In a subcommittee hearing titled, “Persistent Poverty in America: Addressing Chronic Divestment in Colonias, the Southern Black Belt, and the U.S. Territories,” representatives from the U.S. House Committee on Financial Services and witnesses discussed the issues impacting some of the poorest areas in the nation, and how they can be addressed.

Congresswoman Maxine Waters (D-Calif.), chair of the house committee, opened the hearing with the following statement:

“Over 1.7 million people in the U.S. live in rural counties experiencing persistent poverty. These rural communities face chronic disinvestment and population loss as housing, lending, and community development needs have gone ignored. We cannot continue to turn a blind eye, especially as inflation – driven in large part by rising housing costs nationwide – has exacerbated rural job loss, further entrenching persistent poverty in many communities.

“One year ago this month, the House passed the Build Back Better Act, which included historic investments for housing in rural America, but not one single Republican member supported it. I hope we can build bipartisan support for efforts to invest in affordable housing, especially in rural areas, and to effectively reduce inflation. And I hope as we go down this path, in the future, we can get some support from the Republicans.”

The Subcommittee on Housing, Community Development, and Insurance heard from Kiyadh Burt, vice president of policy and advocacy and interim director of the HOPE Policy Institute; Amber Arriaga-Salinas, assistant executive director of Proyecto Azteca; Lance George, director of research and information at the Housing Assistance Council (HAC); Yarimar Bonilla, director of the center for Puerto Rico Studies at Hunter College, and Chris Potterpin, president of development at PK Companies.

The key words at the hearing: homeownership and affordable housing.

Burt informed the subcommittee on HOPE Policy Institute’s work to increase financial inclusion in the deep South (Alabama, Arkansas, Louisiana, Mississippi, and Tennessee). His testimony included strategies to increase affordable homeownership and housing with an emphasis on increasing opportunities for communities of color, such as down payment assistance programs.

“In the deep South, there’s nearly a 27 percent difference between Black and white homeownership, largely due to financial exclusion and exploitive practices,” he said. “Many Black and brown communities simply lack adequate capital to purchase a home. Now, down payment assistance is a critical strategy in resolving that gap. Down payment assistance has the ability to transition households from a history of renting to a future of homeownership.”

Burt said his organization has seen a clear correlation between an increase in down payment assistance programs and an increase in homeowners of color.

The next strategy was to ensure banks and credit unions offer mortgage products that meet the needs of communities experiencing persistent poverty and the secondary market supports these efforts. HOPE, Burt said, has an in-house mortgage product that is manually underwritten, discounts student-loan-deferred debt, and has a loan-to-value ratio of 100 percent to eliminate the down-payment disparities and challenges.

However, he noted, Fannie Mae and Freddie Mac do not support this product. This, he further stated, speaks to their lack of capacity to provide an increase homeownership for these communities and limits HOPE’s ability to expand this lending opportunity.

“One major contributor to the gap in homeownership includes uneven access to mortgage loans,” Burt wrote in his written testimony. “Loan denial rates illustrate the failure of financial institutions to ensure fair lending. In 2021, the percent of loan originations for Black borrowers in deep South states substantially trailed the percent of population represented.

“The denial rate for Black borrowers in the deep South earning more than $150,000 was higher than for white families earning between $30,000-$50,000,” he continued. “Black households in Mississippi have the highest mortgage loan denial rate in the country (40 percent). This is more than twice the rate of white households. Statewide, 17 percent of all mortgage originations were to Black borrowers (in a state that is 36 percent Black); in contrast, 70 percent went to white households.

“Closing gaps in mortgage lending is critical to closing homeownership gaps. Eliminating racial disparities in rates of homeownership is a critical strategy for narrowing the racial wealth gap. In fact, if policy changes resulted in equalizing homeownership rates between Black and white households in the Southeast, the wealth gap would shrink by 38 percentage points.”

Burt also stated HR 4495, titled the Downpayment Toward Equity Act, is one of the most significant pieces of legislation crafted for meaningfully decreasing the racial wealth gap through homeownership and would appropriate $100 billion for down payment assistance grants for first-time homebuyers.

Burt’s last strategy was to hold state housing finance agencies accountable for meeting the pandemic recovery needs of local people.

“An examination of the emergency rental assistance program shows that state governments in the deep South did not meet the needs of local people and the distribution of rental assistance and levels achieved across the country,” he said. “Such findings call for increased accountability among states, particularly states with questionable track records and serving the most vulnerable populations.”

Arriaga-Salinas provided insight into the housing challenges experienced by colonias, where residents do not have basic services like potable drinking water, sewage treatment, electricity, paved roads, streetlights, and decent housing. Proyecto Azteca, a nonprofit construction organization in San Juan, Texas, provides affordable housing for low-income families who cannot obtain a traditional mortgage.

“Housing is the most important component that determines a family’s quality of life, and communities cannot thrive when so many live in unstable conditions,” Arriaga-Salinas said. “We ask that a program like the state colonias ombudsmen be revived in order to track improvements. Colonias would have a greater opportunity to address affordability, equity, and sustainability problems if the term ‘colonia’ was included in the Federal Housing Finance Agency’s Duty to Serve definitions.”

Though the Build Back Better Act and the American Rescue Plan provided relief monies for the communities Proyecto Azteca serves, Arriaga-Salinas said the dollars are designated to address homelessness and rental assistance. However, that does not sufficiently address the needs for housing in colonias because, even though the homeless population in these areas are low, issues with overcrowding, limited rental units, and the unavailability of rental vouchers outside city limits show a need for funds specifically set aside for community development and affordable housing in this sector.

George from HAC, a national nonprofit supporting affordable housing efforts in rural areas and a certified community development financial institution (CDFI), spoke about five trends his organization believes are key to improving social and economic housing conditions. These trends were:

• Areas of persistent poverty are not random – they are geographically clustered while seemingly invisible to the rest of the country. Persistent poverty counties make up 10 percent of all counties, and 15 percent of the nation’s landmass.
• Persistent poverty areas are fluid. While 70 counties moved off the persistent poverty list, 13 have been added, and 78 percent of the current persistent poverty counties have consistently been considered so since 1980.
• Poverty is not new to U.S. territories. HAC recently calculated the persistent poverty status for Puerto Rico for the first time, and all 78 of the country’s municipios are classified as having persistent poverty.
• Race and ethnicity are closely aligned with persistence of poverty. People of color make up 60 percent of those living in persistent poverty counties, and 42 percent of persistent poverty counties have majority populations color.
• The visible impact of economic distress is evidenced in the housing conditions of these communities. Communities experiencing persistent poverty are challenged with overcrowding, affordability problems, and few mortgage and housing finance opportunities.

“There are two critical factors necessary to build equity in persistently poor rural places,” George said. “The first is just local organizational capacity. Second, is access to capital. Additionally, tailoring of federal resources and improving the reliability and availability of rural data would also improve equity for persistent poverty communities.

“An example of this importance of data are HAC’s development of the colonias investment areas. This research created a usable and programmatic definition of colonia so that mortgage and housing finance resources can be more efficiently directed to colonia communities.”

Bonilla discussed housing challenges in Puerto Rico and other U.S. territories.

“The U.S. government has set 20 percent (poverty rate) for 30 years as the trigger of an alarm, but that fact is Puerto Rico’s poverty rate has been twice that for over a century,” she said. “At 40.5 percent, Puerto Rico has the second-highest poverty rate in the U.S., second only to American Samoa, and the absolute lowest median income of any U.S. jurisdiction.”

Bonilla said while many may contribute the lower median income – 25 percent of the Puerto Rican population subsists on $10,000 year – to a lower cost of living, this is not accurate. The average cost of rent, mortgage, and utilities are higher in Puerto Rico than the national average, partly due to the privatization of many services.

“The U.S territories as a whole share these concerning metrics, leading us to ask whether this is really a question of persistent poverty, or rather of the systemic poverty of empire,” she said.

To help the citizens of U.S. territories, Banilla requested Congress address the exclusion of territories from vital federal programs geared to help the most disadvantaged sectors of the population and exercise its oversight over the fiscal oversight board and its focus on austerity and privatization in the territory.

Banilla also stated the U.S. Department of Housing and Urban Development (HUD) and Federal Emergency Management Agency (FEMA) be held accountable for “existing bureaucratic hurdles that have stymied the release of appropriated funds for reconstruction and resilience and Puerto Rico in the aftermath of natural disasters” like Hurricane Maria.

Potterpin addressed the subcommittee on behalf of the Council for Affordable and Rural Housing (CARH), an industry trade association that represents the interests of for-profit and non-profit builders, developers, management companies, owners, and financial entities who provide goods and services to the affordable rental housing industry in the U.S.

“The lack of safe and decent housing in rural America is one of the greatest contributors to the challenge of poverty,” Potterpin said. “The lack of affordable housing reflects the lack of investment in these localities more broadly. In fact, rural renters are more than twice as likely to live in substandard housing compared to people who own their own homes.

“In these areas, we are losing our affordable units,” he added. “Loss of federally assistant multifamily housing means losing a finite resource and that trend is contributing to challenges in rural areas.”

Potterpin said the adverse effects of housing instability and its impact on the education and health of the country’s children has been well documented and cannot be solved solely by private or public actors. He said to address the issue, a partnership is necessary.

Federal programs have been very effective when properly funded and supported with technology and staff, Potterpin continued, but too often these resources are allotted to issues in urban areas, limiting the amount of assistance rural areas can receive. Projects funded by the USDA rural development program have not seen proper funding or support since the mid-90s and are now aging with no way of preservation or rehabilitation outside of the housing tax credit, which he said predominantly goes to urban or suburban areas.

“We’re down to less than 14,000 projects and properties,” Potterpin said. “Over the next decade, as many as three quarters of all §515 mortgages will mature, and with it, the end of rental assistance for the folks in those properties, and that will affect approximately 250,000 families and elderly persons, leaving them without the ability to house themselves.

“In 300 counties, §515 properties are the majority of project based subsidized units and 90 percent of all §515 properties are in counties with persistent poverty.”

Potterpin gave suggestions for tools to combat these issues. These included continued investment in rental assistance, modernizing the housing credit so it is more focused toward rural areas, and allowing LLCs and S corporations to participate more fully in housing, credit, and support relief.

In reference to Potterpin’s statement about the allocation of federal dollars for housing support and its limited reach to rural communities, subcommittee Chair Emanuel Cleaver (D-Mo.) spoke about his perspective. He said the problem may lie in the fact Congress gives the money to states to distribute, and if money goes to entitlement cities, like those who receive Community Development Block Grants, then the smaller communities have to fight over what is left.

“If we’re going to correct a problem, it needs to be with what’s going on with the federal allocation to the states, because that’s where the problem is most clearly seen,” Cleaver said. “I’ve been arguing this for a long time now, that we need to take a whole different view of this…. It’s a horrible situation that needs to be corrected. This might not be exactly what this hearing is about, but this creates one of the biggest obstacles in providing sufficient housing dollars, or dollars to fight poverty.”

Subcommittee Ranking Member French Hill (R-Ark.) mentioned reports from the Government Accountability Office stating HUD, USDA, and the Department of Commerce’s Economic Development Administration have not incorporated leading practices for interagency collaboration in select economic development programs, and asked George his opinion on interagency coordination.

“I agree that there could be more coordination, and more effort, generally,” George stated. “I do think the agencies try really hard and are making sound investments in these communities. There are some instances that were noted in the testimony where there was a lack of adequate staffing and resources in some of these agencies to redirect those funds. But by all means, we think collaboration is a good effort across the board among agencies.”

Hill also asked Burt for his opinion on the matter, as well as on coordination with state and local entities when it comes to dispersing federal funds for housing programs.

“We do support the interagency collaboration and deploying funds to communities that are deep in poverty,” Burt said. “One of the things that we’d like to highlight is making sure that federal funds get to the [entities] that do the best work and serve in these communities, as evidenced by the emergency rental assistance program and in some cases, the homeowner assistance program.

“At times, our states may have the inability or unwillingness to effectively serve these communities,” he added. “From our experience, we saw communities and households express challenges in accessing their rental assistance program, whether it be through an online application or having to have an email address or simply lacking access from state agencies that were managing the funds to actually access critical, critical, critical relief.

“But in addition to that, we also like to amplify is that where there’s opportunities to send these funds directly to CDFIs with a strong track record, we have a good example of the ways in which CDFIs have the ability to encourage public and philanthropic dollars to make a difference in homeownership and real communities.”