PROGRAM HIGHLIGHTS

SUMMARY OF BUDGET ESTIMATES

1. SUMMARY OF BUDGET REQUEST

The fiscal year 2001 Budget proposes $27 million for Rural Housing and Economic Development (RH&ED). These funds will be used to encourage new and innovative approaches to serve the housing and economic development needs of the Nation's rural populations by providing funding on a competitive basis to local rural non-profits, community development corporations, Indian tribes, and State economic or community development organizations.

This funding will support HUD's Strategic Goal #1: Increase the Availability of Decent, Safe, and Affordable Housing in American Communities, and #4: Improve Community Quality of Life and Economic Vitality. This program promotes the objectives of the Administration's New Markets Investment Initiative by encouraging economic investment in the Nation's most distressed rural areas, such as the Appalachian region, the Mississippi Delta region, the border counties of the lower Rio Grande Valley (Colonias), and American Indian Reservations. This initiative represents a growing national recognition of the need to enhance State and local capacity in order to expand the supply of affordable housing and encourage economic development in rural areas. Rural Program activity is beginning in fiscal year 2000 and the fiscal year 2001 Annual Performance Plan reflects projected activity in indicator 1.2.c.

In fiscal year 1999, HUD awarded approximately $27 million, including $3 million from the 1998 appropriation, in Rural Housing and Economic Development grants to housing finance agencies, local rural non-profit organizations, State community and economic development organizations, Native American tribes, and community development corporations. The number of grant applications far exceeded the Department's expectations, with over 740 applicants requesting more than $200 million. This overwhelming response confirms the tremendous unmet need for funding targeted toward rural areas.

Rural communities face different socio-economic challenges than do cities. According to the U.S. Department of Commerce, while poverty levels in metropolitan areas have been slowly decreasing over the last several years, they have remained constant in non-metropolitan areas. In addition, while the population is growing in some rural regions, especially those focused on retirement or recreation, the population continues to decline in the majority of rural America. This is due in part to the limited capacity to attract industry, and jobs, to rural areas. Many rural areas have been by-passed by the Nation's strong economy, and suffer from extremely high unemployment rates, endemic under-employment, and low, stagnating wages. It is imperative that rural regions have greater access to community and economic development funds that would foster investment in economic opportunities.

HUD has significant and historic experience in managing housing and community and economic development programs in rural areas, and continues to demonstrate this experience and commitment to rural communities through initiatives such as the Community Development Block Grant and HOME Investment Partnerships programs. This experience, as well as the partnerships that HUD maintains with organizations such as the Housing Assistance Council, provides the basis for fostering the creation of innovative approaches to the unique problems faced by people and families in the Nation's rural areas.

President Clinton highlighted the profound need for rural development grants during his July 1999 visit to the Pine Ridge Indian Reservation, the poorest census tract in the nation. A $538,266 grant awarded to The Lakota Fund will be used to assist with the completion of a 30-unit, single family housing project for Pine Ridge residents. In addition, Cangleska, Inc., plans to use a $211,764 grant to establish an office to serve the needs of homeless battered women on the Reservation. The President also announced several grants in Appalachia, including one that will strengthen a post-homeownership counseling partnership with groups in Kentucky, Tennessee, Virginia, and West Virginia. The grant to the Federation of Appalachian Housing Enterprise, Inc. was $482,374. Other examples of projects funded through the Rural Housing and Economic Development Program include:

• homeownership assistance for 78 low-income residents of the San Luis Colonia in Yuma County, Arizona;
• five grants totaling $1,635,626 to assist Sioux tribes in South Dakota;
• three grants totaling $1.7 million to assist Colonias in Hidalgo County, Texas, where the poverty rate is 42 percent and unemployment is 4 times the national average;
• the creation of 150 new jobs through a revolving loan fund and job training program to assist rural entrepreneurs in Sullivan County, New York;
• the acquisition, improvement, and marketing of 17 acres of property to be developed as a top quality industrial site in Uniontown, Alabama;
• the creation of a residential construction company by the Catawba Indian Nation in York County, South Carolina, resulting in 20 new jobs and the construction of 10 new homes for qualified low-income families;
• homeowner counseling for 240 migrant farmworker families in Coachella Valley, California, approximately 70 of whom are expected to purchase homes, and for all RH&ED grants; and
• in addition to the above grants, approximately $200 million in private and other public funds will be leveraged with the RH&ED grant funds.

HUD continues to work closely with the U.S. Department of Agriculture (USDA) and other Federal agencies (Economic Development Administration, Appalachian Regional Commission and Department of the Interior) to structure a more effective response to the housing and economic development needs of the Nation's rural areas. This includes examining programs to see if legislative and/or regulatory changes may be necessary to make them more responsive to rural needs. Rural housing and economic development "specialists" are in place in Headquarters and the field offices to provide coordination and cross-state solutions to the problems facing residents of rural areas, including people living in Colonias, Native Americans, migrant farm workers and others. Other HUD staff in HUD field offices help coordinate rural housing and economic development activities and assist constituent rural communities in their efforts to access available resources.

2. CHANGES FROM 1999 ESTIMATES INCLUDED IN 2000 BUDGET

Fiscal year 1999 funds were awarded on June 1, 1999, as required by the 1999 Appropriations Act. These grants will be obligated early in fiscal year 2000. Outlays will be reflected in 2000 actuals.

3. CHANGES FROM ORIGINAL 2000 BUDGET ESTIMATES

Funding was not requested for fiscal year 2000 but $25 million was appropriated. Outlays reflect the spendout as projected for previous rounds of funding plus the fiscal year 2000 appropriation.

EXPLANATION OF INCREASES AND DECREASES

Obligations decrease from 2000 to 2001 due to the expectation that all available funds will be obligated during fiscal year 2000. Outlays increase by $10.6 million reflecting an increased spendout of prior year appropriations, as projects are obligated and grantees draw funds.

PROGRAM DESCRIPTION AND ACTIVITY

1. Legislative Authority. An authorization proposal was submitted for this program on July 1, 1999.
2. Program Area Organization. The Office of Rural Housing and Economic Development is located in the Office of Community Planning and Development. This Office focuses on issues related to rural housing and economic development needs, and works with other HUD offices, the Department of Agriculture and other Federal agencies with related programs on such matters. In addition, HUD has designated a number of our new Community Builders to provide coordination and cross-State solutions to the problems facing residents of rural areas, including people living in Colonias, Native Americans, migrant farm workers and others. Other Community Builders working in HUD field offices will be helping to coordinate rural housing and economic development activities and will assist constituent rural communities in their efforts to access available resources.
1. Eligible Recipients. Eligible recipients include local rural non-profit organizations, community development corporations, Indian tribes, State housing finance agencies, and State economic development or community development agencies.
2. Allocation of Funds. Grants are made on a competitive basis in accordance with HUD's competitive process.
3. Eligible Activities. Eligible housing and economic development activities include: (1) Capacity Building activities, including hiring qualified staff, supporting and training existing staff, providing software and other tools to provide networking and research capability, obtaining expertise from outside sources, and technical support and development. Capacity building funds can also be used to establish private community development financial institutions, lines of credit, revolving loan funds, micro-enterprises, and small business incubators; (2) Seed Support activities, including acquiring space and equipment, purchasing land and/and options, hiring staff, and other "start-up" activities; and (3) Innovative activities, including the preparation of plans, architectural and engineering drawings, financial assistance for acquisition of land and buildings, demolition, purchase of materials, construction, the use of local labor markets, and the provision of infrastructure.

STATUS OF FUNDS

Balances Available

1. Unobligated Balances. The following table compares the program obligations with funds available by year.



2. Obligated Balances. The status of obligated balances is as follows: