Policy update: income banding—another perspective

By Stanley Keasling, RCAC CEO

In the last newsletter (Self-Help Builder November 2016) I discussed some of my concerns regarding USDA Rural Development’s use of income banding for low-income families even though it may also benefit very low-income households. My concern was that this may end up benefiting households who do not really need assistance and who, absent banding, would not be eligible borrowers. In spite of these concerns, as you will see below in the story that Benjamin Farnsworth from Neighborhood Nonprofit Housing Corporation shared with me, there are real benefits to income banding for small households.

Ronald and Linda Larson live in the apartment complex directly across the street from the office of Neighborhood Nonprofit Housing Corporation (NNHC), a Mutual Self-Help Housing grantee.

Due to a disability, Linda does not work outside the home. Ron was employed in Logan as a production worker at Schreiber Foods until being laid off in 2009. The family’s financial situation took a turn for the worse, they lost their home and filed bankruptcy in 2010. Obtaining credit has been an ongoing struggle since that time.

In 2013 Ron found reliable work through a temp agency. This temporary employment, fortunately, transitioned to a regular full time job in October 2014 with Autoliv, a large manufacturing company in the automobile industry. Ron now earns an annual income of $44,660.

In April 2014, Ron and Linda stopped by the NNHC office and filled out an intake form for the Mutual Self-Help Housing program. They met with Karli, an experienced Housing Specialist, and started the hopeful journey to homeownership. As Karli worked with Ron and Linda regarding their income, debts and credit, they set goals to obtain regular employment and improve their budget with money management techniques. They worked hard on these goals for the next six months. After the move to full-time employment in October that year, Ron and Linda visited with Karli again, only to find out that they suddenly earned too much money to be considered eligible for participation as owner-builders.

Luckily this story doesn’t end with disappointment. Ron and Linda were notified earlier this year when the USDA Rural Development introduced the new pilot program. The income banding method for determining program eligibility was literally a saving grace for the Larsons. In FY 2016, the Logan, UT-ID MSA income data, derived from census reports and compiled by U.S. Department of Urban Development, traditionally would allow two-member households to earn no more than $41,050 to be considered low-income (i.e. at, or below, 80% of the Area Median Income, or AMI). Under the new income-banding guidelines, these same households can now make up to $51,300. In essence, the new pilot program for income banding has turned the key of opportunity in the door of the American dream for many rural households in need.

For Ron and Linda this dream became a reality on August 25when they received an eligibility letter from USDA Rural Development. The Larson’s have already begun construction on their home in the Wasatch View subdivision, located in Hyrum, Utah, a quiet rural community of approximately 8,000 residents on the southern end of the beautiful Cache Valley.