Rental Housing

The Housing Act of 1949 created the Rural Rental Housing Program to provide affordable housing for lower-income households. With annual appropriations of about $574 million for fiscal years 1992 and 1993, the program provides low-interest loans to borrowers to build and rehabilitate affordable housing projects in rural areas. This report discusses the (1) Farmers Home Administration's (FmHA) procedures for allocating funds to states and selecting projects within states and whether these procedures have caused project concentration in a relatively small number of states; (2) extent to which FmHA's allocation and project award procedures reflect actual housing needs; (3) extent to which states have used program funds, including the amount of unused funds that have been reallocated to other states; and (4) size and status of the rural rental housing portfolio as of September 30, 1992.

GAO found that: (1) FmHA procedures reflect the program's purpose of providing suitable and affordable housing for low-income individuals living in inadequate housing; (2) the allocation formula estimates each state's rural rental housing needs based on its rural population, occupied substandard housing units, and families with income below the poverty level; (3) FmHA reserves about 15 percent of the program's annual appropriation to meet specified or unexpected program needs during the year; (4) FmHA project award procedures are similar to FmHA allocation procedures; (5) 56 percent of all projects are concentrated in 15 states, but those states also account for 51 percent of the states' total housing needs; (6) FmHA estimates of rural housing needs may differ from actual needs because they are based on outdated decennial census data; (7) FmHA funding processes do not guarantee that the neediest areas will receive program assistance, since project developers determine their project sites; (8) in recent years, most states have used their annual allocations due to decreased program funding and numerous project proposals, and few unused funds have been reallocated to states with outstanding loan demands; (9) the number of outstanding loans is increasing; and (10) 84 percent of the loans made since 1962 were still outstanding with a delinquency rate of 3 percent as of September 30, 1992.