to region in the degree of income targeting under the new eligibility limits, and the greatest degree of targeting has occurred in the south. Under the new law, income limits for small households were generally reduced while those for larger households were increased, and qualifying incomes will rise considerably in some locations.