A Methodological Approach to Estimate Residential Heirs’ Property in the United States

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The Housing Assistance Council (HAC), in partnership with Fannie Mae, developed a methodology to estimate the prevalence of heirs’ properties in two categories, most likely heirs’ properties and properties that are at risk of currently being or soon becoming heirs’ properties throughout the United States. Slightly over 500,000 properties were identified as potential heirs’ properties with nearly two thirds (64.6%) located in rural areas.  Despite challenges including the lack of uniformity of tax assessment data collection and reporting, the conservative estimated assessed value of identified heirs’ properties is $32.3 billion in 44 states and the District of Columbia.

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Heirs’ Property Research Report 12.11.23 1
HAC Loan Office Alison Duncan (center) breaks ground for Carnation Village.
Photo by Adam Robison, the Daily Journal.
Photo by Adam Robison, the Daily Journal.

Old Historic Carnation, LP: A HAC Success Story

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HAC’s patience and flexibility help convert a vacant Carnation milk plant into homes for seniors in Tupelo, MS

Rendering of carnation plant developmentThe Carnation Milk plant in Tupelo, Mississippi, has sat vacant since 1972. In about a year, that will change when 33 low-income senior households move into new affordable homes in this old factory. This May, Old Historic Carnation, LP broke ground on Carnation Village, a $16.8 million adaptive reuse project to convert the abandoned factory into 33 units of affordable senior housing. These units are sorely needed in Tupelo, a high-poverty community which needs over 1,500 additional senior affordable housing units. With a $325,000 loan from The Housing Assistance Council (HAC)—and two sixth-month extensions to that loan—the developer successfully navigated a predevelopment process mired in construction cost increases and unexpected funding gaps. Here’s how:

Photo of vacant Carnation plantThe original project scope called for 50 units: 25 from an adaptive re-use of the plant itself and another 25 in a second building to be constructed next door. When our loan closed in July 2021, the project budget totaled about $12.7 million, to be funded by Low Income Housing Tax Credits, Historic Tax Credits, and a $1.6 million equity investment. Our financing covered the predevelopment costs of the work required to get to construction financing closing including environmental testing, historic preservation approvals, tax credit application and reservation fees, a market study, and an appraisal.

In the fall of 2021, increases in construction costs left Old Historic Carnation with a $3.8 million funding gap. By the time they applied for and received more tax credits from the Mississippi Housing Corporation (MHC), added a $1 million mortgage, received approval from the National Park Service, and updated the construction bids, costs had increased by a further $4.5 million. In the space of less than a year, the construction cost for the project nearly doubled.

Because HAC can be a patient lender, we extended our loan by six months to give the developer time to solve the problem. Old Historic Carnation applied for and received another tax credit increase from the state, reduced costs with value engineering measures, and increased the deferred developer fee by almost $2 million.

Construction costs increased again in the summer of 2022, causing the equity investor to back out of the project. The developer went back to the drawing board once again and reduced the project’s scope to 33 units, all affordable to households making less than 80% of the area median income (AMI). Plus, 26 would also be affordable to households under 60% AMI. With an additional loan extension from HAC, Old Historic Carnation secured approval of the new scope by MHC, obtained the necessary building permits, and have now begun demolition.

HAC Loan Office Alison Duncan (center) breaks ground for Carnation Village.

HAC Loan Office Alison Duncan (center) breaks ground for Carnation Village. Photo by Adam Robison, the Daily Journal.

On March 21st, Old Historic Carnation, LP closed on construction financing and repaid our predevelopment loan in full. And on May 31st, the project broke ground. Old Historic Carnation’s persistence and creativity made this project a success. But it was HAC’s flexibility that supported them as they went through the process of raising additional funds three times to make the project work. The Carnation Village project showcases how the ingenuity of a local housing developer, solid working relationships with private, state and federal funders, and flexible and patient HAC financing all add up to bring difficult and important projects to fruition. Fifty-one years ago, Carnation Milk closed its factory in Tupelo, Mississippi. Soon, thirty-three low-income, senior households will be able to call it home.

HAC is proud to be a critical part of this project and we look forward to watching it develop.

Policy News from Congress

HAC’s Research Director Testifies to Senate Banking Committee on the State of Housing 2023

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HAC was deeply honored by an invitation to testify at the first hearing held in the new 118th Congress by the Senate Banking, Housing, and Urban Affairs Committee. Titled The State of Housing 2023, the session featured Lance George, HAC’s Director of Research and Information, as one of  three witnesses.

A wide range of topics was covered by the witnesses’ testimony and the Senators’ questions. Among the key areas of concern were the gap between housing supply and need, the high cost of both homeownership and rental housing, and what congressional actions could address these challenges. Committee Chair Sherrod Brown (D-Ohio) asked specifically about the loss of rentals financed by USDA’s Section 515 program, a serious concern addressed by HAC research in 2016 and 2022.

Key Takeaways

Lance’s statement made five key points about the state of rural housing in 2023:

  • The pandemic left its mark on rural America and housing markets remain uncertain.
  • Rural mortgage markets are being impacted by interest rates and prices too.
  • Affordability is the greatest housing challenge in rural America, by far.
  • Manufactured housing is an often overlooked but important source of housing – especially in rural America.
  • Race matters across the rural spectrum – especially in housing.

Key policy recommendations, based on HAC’s full set of policy priorities for 2023, included:

  • Increase rural communities’ access to credit and capital and strengthen USDA and HUD homeownership supports.
  • Improve opportunities and financing for preserving aging rental properties and protecting tenants.
  • Authorize the powerful Rural Community Development Initiative and a significant cross-sectoral, flexible capacity building rural investment initiative.

Read Lance’s Statement

Lance George

Lance George

HAC’s Director of Research & Information

Watch the Hearing


HAC Advises Housing Protections and Education for H-2A Farmworkers

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HAC responded on October 24, 2022, to a request for information from the U.S. Department of Agriculture’s Farm Service Agency (FSA), which is developing a Farm Labor Stabilization and Protection Pilot Program.  FSA says this “grant program will use up to $65 million in American Rescue Plan Act funding to provide support for agricultural employers in implementing robust labor standards to promote a safe, healthy work environment for both U.S. workers and workers hired from Northern Central American countries under the seasonal H-2A visa program.”

HAC’s comments noted that currently, the H-2A program requires employers to provide free housing to visa holders that complies with a set of guidelines. While the law requires these living quarters to be inspected before occupancy, Department of Labor (DOL) data shows that neither federal nor state governments have allocated sufficient resources to conduct these inspections. In 38 states, there is no regulation of farmworker housing or dedicated agency to perform the required inspections. States that do have housing inspection systems in place are often under resourced.

Key takeaways:

  • Affordable, Decent Housing

    The pilot program should incentivize accessible, affordable, and decent housing for farmworkers

  • Wellness Checks

    This pilot program should fund farmworker organizations and partner organizations who are on the ground and familiar with farmworker communities to perform regular wellness checks

  • Survey of Conditions

    The pilot program should fund a detailed, comprehensive survey on farmworker housing conditions

  • Appropriate Communication

    Services and information should be provided in appropriate languages and using appropriate communication techniques

  • Training in Rights

    Trainings and informational resources should be made available that cover workers’ rights (including housing) and how to report exploitative practices

Introduction to USDA's Mutual Self-Help Housing

Self-Help Housing Trainings from HAC’s Conference

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Self-Help Housing

There are many potential homeowners who fall short financially but are able to contribute time and labor toward the construction or rehabilitation of their homes.

The self-help housing model helps bridge the gap in housing affordability by having participant families work together to build their homes. Instead of requiring a down payment, the prospective homeowners contribute their own labor to the project. When these families work together, they learn valuable construction skills and build a sense of community with their neighbors.

These five workshops, first recorded at HAC’s Virtual National Rural Housing Conference, provide an overview of the self-help housing process, how it works, and information on how local organizations can incorporate it into their efforts.

This session provides an overview of USDA’s Mutual Self-Help Housing program. It covers funding possibilities, regulation requirements, and the grant application process, as well as eligible grant uses, program development, staffing needs, and feasibility.

USDA-supported self-help housing rehab activities (acquisition/rehab and owner-occupied rehab) can be viable additions to affordable housing work. This session is designed for organizations currently active in the program as well, as those considering it. Workshop leaders share the latest instructions and guidance governing rehab activities and show before-and-after pictures of self-help projects. The discussion focuses on challenges, successes, and best practices in delivering the program. The audience was able to ask questions about the impacts of COVID. One of the presenters shares the key to the self-help method with a quote.

“Helping people help themselves benefits the participants and the community while making better use of scarce resources.”

In this session, experts present information on recent improvements to SHARES for group coordinators. Workshop leaders also provide an overview of how to use e-Forms for submitting Section 502 and 504 applications. A nonprofit marketing specialist provides strategies for how to use social media, email marketing, and design to share about your work with self-help programs. Self-help grantees are encouraged to share their updates on https://www.selfhelphousingspotlight.org/.

Learn what’s new in Section 502 loan packaging and how to avoid common errors and omissions that cause delays in processing 502 loan applications. This session will help packagers improve the quality and completeness of applications to get faster loan closings for families.

5 challenges in 502 Packaging

  1. Significant Delinquencies, how credit worthiness impacts application processing and what can be done to streamline this step.
  2. How to account for full-time student income and student loan debt.
  3. COVID’s impact on calculating income and how to account for variations.
  4. What forms of verification are acceptable and what can a packager use to verify application details?
  5. What has COVID’s impact been on budgets and materials and how to best incorporate them into the loan process?

The coronavirus pandemic’s cost overages, material delays, and numerous other challenges have intensified the need for leveraged funds in self-help housing programs. Learn how leveraged funds can not only increase affordability and resources for applicants, but also build an organization’s capacity and control. Leveraging can also better position an organization for program diversification to address community needs.

Policy News from Congress

HAC’s Research Director to Speak at Congressional Manufactured Housing Hearing

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The House Transportation-HUD Appropriations Subcommittee is holding a hearing May 26 on Manufactured Housing: Supporting America’s Largest Unsubsidized Affordable Housing Stock, with HAC’s Director of Research and Information, Lance George, among the witnesses. His testimony explains the importance of manufactured homes as affordable housing in rural America and the challenges facing manufactured housing residents, owners, and communities. It suggests that new research is needed to inform evidence-based solutions and that Congress could help address pressing challenges by providing grants for land acquisition by resident owned cooperatives, other mission-focused nonprofits, and public sector housing agencies, as well as financing for individual homeowners.

 

Lance George Statement to House THUD Committee - May 26, 2022
Policy News from the Administration

HAC CEO Statement on Biden-Harris Housing Supply Action Plan

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by David Lipsetz

The Biden-Harris Administration released a Housing Supply Action Plan on May 16 that can bring the cost of housing back in line with families’ incomes. This is particularly important in small towns where incomes remain stubbornly low, while the cost of buying or renting a place to live is soaring. The Housing Assistance Council (HAC) applauds the Administration for designing and including several provisions specifically with rural markets in mind.

The Plan includes administrative and legislative proposals to improve existing housing finance mechanisms. It establishes new housing production programs. It calls for changes to the Low-Income Housing Tax Credit that will attract private investment in affordable rental housing. It provides grants—such as the HOME Investment Partnerships Program—to states, cities and towns to do what locals know will be best for their local housing market.  It calls on Congress to establish a Housing Supply Fund and incentivize zoning reform to accelerate the building of more housing across the Nation.

Critically, the Administration proposes reforms that prioritize homeowners living in the homes that they own. This is a welcome change for rural Americans who need high-quality affordable homes in which to live far more than they need high-priced vacation homes. For rental housing, the Administration focuses investment on small-scale 2–4-unit buildings instead of high-rise apartment complexes. It calls for new rentals where few are being built and recognizes the urgency of preserving affordable rentals that already exist. And for the first time in decades, an Administration released a housing plan that calls for improved financing for manufactured housing, an important resource in rural places.

The shortage of affordable housing in rural America is a serious issue. Rental units are being lost at an alarming rate. Single-family homes are significantly older than elsewhere in the Nation. The Administration’s framework recognizes the unique need for affordable housing and proposes solutions built to work in small town and rural America.

Many of the Administration’s actions just announced reflect HAC’s policy priorities. But it remains critical that these actions be complemented by initiatives to address another essential factor in improving housing for rural Americans—building the capacity of local organizations to improve their own communities. Because rural places often have small and part-time local governments, they often find it particularly difficult to navigate the complexities of federal programs and modern housing finance, and to compete for government resources. Philanthropy has not stepped in to address this inequity built into our systems, instead concentrating its resources in already-prosperous high-cost regions. Targeted capacity building through federal investments in training and technical assistance is how most local organizations build skills, tap information, and gain the wherewithal to do what they know needs to be done.

Rural communities hold vast potential to drive economic growth and improve the quality of life for all Americans. Access to quality, affordable housing is key to jumpstarting that potential. Building and preserving homes creates jobs, improves education and health outcomes, and provides much-needed financial and physical stability to families in need. We look forward to working with the Biden-Harris Administration and Congress to ensure that these initiatives move us closer to the day when every American has access to a safe, decent, and affordable place to call home.

Solar panels covering parking spaces at Calistoga Family Apartments
Photo: U.S. Department of Agriculture
https://flic.kr/p/CpXy7x The U.S. Department of Agriculture

“Worst Case” Rental Housing Needs Changed Little from 2017 to 2019

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Only 62 affordable rental units were available for every 100 very low-income renters in 2019, according to Worst Case Housing Needs: 2021 Report to Congress, released on October 5 by the Department of Housing and Urban Development (HUD). While data on the impact of the coronavirus pandemic and economic recession that began in 2020 is not yet available, the report notes that they pose a “great risk of widespread housing problems.”

Households with worst case needs are defined as renters with very low incomes (at or below 50 percent of area median income) who do not receive government housing assistance and pay more than half their income for rent, live in severely inadequate conditions, or both. Cost burden – the mismatch between income and housing costs – is by far the most significant housing problem in all geographic areas. Inadequate housing quality caused only 3 percent of worst case needs nationwide.

In 2019 there were 7.77 million renter households with worst case needs in the U.S., 42.2 percent of all very low-income renters. This represents an improvement from the record high of 8.5 million (44 percent) in 2011 but it remains above the rate during the years preceding the 2007-2009 recession.

Almost three-quarters (74 percent) of worst case renters in 2019 had extremely low incomes (at or below 30 percent of area median), the highest proportion since 2005. Worst case needs were highest among American Indian or Alaskan Native households at 55 percent; 53 percent among Asian households, 45 percent among Hispanic households, 44 percent among non-Hispanic White households, and 36 percent among non-Hispanic Black households and Native Hawaiian or Other Pacific Islander households.

Worst case needs declined in the Midwest, Northeast, and South from 2017 to 2019, but those improvements were offset by an increase in worst case needs in the West.

Harvard Joint Center for Housing Studies - 2021 CoverHarvard Joint Center for Housing Studies

The State of The Nation’s Housing – 2021

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Joint Center for Housing Studies of Harvard University
Harvard Joint Center for Housing Studies - 2021 Cover

Even as the US economy continues to recover, the inequalities amplified by the COVID-19 pandemic remain front and center. Households that weathered the crisis without financial distress are snapping up the limited supply of homes for sale, pushing up prices and further excluding less affluent buyers from homeownership. At the same time, millions of households that lost income during the shutdowns are behind on their housing payments and on the brink of eviction or foreclosure. A disproportionately large share of these at-risk households are renters with low incomes and people of color. While policymakers have taken bold steps to prop up consumers and the economy, additional government support will be necessary to ensure that all households benefit from the expanding economy.

HAC is a proud sponsor of Harvard’s State of the Nation’s Housing report.

Policy News from the Administration

HAC Urges Treasury Department to Provide Guidance on Emergency Rental Assistance Funds

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In December, Congress came together to pass a pandemic relief bill, which included $25 billion in emergency rental assistance. This emergency rental assistance (ERA) funding will run through the Coronavirus Relief Fund at the U.S. Department of the Treasury. To ensure that rural areas are equitably served, the Housing Assistance Council submitted comments to the Treasury Department calling for ERA guidance to include the needs of rural communities. HAC’s comments focused on highlighting several key areas:

  • The lack of rural-targeted housing assistance provided thus far in the pandemic, and the outsized impact COVID-19 has had in rural communities.
  • The importance of Treasury encouraging states to use their ERA funding proportionally in rural areas.
  • The need for Treasury to make clear in guidance that currently unassisted families living in USDA multifamily properties are eligible for ERA funds.
  • The need for Treasury to clarify that local governments do not have to incur costs up front before being able to use ERA funds.

Read the full comment letter to the Treasury Department here.

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50 Years for Rural America

Over 50 years HAC has worked in every U.S. state and the territories. Learn more about what our work means for rural communities.

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