ACRE Act: With the right policies, community banks can deliver financial relief for families and farmers

Over the last two years, poor decision making in Washington has increased costs for our families, farmers, and small businesses. The average mortgage rate nationwide has nearly eclipsed 7% as the Federal Reserve continues its aggressive rate hikes, inflation remains at historic highs, and small business optimism has plummeted to a 10-year low. Thanks to persistent economic uncertainty, families have forgone new home purchases, farmers have seen their profit margins dwindle due to higher input costs, the next generation of producers cannot afford to get their foot in the door, and Main Street businesses struggle to keep their doors open. In other words, the dream of homeownership and the promise of entrepreneurship have all but evaporated in our economy. 

These challenges are especially acute in rural America. On my biannual 36 County Tour, I have had countless conversations with families, farmers, and business owners about the rising cost of living and doing business. Community leaders have also expressed to me their real concerns that population loss in rural small towns will worsen as home prices increase and home loans become more costly. In short, our economy is failing working families and family farmers who need access to capital at affordable rates to weather the financial storm that Washington has unleashed on our communities. The solution, however, is not big-government overreach; the solution is to remove Uncle Sam from the equation entirely and allow our community banks — which provide 80% of all financing to our farmers in the banking sector and maintain strong relationships with local residents — to do what they do best: serve our rural communities.

That’s why I am proud to lead the Access to Credit for our Rural Economy (ACRE) Act with my colleague from North Carolina, Rep. Wiley Nickel. This legislation is as straightforward as it is vital. It excludes from gross bank income interest accrued from farm real estate loans, and home mortgages less than $750,000 in rural communities of fewer than 2,500 people. In my district — Iowa’s 4th Congressional District — these parameters apply to nearly every community that I represent. These exclusions already apply to large credit unions and the Farm Credit System, so, in the name of fairness, I believe that they should also apply to our community banks and local lenders. The cost savings realized by Iowa’s local banks will undoubtedly be passed along to consumers through lower interest rates on loans and increased access to capital — two priorities vital to economic development and financial prosperity in rural Iowa.

Again, the benefits of ACRE are multifaceted. These cost savings will not only keep our community banks profitable and productive, but also lower costly interest rates for families looking to secure a home loan and beginning farmers in need of affordable financing for new equipment, inputs, and other necessities to run their business. More specifically, according to industry estimates, the ACRE Act would save farmers and producers $950 million in costs every year, lower rates on home loans between 0.5% and 1.5% resulting in approximately $200 million in interest savings, and secure $1.15 billion in annual interest savings for families and farmers in rural communities nationwide. Additionally, the American Bankers Association forecasts that this legislation would expand access to affordable agricultural and home loans to over 4,000 rural communities nationwide.

Given the dire condition of our economy, we need to give our main street lenders much-needed flexibility to offer and restructure agricultural and home loans at affordable rates to grow our rural communities and reverse population loss in rural America. Fortunately, the ACRE Act ensures that our family farmers have access to the capital they need to remain profitable, and our families have the financial support they need to plant and keep their roots in rural Iowa. This legislation represents an important investment in our community banks — which remain the trusted lenders of every rural main street — that will pay dividends for our families and farmers in the form of lower costs across the board. Because of this bill, the American Dream will continue to flourish in rural America. 

Community banks power our rural economy and fund critical investments that our communities rely on to grow and thrive. By reducing the tax burden on local lenders and allowing them to more flexibly serve our families, the financial savings will multiply throughout our economy. In Congress, I will continue to be an unwavering advocate for our community banks, our farmers, and our hardworking families. Together, I am confident that we will continue to deliver results for our families, support our farmers, grow our economy, and keep Iowa the best place to live, work, run a business, and raise a family.

This op-ed was originally published in the Summer 2023 edition of the Iowa Bankers Exchange.