Sue M. Harris-Green
Multi-Family Housing, Direct Loans
Rural Housing Service
US Department of Agriculture
The Commission on Affordable Housing and Health Facility Needs
for Seniors in the 21st Century
The Conference Center at Charlestown
Monday, March 11, 2002
Members of the Commission, thank you for the opportunity to offer testimony at this important hearing. I am Sue M. Harris-Green, Deputy Director, Multi-Family Housing, Direct Loans, Rural Housing Service, which is an Agency within USDA.
It is expected that America will undergo a tremendous shift, as older citizens become a larger part of the population. By 2050, the elderly population will more than double to 80 million, with the "oldest old" (85 and over) making up almost one-quarter of that population.
Housing plays a key role in this shift. The purpose of my testimony is to let you know what we are doing in rural America to address housing needs of the elderly.
Rural Housing Service (RHS) offers several programs that provide funding for rental properties intended for very-low, low- and moderate-income rural residents. Over $11.9 billion in subsidized credit has been provided to developers of affordable low-income and farmworkers housing. Currently, about 470,000 rental units in about 17, 500 complexes are financed by loans and grants through the RHS Multi-Family Housing programs. The programs are the Rural Rental Housing (RRH), Farm Labor Housing (FLH), Rental Assistance (RA) and Guaranteed Rural Rental Housing programs. These programs have served a long and useful role in assuring that rural Americans have decent, safe and sanitary affordable housing.
Housing Options for the Elderly
The Section 515 Rural Rental Housing Program:
The program was implemented in 1962 by the signing of the Senior Citizen Housing Act of 1962 (Public Law 87-723). The purpose of this program is to provide affordable rental housing for rural families and elderly people who have very low to moderate incomes. Eligible sponsors are individuals, corporations, Limited Partnerships and Limited Liability Companies, Public Bodies and Indian Tribes. Eligible residents are moderate, low and very low-income families, the disabled and the elderly (62 and older. The Rural Rental Housing program also has authority to provide funds to build congregate housing and group homes, recognizing that elderly needs will change as they get older and housing must adapt to these changes. Properties built for the elderly typically contain community rooms where the delivery of services at the property may be accomplished. All properties financed by RHS are required to comply with applicable handicapped accessibility requirements. The program is most often used in conjunction with other affordable housing programs such as the Low Income Housing Tax Credit, Affordable Housing Programs from members of the Federal Home Loan Bank, and HUD HOME program funds. The section 515 is the only available rental housing in some small towns. The section 515 allows the elderly to stay in the communities where they have lived their entire life and all their friends and family live.
Rental subsidy is available to residents at or below 50% of Adjusted Median Income. Section 521 Rental Assistance subsidizes tenant's rents and utility costs to 30% of the households' adjusted income. Approximately 55% of the tenants occupying section 515 housing receive Rental Assistance. Another 7% of our tenants receive project-based section 8 from HUD. Approximately 15% of tenant households are paying in excess of 30% of their incomes for housing, as additional tenant subsidies are not available.
Properties financed under the section 515 program may be designed and designated for the elderly or for families. Elderly designated properties are for occupancy exclusively by the elderly, handicapped or disabled. Family designated properties can be occupied by families or the elderly. Approximately 40% of properties financed under the program have been built and operated as housing for the elderly. 57.8% of all units in both elderly and family properties are currently occupied by elderly, disabled or handicapped households; 74.1% of all tenant households are headed by females; and 44.8% of all households are female, one-person households. 90.5% of all households are very low income, defined as 50% of adjusted median income or below; 7.9% of households are low income. The current average adjusted household income of our tenant households is only $7,980, well below very low-income limits.
The residents of the housing are very diverse racially. 6.6% of units are occupied by individuals of Hispanic origin; 16.6% of units Black not of Hispanic origin; 74.9% of units are White not of Hispanic origin; and 1.7% of units are occupied by individuals who are American Indian, Alaskan Native, or Asian/Pacific Islander.
Section 514/516 Farm Labor Housing Program:
Farm workers are often the most poorly housed people in the country. RHS is the only national source of construction funds for dedicated farm labor housing. The Agency provides low-interest loans and grants to public or nonprofit agencies or to individual farmers to build affordable rental housing for farm workers.
Eligible sponsors for Section 514 loans are public bodies, nonprofit organizations, non-profit cooperatives, association of farm workers, family farm partnership, family farm corporation, association of farmers, Indian Tribes, farm workers, limited partnerships with non-profit general partner. Eligible sponsors for Section 516 grants are public bodies, non-profit organizations, non-profit cooperatives, associations of farm workers, family farm partnership, association of farmers and Indian Tribes. Properties built with funds under this program are often partnered with other sources, as in the section 515 program.
Eligible residents are farm workers (individuals who derive a substantial portion of their income from farm work) and their families. In addition, the residents must be U.S. citizens or legally admitted to the United States for permanent residence.
There are 211 off-farm facilities and 763 on-farm loans with a total of 14,541 housing units. The average income of a farm worker family is $10,000. About 45.8% of all farm worker households use section 521 Rental Assistance.
While this program is not usually thought of as one that benefits the elderly, 11.6% of all units are occupied by the elderly, disabled or handicapped - a person at least 55 years of age and who has spent the last 5 years prior to retirement as a domestic farm laborer or spent the majority of the last 10 years prior to retirement as a domestic farm laborer. A "disabled domestic farm laborer" is a person who is determined to have an impairment which is expected to be of long-continued, indefinite duration, and substantially impedes the person's ability to earn a livelihood from farm labor and who is a domestic farm laborer prior to disability.
Section 538 Guaranteed Rural Rental Housing Program:
This relatively new program, first authorized in 1996, provides guarantees to private and public lenders for loans made to developers of rental housing in rural areas. The guarantee enables lenders to charge lower interest rates, resulting in lower rents to rural residents. 20% of the guarantees made are provided with a limited interest credit, which can further reduce rates. No rental subsidies are provided to the tenants, however, when the section 538 program is combined with the Low Income Housing Tax Credit, HUD HOME funds, tax exempt bonds or other affordable housing programs, the sponsors are able to reduce rents further allowing lower income persons to occupy the property.
As the program does not have deep tenant subsidies, the primary beneficiaries are low and moderate-income rural residents. A significant segment of seniors have incomes that are too high for many affordable housing programs, yet too low to access market rate housing in appreciating markets. The section 538 program provides a solution to this problem.
Many rural residents live in houses or apartments that are badly in need of repairs or renovations - many of these homes are substandard, or are in need of full service assisted living. Three RHS programs can help these rural residents. The first is the Housing Preservation Grant Program. The second is the Section 504 Home Repair Loan and Grant Program, and the third is the Community Facility Loan and Grant Program.
The Section 533 Housing Preservation Grant Program:
The purpose of this program is to repair and rehabilitate housing owned or occupied by rural people with low incomes by providing grants to non-profit organizations and public bodies.
The grants are provided to qualified grantees for the purpose of assisting very-low and low-income homeowners to repair and rehabilitate their homes. Assistance is also available to rental property owners to repair and rehabilitate their units provided they agree to make such units available to very-low and low-income families. Eligible grantees are public or private non-profit organizations, public bodies and Indian Tribes.
Section 504 Home Repair Loan and Grant Program:
This program is offered to elderly persons and very-low income families who own homes that need repair. Funds may be used to repair or replace a leaking roof, insulate a home, install electric lines, replace a wood stove with central heating, install running water, a bathroom, a waste-water disposal system, or make a home accessible to family members with disabilities. Homeowners who are at least 62 years old can receive home improvement grants of up to $7,500 if they cannot afford a loan at the 1 percent interest rate.
Assisted Living Facilities:
For elderly people who need more help with their daily living, RHS Community Facilities programs provide funds to build assisted-living facilities. Various interpretations exist regarding the definition of an assisted living facility. To be considered for a community facility loan, the facility should be designed and operated to provide care to persons unable to live independently in either a house or an apartment. An assisted living facility would normally include: (a) a significant number of units designed to meet requirements of handicapped persons; (b) nursing care to assist in the dispensing of medication, to monitor the residents on a daily basis, and on 24-hour call; (c) central kitchen/dining facilities on the premises to provide and/or deliver meals to the residents; (d) transportation and assistance to shopping areas, doctor's office, etc. Generally, the borrower provides these services.
Current Challenges and Future Directions:
The RHS portfolio of rental properties is aging. The average age of a property financed under the section 515 program is approximately 20 years old. While the great majority of the properties have been well cared for, they are now at a time in their life cycle where it is necessary to fund major repairs such as cabinets, roofs, HVAC systems and parking lots. Many of the properties have insufficient funds to cover all of these costs. RHS is unable to fund all requests for repairs with its current budget, so we have worked actively with third parties to assist in funding this need. This effort to acquire additional funding will be necessary into the future if we are to sustain the existing housing as safe, decent and sanitary for its current elderly occupants.
Along with the aging of the properties, the ownership of the properties is also aging. Many developers and investors, having built the housing 20 years ago, are now at a point in their lives or their investment cycle that they wish to divest themselves from ownership of the properties. This has proven to be a difficult task as a combination of tax liabilities for exiting the investments, a lack of willing buyers, and capital to finance their sale has seriously limited the liquidity of these properties. RHS has actively worked with third party intermediaries and lenders to help facilitate the sale or refinancing of such properties, particularly to new nonprofit entities interested in preserving the long term affordable use of the properties. Several national and regional faith based nonprofit corporations are currently reviewing their options in purchasing section 515 properties. The Agency sees great promise in such groups acquiring existing properties as they often bring additional services to benefit the residents that previous owners were unable to provide. However, to do so, adequate funding must be available to allow organizations to purchase and recapitalize the properties and to conduct the reviews necessary prior to purchase to determine the feasibility of the deal.
There are also many markets within rural America that have seen appreciation in real estate values. The appreciation, coupled with principal pay down of the debt over time, has created equity in many properties financed by RHS. In many cases, owners are seeking to cash in on the higher values of the marketplace, either by converting the properties from affordable housing to market rate rentals or by seeking an equity cash out in return for agreeing to extend the low income use of the properties. To retain such properties as affordable, it is necessary to either seek new purchasers for the properties that will agree to retain the affordable use, or to find ways to fund equity to keep existing owners in place. At present, RHS has limited funds to accomplish these goals, so we have sought out partners in the states and the commercial sector to assist in meeting these needs. To fail to do so can mean the loss of the housing as affordable and the potential displacement of low-income families and the elderly.
RHS recognizes that many of our elderly residents have "aged in place" since initially moving into their apartments. Often they require supportive services that they may not have needed when they first occupied the housing. As RHS is primarily a housing provider, we are unable to fund supportive services with current program authorizations. We continue to encourage property owners to partner with local elderly organizations, foundations and health care providers to help improve the elderly residents' quality of life by offering a place at the property for services to be provided to residents. Additionally, when property finances allow, we have encouraged the construction of community rooms where none exist or the expansion of those already in place when property sponsors need additional space to provide services for the tenants.
Thank you for allowing me to testify today. We look forward to continuing to work with the Commission and the Congress to provide decent, affordable housing to the elderly in rural America.