Unlocking Rural Housing Potential: Navigating Affordability Challenges for Sustainable Growth

Amid the post-pandemic housing market challenges, the role of the Low-Income Housing Tax Credit (LIHTC) in supporting affordable housing projects cannot be overstated. However, rural communities encounter hurdles in securing funding through LIHTC, and the credit's impending sunset on January 1, 2025 adds urgency to the situation. As federal support declines, a looming affordability crisis emerges, particularly in the context of aging rental units under programs like the U.S. Department of Agriculture's Section 515 Rural Rental Housing Loans.

Based on research conducted by the Richmond Federal Reserve, it's evident that rural renters in the Fifth District are disproportionately more likely to fall into the low-to-moderate income (LMI) bracket compared to rural homeowners. Senior research analyst Sierra Latham highlighted in a September Regional Matters blog post that 63 percent of rural renters in the Fifth District earn 80 percent or less of the area median income, whereas only 25 percent of rural homeowners with mortgages fit into this category. Moreover, incomes in rural areas typically lag behind those in metropolitan areas, and the median income of rural renters is less than half that of rural homeowners with mortgages in each state within the Fifth District. This emphasizes the vital role of the rental market in catering to low-to-moderate income (LMI) households in rural areas, with an anticipated surge in demand from these demographics as rural households age. 

The pandemic has led to a unique opportunity for rural communities to attract teleworkers with incentives like those offered by the Ascend West Virginia program. Regardless, without a plan to expand housing supply, an influx of newcomers may worsen affordability issues. In response to these challenges, rural communities are urged to adopt strategies that include repurposing existing structures to meet the growing demand for affordable rental units and exploring the potential of single-family build-to-rent homes as viable solutions. Rural communities must develop strategic housing plans that address supply to mitigate affordability issues for both renters and homeowners alike. In doing so, they can navigate the existing challenges and pave the way for sustainable growth and economic well-being in these regions.