WASHINGTON, D.C. — The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) announced significant updates to their multifamily mortgage insurance programs, aimed at increasing financing flexibility and addressing the nationwide shortage of affordable rental housing. The changes, effective immediately, are designed to support developers and lenders in creating and preserving housing for low- and middle-income households.
“These changes to our underwriting rules will help create and preserve much-needed homes,” said HUD officials, underscoring the acute housing crisis. The revisions reflect FHA’s commitment to adapting policies to align with market demands while prioritizing affordable housing.
Key Changes to Underwriting Policies
The updates will apply to two categories of housing projects and aim to expand the reach of FHA’s multifamily programs.
- Affordable Housing Projects
For properties where units are targeted to individuals and families earning at or below 80% of the Area Median Income (AMI), FHA will now allow higher loan-to-value (LTV) and loan-to-cost (LTC) ratios. Additionally, debt service coverage ratios (DSCRs) will be lowered, enabling increased loan proceeds for developers. These changes affect mortgages insured under the 223(d)(4) and 223(f) programs, providing greater financial flexibility to expand or preserve affordable housing projects. - Middle-Income Housing
FHA has introduced new policies to support middle-income housing, a growing area of need. Properties where at least 50% of the units are targeted to households earning up to 120% of AMI will benefit from tailored underwriting thresholds. These adjustments leverage the existing FHA 221(d)(4) program to incentivize the development and substantial rehabilitation of middle-income rental housing, expanding housing opportunities for individuals and families often underserved by traditional resources.
Collaborative Approach and Immediate Impact
The changes result from close collaboration between FHA and multifamily housing stakeholders, including lenders, developers, and affordable housing providers. HUD Deputy Assistant Secretary Ethan Handelman praised the engagement, stating, “We’re grateful for the thoughtful insights shared through meetings and public feedback that shaped these policies.”
The adjustments aim to make FHA-insured financing more competitive in today’s market, reducing up-front costs for developers and accelerating the creation of affordable housing units. Developers will be able to access funds more easily, particularly in projects with rent-assisted or income-restricted units, while middle-income households will see more rental opportunities within reach in high-demand areas.
These changes align with the Biden-Harris Administration’s commitment to expanding the national housing supply through innovative policies and partnerships. Strengthened by collaboration with private and nonprofit stakeholders, the updated FHA requirements are expected to play a key role in addressing housing shortages and building resilient communities for years to come.
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