Bipartisan Act Tackles Rural Housing Affordability Crisis

The nation’s housing crisis often focuses on high-cost cities like San Francisco, New York, Boston, and Los Angeles, where soaring rents and home prices dominate headlines. However, rural America faces its own, less visible housing challenges.

A 2025 White House report revealed that between 2000 and 2023, rural rents rose 31.2% after adjusting for inflation, while median real income for rural renters grew just 5.5%. Rural home prices also outpaced homeowner incomes by more than six times. The report showed the urgent need to address housing affordability in these areas.

A bipartisan push to ease rural housing barriers

The 21st Century ROAD to Housing Act seeks to tackle these issues through multiple provisions, including measures to preserve affordable housing supply and streamline environmental reviews to help ease barriers to rural housing development. It also introduced revisions to the USDA’s Section 515 program, allowing certain properties to retain Section 521 Rental Assistance even after their USDA loans mature, thereby preventing the loss of affordable housing.

This week, the USDA and HUD signed a memorandum of understanding (MOU) to implement parts of the act. Their agreement focuses on reducing redundant environmental reviews for federally funded rural housing projects by evaluating potential exemptions and establishing a process for one agency to adopt the other’s environmental impact statements.

“Today, a rural housing development financed by both departments can face two separate environmental reviews and two separate physical inspections, each under slightly different rules,” said David Dworkin, President and CEO of the National Housing Conference. “Every redundant step adds time, and every delay adds cost to homes these programs exist to make affordable.”

Beyond bureaucracy: persistent barriers to rural housing

While the MOU marks progress, rural housing leaders say more action is needed. Rural communities face challenges like limited financing, inadequate infrastructure, labor shortages, and restrictive zoning laws. ROAD also addressed opportunity zones in Section 201, allowing HUD to give preference to grant applicants whose projects are located in or primarily serve designated opportunity zones, including rural areas.

The ROAD Act includes revisions to the USDA’s Section 515 program, which provides 1% interest-rate loans for rural multifamily housing. The bill gave USDA the authority to separate Section 521 Rental Assistance from a Section 515 mortgage for certain properties nearing loan maturity. This change is particularly key in rural areas, where the closure or conversion of a single property can significantly impact the local housing supply.

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The act also addresses opportunity zones, allowing HUD to prioritize grant applicants serving these areas. Jarrod Elwell, Community Development Regional Manager at the Federal Reserve Bank of Richmond, notes this will attract housing developers to rural communities. However, rural areas often lack staff to pursue government funding for housing projects. While urban or suburban communities may have full-time employees spending 40 hours a week on housing programs, rural communities may have staff working only several hours a week dedicated to that work, complicating access to funding.

Limited local banking relationships further complicate financing, though Community Development Financial Institutions (CDFIs) are stepping in to help. Attracting private investment remains difficult, as rural markets have fewer developers, especially those capable of large-scale projects. Builders in these areas often focus on custom homes rather than expanding the overall housing supply.

A shortage of construction workers hampers rural homebuilding, forcing developers to import labor from outside the area, increasing costs. Building the local workforce is challenging due to low instructor pay at community colleges compared to industry wages, making it difficult to train skilled workers like plumbers and electricians.

Topography and limited infrastructure further restrict development in some rural areas, particularly mountain communities. Zoning restrictions remain a significant hurdle, with some communities requiring five-acre minimum lots, making large-scale housing construction difficult.

The Richmond Fed’s Rural Investment Collaborative provides training to help rural leaders develop investment-ready projects. One success story is in Martinsville, Virginia, a community of fewer than 14,000 people. Project leaders explored bringing in developers from North Carolina’s Research Triangle, about two and a half hours away, but travel and lodging costs threatened the project’s feasibility. A local representative participated in the Collaborative and is now leading the project, which will use modular construction to build 10 duplex units, each with two bedrooms and two bathrooms across roughly 1,100 square feet, priced around $140,000.

The town of Martinsville provided the land and handled water and sewer infrastructure, while the local community foundation supplied a zero-interest construction loan.