- Rural housing stock grew just 1.7% from 2010 to 2020, with many states experiencing a decline.
- Thousands of USDA-financed rural housing units are losing federal affordability protections annually.
- The Rural Housing Service Reform Act streamlines federal rural housing programs with bipartisan political momentum.
- Experts suggest the Act could lead to more public-private partnerships in Native and underserved rural communities.
- Real estate investors may find rural markets increasingly viable due to new incentives and lower competition.
The growing housing crisis isn’t limited to booming cities. Rural communities are experiencing acute shortages of affordable housing due to the expiration of federal support, regulatory red tape, and disrepair of aging housing stock. In this context, the reintroduction of the bipartisan Rural Housing Service Reform Act brings both hope and pressing questions: will these reforms bring real results to America’s overlooked regions?
The Rural Housing Service Reform Act: A Needed Reset
The Rural Housing Service Reform Act was reintroduced by Senators Mike Rounds (R-SD) and Tina Smith (D-MN) in 2024 to address glaring shortcomings in our nation’s rural housing programs. Originally proposed in 2023 but held back by not enough cosponsors, the renewed bill now gets strong bipartisan support from more senators worried about the growing rural housing crisis.
Designed as a strategic fix to modernize and preserve affordable housing in rural communities, the Act signals a turning point for programs managed through the Rural Housing Service (RHS), an agency within the U.S. Department of Agriculture (USDA). The legislative overhaul seeks to repair a system that has often lagged behind both urban-focused housing policies and the shifting economic realities of rural America.
Most critically, the proposed changes aim to address the looming threat of widespread portfolio loss in USDA-sponsored housing developments—an urgent concern for more than 400,000 low-income families who depend on these properties for safe, stable homes.
Understanding the Rural Housing Service’s Role
The USDA’s Rural Housing Service exists specifically to support housing needs outside of metropolitan areas. It administers key programs designed to offer funding, loan assistance, and rental aid. These initiatives include
- Section 515 Rural Rental Housing Loans: Offers developers loans for building low-income rental housing in rural settings.
- Section 521 Rental Assistance: Provides rental subsidies to tenants living in Section 515 properties.
- Section 502 Direct and Guaranteed Loans: Helps low- to moderate-income families purchase, build, or repair homes.
However, many properties financed through these programs are aging, and when USDA mortgages reach the end of their term, the affordability restrictions often expire with them. This means thousands of homes could transition to market-rate pricing—or worse, be lost entirely from the stock.
The National Housing Law Project (NHLP) has warned that without intervention, an estimated 15,000 USDA-financed rental units will be lost annually through 2030, leaving predominantly elderly or disabled tenants at risk of displacement.
What the Reform Act Promises
The reintroduced bill focuses on three important pillars designed to rejuvenate the Rural Housing Service and its mission
Preserving Existing Affordable Housing
One of the most urgent threats to rural affordable housing is attrition caused by mortgage maturity. When a USDA-financed loan reaches its end, rural landlords are often no longer bound by affordability requirements. This creates a consistent and worsening bleed of affordable units.
The Reform Act proposes strategies to maintain these units in the affordable pool, such as
- Extending affordability requirements beyond loan maturity dates
- Authorizing USDA to restructure existing loans to keep rents low
- Enabling non-profits to take over properties and preserve affordability
These efforts echo calls from local housing advocates and fair housing organizations who emphasize that preservation is less costly—and more sustainable—than new construction.
Modernization and Bureaucratic Streamlining
Red tape has long hampered the efficiency of RHS programs. Current processes are often slow, not clear, and outdated, making them harder for tenants and developers to use.
The bill suggests
- Digital transformation of application and loan processing
- Clearer communication channels between USDA and stakeholders
- More transparent compliance guidelines for property managers and owners
- Greater flexibility in allocating funds and setting mortgage terms
This modernization is intended to match the changing realities of construction cycles, population mobility, and funding entry points—particularly crucial for communities facing lagging internet infrastructure and workforce shortages.
Accelerated and Targeted Assistance Delivery
Whether it’s rental subsidies, direct housing loans, or emergency assistance, speed and clarity matter. The bill aims to reform how RHS disburses aid, with measures including
- Real-time eligibility updates and application tracking
- Consolidation of loan and grant portals to reduce confusion
- Incentives for local and state partnerships to co-administer aid
This direct support model could be transformative not only for individual residents but for entire rural towns currently squeezed out of competitive funding cycles simply due to lack of administrative capacity.
Growing Support from Both Sides of the Aisle
Rarely do we see such broad political consensus—in a polarized era, the Rural Housing Service Reform Act stands out for being both practical and universally recognized as sorely needed. Senators from both major parties, including Steve Daines (R-MT), Kevin Cramer (R-ND), John Fetterman (D-PA), and Jeanne Shaheen (D-NH), have all voiced concern over the deteriorating state of rural rentals and the urgency to take legislative action.
These leaders are hearing from their constituents, many of whom live in areas where rents are rising despite stagnant or declining wages. In numerous rural counties, especially in the Midwest and Pacific Northwest, over one-third of renters are cost-burdened—spending more than 30% of income on housing—and often doing so without the benefit of secure leases or housing codes.
The bipartisan support signals political readiness to act, an essential condition for meaningful change. Moreover, advocates are working closely with these lawmakers to ensure tenant protections are maintained alongside market revitalization.
Rural America’s Growing Housing Inequity
Contrary to popular belief, housing affordability gaps aren’t solely a big city concern. In fact, rural communities often face even deeper structural disadvantages.
Higher Construction Costs, Lower Supply Incentives
While land might be cheaper in rural areas, costs for materials, transportation, and labor are often significantly higher due to distance and limited access. Without economies of scale, projects become financially unfeasible for developers, who prefer high-yield urban or suburban markets.
Add to this the low return on investment (ROI) for investors in less-populated towns and you see why supply consistently lags behind demand.
Decaying Housing Infrastructure
Much of the existing affordable stock in rural America was built in the 1960s through 1980s, with limited renovation since. As maintenance costs rise and properties collect code violations without adequate funding for repairs, rural families increasingly live in substandard conditions. Mold, utility outages, and poor insulation are persistent issues in several post-industrial counties and agricultural zones.
Disproportionate Effects on Native Communities
Native American reservations face some of the country’s most acute housing crises. In South Dakota’s tribal lands, for instance, multiple families often share homes lacking modern plumbing or electricity. Lakota Vogel, from the South Dakota Native Homeownership Coalition, underscores that policies like the RHS Reform Act could be watershed events for tribal housing advocacy.
Urban Lessons from Rural Reform: The Case for Las Vegas
Even though Las Vegas is far from rural, many of its neighborhoods reflect the same symptoms—affordability gaps, weak regulatory incentives for affordable housing developments, and a widening wealth divide.
Real estate veteran Steve Hawks points to investment patterns that chase luxury and tourism-oriented properties, often ignoring service economy workers or single-parent families pushed to the urban peripheries.
By looking at how the RHS Reform Act works—with streamlined processes, direct housing aid, and keeping housing affordable—Las Vegas and other cities could take good ideas from it to help balance what’s needed for housing in their own areas.
Why Real Estate Investors Should Pay Attention
Affordable housing is no longer a philanthropic side note—it’s increasingly a viable market segment with promising yields, especially when government-backed initiatives support long-term stability.
The RHS Reform Act sends clear signals to private investors
- Low-cost federal capital is back on the table.
- Regulatory light-touch zones may emerge in new areas.
- Demand for quality housing remains high in regions with limited competition.
Savvy investors looking for portfolio diversification should be tracking rural counties in states like Nebraska, Kansas, Idaho, and northern Nevada, which stand to gain from fresh federal loan support and public-private housing partnerships.
Applying Affordable Housing Models in Cities
The preservation-centric model in the RHS Reform Act is worth replicating in cities through
- Multifamily unit conversions and long-term subsidies
- Loans for retrofitting older buildings rather than razing them
- Incentive zoning policies that reward preservation of affordability
Hawks emphasizes market diversification as both recession-proof and socially impactful. Developers traditionally focused on luxury properties are now reconsidering their stance—opting for income-tiered project portfolios in response to changing consumer demographics and rising civic pressure.
Momentum in Housing-Focused Legislation
The RHS Reform Act isn’t an isolated push—it joins a rising tide of legislative efforts aimed at systemic housing reform
- The Neighborhood Homes Investment Act (NHIA): Encourages rehab and infill construction in distressed neighborhoods.
- Affordable Housing Credit Improvement Act: Expands low-income housing tax credit (LIHTC) allocations.
- Housing Supply Frameworks Act: Creates national benchmarks for housing production targets.
- The Homebuyers Privacy Protection Act: Aims to prevent consumer data manipulation in mortgage marketing.
These initiatives indicate the makings of a coordinated federal approach to solving America’s housing crisis. As these proposals move forward in tandem, the Rural Housing Service Reform Act could emerge as a template for local and federal integration.
What Comes Next
As of April 2, 2024, the RHS Reform Act has been referred to the Senate Banking Committee—a critical first step. The coming months are key: amendments may be proposed, stakeholder testimony presented, and funding mechanisms negotiated.
If the momentum continues, the Act stands a strong chance of passage, potentially via bundling with other housing or infrastructure legislation.
For now, professionals in real estate, community development, and public housing should watch closely—and start getting ready for what this new situation might mean for financing, funding, and compliance.
Steve Hawks’ Take: Plan for Smart Growth
Housing isn’t built in a vacuum—it’s created in a matrix of policy, economic pressure, and neighborhood need. Steve Hawks believes that forward-thinking investors and developers who track policies like this are better positioned to act when funding opens up or underserved markets suddenly become prime.
With a proactive policy like the RHS Reform Act, entire regions could transform. And whether you’re investing in Las Vegas or Lamar, diversification backed by sound economic data and social need isn’t just about growth—it’s about impact.
If you’re considering building or investing in housing—be it in rural counties or metro districts—the time to learn about this reform is now.