Access to rural housing programs that benefit a significant number of homebuyers in Aberdeen could be extended under a bill introduced Thursday by Sen. Tim Johnson, D-S.D., and others.
Without an extension of some sort, the city would lose access to two important housing programs come Sept. 30, said Jeff Mitchell, executive director of Homes Are Possible Inc.
HAPI is a nonprofit group that helps facilitate home buying for low- and moderate-income residents in northeast South Dakota.
The bill's introduction is amazing news, Mitchell said, because so many people in Aberdeen and across the region tap into U.S. Department of Agriculture rural housing development programs.
In 2009, he said, 40 percent of homes that sold in Aberdeen used some type of USDA funding. And there's no reason to expect that number has changed since, he said.
According to a news release from Johnson, the largest component of the USDA's rural housing activity is the Section 502 loan program.
Section 502 loans are primarily used to help low-income people buy homes in rural areas, according to information from Senate Committee on Banking, Housing and Urban Affairs. Funds can be used to build, repair, renovate or move a home or to buy and prepare sites, including providing water and sewage facilities.
Mitchell said two 502 programs that are especially popular locally:
• Direct lending program: This subsidizes the interest rate on a loan to as low as 1 percent for people who want to buy homes and who meet stringent income requirements.
• Guarantee program: This allows people who meet considerably less-stringent income requirements to borrow the appraised value of a home so they don't need to come up with a down payment.
The guarantee program is used more often and is popular with young people who are just starting their careers and want to buy a home, Mitchell said.
Brenda Waage, mortgage banker manager at Dacotah Bank in Aberdeen and a member of the HAPI board of directors, echoed Mitchell's comments. She said qualified borrowers have access to a guaranteed loan.
She estimated that 45 percent of the homes in the HAPI development in western Aberdeen have accessed the guarantee program. Mitchell said the percentage could be even higher. He said there are about 240 homes in the subdivision.
The privately funded loans are for 30 years and are insured by the Rural Housing Service, according to information from Johnson.
"It would really help Aberdeen if we were able to keep that" access to funding for rural housing programs, Waage said.
Johnson, in the news release, said the bill will ensure that hundreds of rural communities across the nation remain eligible for the USDA's rural housing development programs.
"Providing these loans, grants and loan guarantee programs helps younger generations stay in the communities they're from and ensures rural housing markets have access to private credit," Johnson said in the release.
The bill would grandfather in currently eligible communities like Aberdeen that meet the population threshold until 2020 and raise the population cap from 25,000 to 35,000, according to information from Johnson's office.
Because Aberdeen's population ticked over 25,000 in the 2010 census, the city is in danger of being losing its eligibility for the rural housing programs, Waage said.
Congress approved a continuing resolution earlier this year that allowed Aberdeen and other communities nationwide to keep tapping into the programs. But it expires at the end of the federal fiscal year.
Julie Johnson, of the marketing and promotion group Absolutely! Aberdeen, said local officials have been visiting with the state's congressional delegation the past couple of years about the importance of the rural housing programs.
"Those programs are absolutely key to being able to grow places like us in rural American," Johnson said.
"I will do everything I can to try to support (the bill) just because, to me, this only makes sense for us," Mitchell said.
A similar measure was included in the Farm Bill earlier this year, according to Johnson's release. It was approved by the Senate, but stalled in the House, he said.