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Today, U.S. Senators Peter Welch (D-VT), John Hoeven (R-ND), and Tina Smith (D-MN) introduced the bipartisan Farm Ownership Improvement Act (S.910) in the Senate. If enacted, the bill would make loan programs work better for farmers and help address one of the most critical barriers to farmland ownership: access to capital. Specifically, the bill directs the U.S. Department of Agriculture (USDA) to develop and pilot a pre-approval or pre-qualification process for Farm Service Agency (FSA) Direct Farm Ownership (DFO) Loans.
High land prices and lengthy approval processes for DFO loans often put young and beginning farmers at a severe disadvantage. Pre-qualification or pre-approval of potential borrowers for DFO loans will allow young farmers to compete more effectively in a fast-moving real estate market, balancing the scale for those who rely on FSA financing.
“I’ve built a viable business from the ground up on rented land, but my partner and I don’t have access to generational wealth or high-income careers to pivot from and pursue farming full-time,” said Michelle Week of Xast Sqit (Good Rain) Farm in greater Portland, Oregon. “Traditional lenders don’t recognize our lifestyle or business model, so we don’t qualify for standard loans. In the Portland, Oregon metro area and southwest Washington counties, land prices are increasing, and while retiring farmers want to pass their land to people like us, they can’t afford to wait. Several farmers have approached me, but I can’t access the capital fast enough to meet their financial needs to address health and relocation costs. With pre-approval for an FSA loan, we’d be better positioned to make offers and purchase our forever farmland, supporting retiring farmers, continuing to nourish our communities, and also better positioned to stabilize and grow our farm operations. It’s a win all around.”
If enacted, the bill would give the USDA up to two years to develop and fully implement the pre-qualification or pre-approval process, ensuring that it meets the needs of young farmers and ranchers. Currently, loans can take up to six months to process, after a purchase agreement has been signed – a timeline that can be prohibitive for those trying to purchase land in a highly competitive market. By implementing a pre-qualification or pre-approval process, this bill could further streamline the application process, reduce delays, and better serve the next generation of farmers. This is especially important in light of the reduction of the federal workforce, which will certainly impact customer service and timeliness of loan approvals.
Amanda Koehler, Land Policy Associate Director for Young Farmers stated, "For young and beginning farmers and ranchers seeking financing through FSA Direct Farm Ownership loans, there is strong competition for available land, particularly with other buyers who have greater access to capital and credit and can close a deal quickly. As the value of farmland continues to skyrocket, the Farm Ownership Improvement Act, if included in the next Farm Bill, will make young producers more competitive in the real estate market, improve the timeliness and customer service of FSA loan services, and help level the playing field for farmers and ranchers seeking land, particularly among this new generation."
The National Young Farmers Coalition (Young Farmers) is a national grassroots network of young farmers changing policy and shifting power to equitably resource the new generation of working farmers. Visit Young Farmers on the web at www.youngfarmers.org, and on Twitter, Facebook, YouTube and Instagram.
