Rural Housing

The Farmers Home Administration (FmHA), part of the Agriculture Department, makes home loans to rural residents who cannot afford homes through private financing. GAO found that although rural areas have the worst housing conditions, they receive a smaller percentage of housing assistance than areas close to urban centers. Program funds lent under FmHA's single-family housing program are concentrated in and around metropolitan areas and are disproportionately higher than the demand for housing in these areas warrants. Remote rural areas, on the other hand, receive a disproportionately low amount of funds in relation to housing needs. Congress has acted to ensure that remote rural areas are better served by the program, but these actions have not yet been implemented. FmHA has identified factors contributing to the low demand for program funds in remote areas, including low income limits difficult for remote rural families to meet and subjective application of criteria used to approve housing for the program. This report includes color photos of houses rejected for the program because of slight violations, such as having a fireplace or too many windows.

GAO found that: (1) FmHA rural single-family home program funds were disproportionately concentrated in and around MSA and higher than needed or warranted for housing in these areas; (2) remote rural housing areas receive a disproportionately low amount of program funds in relation to their needs; (3) although Congress has undertaken several initiatives to address the fund allocation disparity, including authorizing programs that increase housing construction cost assistance and promote the availability of program funds, the initiatives have not been implemented or funded; (4) factors contributing to the disparity in program funds apportionment and demand between remote rural areas and those near MSA include low program income limits for remote rural areas, subjective application of housing criteria used to qualify homes for program participation, and restrictive FmHA home construction financial assistance policies; (5) FmHA officials believe low income limits and subjective application of housing approval criteria have the most impact on the concentration of funds allocation; (6) remote rural housing areas' low demand for funds often results in the reallocation of unused funds to other rural housing areas including those near MSA; and (7) between 1987 and 1991, FmHA reallocated about $1.1 billion in rural program funds under its need-based formula.