Rural Areas to Stay Rural — for Now

September 27, 2012

The National Association of REALTORS® and other housing groups have been urging Congress for years to grandfather eligibility of some 900 rural communities into federal rural housing programs, including the popular Sec. 502 direct-loan program that enables home buyers who can’t get financing elsewhere to get no-down mortgage loans. Congressional intervention is needed because the definition of rural hasn’t changed since 1974, and hundreds of rural communities, including many near growing metropolitan areas, are at risk of losing their designation even though they remain for all intents and purposes rural.

As NAR and its coalition partners say in a letter last month to congressional leaders, “these communities are, by any measure, rural, and most will lose eligibility because they are located within Metropolitan Statistical Areas (MSA).” Under the 1974 definition, communities have to have populations of fewer than 20,000 residents and can’t be part of a larger MSA. NAR has asked the population cap to be raised to 35,000 and not penalize rural areas of under 10,000 that have had MSA areas encroach upon them.

In years past, Congress has enacted temporary measures to grandfather these communities into the rural housing programs. The latest authorization, passed in 2000, is set to expire on Oct. 1, and although legislation to extend it passed the Senate a few weeks ago, Congress won’t be back in town until well after the expiration date.

Against this backdrop, the federal Rural Housing Service (RHS), which administers federal rural housing programs, issued an administrative notice that says it is keeping its current method of determining eligibility in place until March 27, 2013, to give it time to transition to a new way to track population and income changes since the 2010 census was conducted.

In the previous census, the U.S. Census Bureau collected detailed information about households using what was called the long-firm questionnaire. With that form, RHS was able to track changes in household income and other important pieces of data, but the Bureau didn’t use that form for its 2010 census. RHS is transitioning to other ways to collect the income data it needs to make eligibility determinations; for that reason, it’s instructing its offices to continue using the 2000 census information through March 27, 2013.

At the same time, Congress has passed legislation funding the government at current services levels until March 27, 2013. These temporary measures enable RHS offices to continue the eligibility of the 900 or so communities that would otherwise become ineligible for the programs. So, for now, for RHS’s purposes, these rural areas will remain rural for housing purposes for another six months.

— REALTOR® Magazine Online