Rural renters face growing rent burden - Affordable Housing Online

Rural renters face growing rent burden

By on May 30th, 2019

When we think of people paying too much for their rent, we think of big, booming cities like San Francisco or Washington, DC. But a new analysis by Stateline shows that a large portion of rural renters are facing severe housing cost burdens.

Although rents are generally lower in rural areas around the country, stagnant incomes and a limited supply of rental housing make it hard for millions of rural Americans to pay the rent. Old and dilapidated housing was the main problem in rural areas 50 years ago, but housing cost burden has become as much a problem in rural areas as in big cities.

In 2016, 47% of rural renter households were cost-burdened, only slightly less than the 51% of urban renters who had housing cost burden. The federal government says that a household is cost-burdened when it pays more than 30% of its income for rent. When looking only at households earning less than $20,000 a year, the percentage of cost-burdened households is the same in both rural and urban communities.

Stateline’s analysis found the most rural places have experienced an increase in households with severe housing cost burden. Severe cost burden means that households are paying more than half their income for their housing.

Nearly a quarter of the nation’s most rural counties have seen a sizable increase in the share of residents with severe cost burden. Severe housing cost burden increased in these areas between the Great Recession years and our current economic expansion. Only two big city counties fell into the same category: Bronx, NY, and Norfolk, VA.

Image provided by The Pew Charitable Trusts

Many rural areas lagged behind the large coastal cities in recovering from the recession. Most rural places have a limited rental housing stock, with few apartments available, let alone affordable ones. Homeownership rates are traditionally higher in rural areas even among low-income households.

With large numbers of people losing their homes during the Great Recession, many people were looking to find apartments in rural places that had few rental options. Rural renter households increased by 300,000 (6%) over the time of the recession, compared with less than 1% total household growth.

Long-term poverty is also prevalent in many rural areas. In recent congressional testimony on the need for rural affordable housing, one national expert pointed out how long-term poverty is especially concentrated in certain rural regions. These regions include the lower Mississippi Delta, the southern border with Mexico, Central Appalachia and Native American lands. In fact, 85% of persistent poverty counties are in rural areas. These are counties where at least 20% of the population has lived below the poverty line for three decades or more.

It is very common for rural areas to be economically dependent on a single industry or company. When changes in those industries occur, whole communities can be disrupted.

For example, demand for coal has been shrinking for some time now. Mining companies have also adopted strip mining as a more efficient way to get at the coal. The lower demand for coal and mechanization resulted in a sharp drop in good-paying mining jobs throughout Appalachia. Even though housing costs are very low throughout much of Appalachia, people’s incomes are so low that they have trouble keeping up with the rent.

Demographic shifts have also contributed to the stagnation of rural economies. Rural areas have a larger percentage of seniors, and a long-term trend of young people moving away in search of opportunity. Population loss has led to many rural businesses closing and fewer economic opportunities for young residents that remain.

On the other hand, some rural areas that are experiencing economic success have cost burden problems similar to big cities. The tech boom has drawn thousands of new workers to urban centers like Seattle, Washington. As more new residents compete for vacant apartments, landlords have raised rents astronomically.

The US Department of Agriculture is the most well known provider of rural affordable housing.

Rural areas in places like North Dakota and West Texas have benefited from the shale oil boom, bringing thousands of new workers to small communities. New meatpacking plants in the Midwest are another industry bringing workers to rural regions. But these places have very little rental housing to accommodate all the new workers moving in. With greater demand, rents have spiked.

Rural areas not only lack rental housing generally, they are especially short on affordable housing. Rural areas are more likely to be served by small affordable rental properties with project-based rental assistance.

Rural areas also have a much smaller proportion of voucher holders than urban areas, in part because there are fewer private market rentals where vouchers can be used. And rural areas are in danger of losing many of the affordable housing developments that are already there.

Much of the subsidized affordable rental housing in rural communities has been developed through USDA’s Section 515 Rural Rental Housing program. Section 515 provides project owners with a subsidized mortgage that requires them to rent apartments at rates affordable to low-income households.

Section 515 has financed construction of more than 530,000 units in nearly 28,000 properties since 1963, with 415,000 apartments still in the program. However, Congress has for years cut funding to the program, with no new units constructed since 2011.

To make matters worse, many Section 515 properties are being lost as affordable housing. When Section 515 mortgages are paid off after 30 years, the owners can raise rents to market rates. In the last decade, there has been a loss of 29,000 units.

Over the next 25 years, hundreds of thousands of Section 515 units could be lost if the government does not find a way to keep owners in the program. In many rural communities, these USDA properties are the only affordable housing of any kind for miles around. They are often the only housing serving low-income rural seniors and persons with disabilities.

Rural areas have a growing need for new affordable housing. A study by the Urban Institute and Housing Assistance Council (HAC) looked at the need for new production in areas eligible for USDA housing programs.

There were 150 rural counties with a severe need for new affordable housing production. These counties had higher than average poverty and unemployment, with few available rentals of any kind. In addition, 38% of USDA-eligible counties had moderately severe needs for new affordable housing production. These counties were concentrated in the West, the southern border region, the Midwest, the rural Southeast, the lower Mississippi Delta and Appalachia.

Rural communities, as much as urban ones, face an affordable housing crisis. Even though rents are lower than in large cities, incomes are considerably lower as well. Without new production of affordable housing in rural areas, low-income rural renters will continue struggling to find a place where they can afford the rent.