HUD No. 16-008
FHA TO CUT INSURANCE RATES ON MULTIFAMILY MORTGAGES
Lower rates expected to stimulate production and rehabilitation of affordable rental housing
WASHINGTON – In an effort to help preserve and increase the amount of affordable, quality rental housing across the country, the Federal Housing Administration (FHA) today announced a multifamily insurance rate reduction designed to encourage capital financing of affordable and energy-efficient apartments. The rate reductions announced today will take effect on April 1, 2016, and will directly impact FHA’s Multifamily Housing Programs and properties housing low- and moderate-income families and/or developments installing energy-efficient systems or building within federal energy guidelines. Read FHA’s new Multifamily Insurance Rates.
U.S. Housing and Urban Development (HUD) Secretary Julián Castro made the announcement today during a visit to an affordable housing complex in Columbus, Ohio. FHA estimates that the multifamily insurance rate reductions will spur the rehabilitation of an additional 12,000 units of affordable housing per year nationally, meaning over the next three years nearly 40,000 families could benefit from higher quality and affordable housing.
“Families across the country are struggling through an affordable housing crisis,” said Secretary Castro. “By reducing our rates, this Administration is taking a significant step to encourage the preservation and development of affordable and energy efficient housing in communities large and small. This way, hard-working families won’t have to make the false choice between quality or affordable housing.”
FHA’s new annual multifamily insurance rates include:
– For ‘Broadly Affordable’ housing (at least 90% of the units are under Section 8 contract and/or covered by Low Income Housing Tax Credit (LIHTC) affordability requirements), FHA is lowering annual rates to 25 basis points, a reduction of 20 or 25 basis points from current rates.
– For Affordable mixed-income properties that is properties that set-aside units based on affordability including partial LIHTC, partial section 8, inclusionary zoning, or other local affordability requirements, FHA is lowering annual rates to 35 basis points, a reduction of 10 to 35 basis points from current rates.
For energy-efficient properties (those committed to industry-recognized green building standards,AND committed to energy performance in the top 25 percent of multifamily buildings nationwide), FHA is lowering annual rates to 25 basis points, a reduction of 20 to 45 basis points. Qualification for the top 25% will be determined using EPA’s Portfolio manager 1-100 score.
– To ensure that the Broadly Affordable and energy-efficient properties benefit directly from the lower rates, FHA will limit the fees that can be charged on these loans.
– Multifamily insurance rates for market-rate properties that are not energy efficient (as defined above) will remain unchanged.
FHA is also reducing upfront premiums to support the affordable housing and energy efficiency goals stated above and to streamline the premium structure. Upfront insurance rates will be set at 25 basis points for Broadly Affordable and Energy-Efficient properties and 35 basis points for Mixed-Income properties. Upfront premiums for market rate properties that are not energy-efficient will remain unchanged.
Each year the U.S. loses more than 300,000 affordable housing units. FHA’s multifamily rate reductions will help preserve and maintain affordable housing by making rehabilitation more cost-effective and allowing the U.S. to better preserve its limited affordable housing stock. Most of the affordable housing in the U.S. was built prior to 1980, making it more than 30 years old. These premium reductions will allow developers to renovate this housing, providing families with better quality places to live. The reductions will allow owners of affordable housing developments to free up the capital needed to support higher levels of rehabilitation or increase the number of affordable units—both of which will increase the access families will have.
Nearly half (49.3 percent) of all renter households spent more than 30 percent of income on housing in 2014, including more than one quarter (26.4 percent) who devoted more than half of income to housing.[1] Since 2000, rents have risen while the number of renters who need affordable housing has increased. The pressure to find affordable housing to rent is more severe for very poor households. Only 28 of every 100 extremely low-income renter households in the United States were able to find decent, affordable homes in 2013.
Encouraging more energy efficient multifamily housing
One-out-of-every-four U.S. households live in multifamily housing units and spend approximately a combined $40 billion on energy costs each year. Making these housing units 20 percent more energy efficient would save $8 billion per year and cut greenhouse gas emissions by over 430 million tons. The lower multifamily insurance rate for energy-efficient projects will contribute to this effort by encouraging owners to adopt higher standards for construction and rehabilitation, resulting in greater energy and water efficiency, reduced utility costs, and improved indoor air quality.
Lowering rates in a responsible way
The reduced rates announced today are made possible by the strong health of the FHA Multifamily portfolio,which stands at a historically low default/delinquency rate of 0.15 percent. FHA’s Multifamily business traditionally generates significant revenue for taxpayers; these changes will leverage over $400 million in new mortgage financing for affordable housing/energy-efficient development without significantly decreasing overall revenue. Even with these reductions, affordable and energy-efficient loans originated in Fiscal Year 2016 are projected to generate net revenue for the federal government.
**The proposed rule is available in the Federal Registrar. Comments are due on Feb. 17, 2016.**
Show your legislators that the Rental Housing Works Programs brings jobs and affordable housing to Maryland. Urge them to continue funding for this program and other key rental housing programs in 2017 by attending the MAHC Housing Day on February 18th in Annapolis. Learn about important legislative initiatives, network with other housing professionals, and show legislators that rental housing matters.
Affordable housing provides Maryland residents with a safe place to live and raise their families, and creates needed job….register for the 2016 Housing Day now!
Housing Day Agenda
8:00 – 9:00am Breakfast & Networking
9:00 – 11:00am Program
11:00am Legislative Visits Begin
For more information and to register, go here.
Q: Tell us a little bit about yourself:
A: I am a current Master’s of Real Estate Development candidate at University of Maryland-College Park. I want to focus on developing mixed-use affordable housing that will provide people with a work/life/live balance. In the affordable housing aspect of the development, I am especially interested in emancipated youths. Ultimately, I would like to provide them a safe and stable environment where they are able to learn independent living skills, work where they live and have a special rental savings program in which they are then able to set aside a portion of their rent to become future home owners.
Q: What do you see as the biggest challenge in your industry?
A: Available space. Many companies are experts at in-fill development. They build beautiful buildings where land is available, but the units are still at market rates. This is difficult for workers who are earning above the poverty income, but not enough for the high end of the market. This population, which is inclusive of teachers, police, social service workers, etc., deserve to have the conveniences of city living and also be in close proximity to all the great amenities that city life offers. Unfortunately, these kinds of homes are typically not affordable in either the homeownership or rentals markets. Because land is so scarce – and at such a premium – to make the development finances work there are no other choices except market rate prices – unless LIHTC is used to subsidize a project, which then changes the dynamics of the deal. As they say: “numbers do not lie,” especially in this niche market, and that is why I see limited space as the biggest challenge in the affordable housing industry.
Q: What’s the one piece of advice you wish you had gotten sooner that helped you be successful?
A: Stay focused on your goals!! It is so easy to get sidetracked when life throws you curveballs. Getting back on your path can becomes difficult as you try to work through life’s day-to-day challenges. The real estate development field is so small and most people know each other or have heard of each other, so if they see you are engaged and enthusiastic about achieving your goals, they are very happy to help you get to that next level.
Q: How has being a member of HAND helped you with your community development efforts?
A: Finding HAND was an absolute blessing. I have always had a deep desire to be in the development world, but after being forced to take a break from real estate because of the recession, HAND helped me get back on my path. It has connected me with all the people that I need to know and has taught me so much that I did not know but always wanted to learn. The training sessions are phenomenal and of such a value. As Heather Raspberry told me when I first phoned her trying to get more information on the organization: “All of the partners required to make projects come to fruition are members of HAND.” And truer words have never been spoken, every member of HAND when I asked for an appointment to pick their brain, have been open and available. It is truly great to be a part of such a wonderful organization!!
‘The Springs’ will provide 104 new apartments within walking distance to Ballston Metro
The Arlington Partnership for Affordable Housing (APAH) recently celebrated the “Topping Out” of The Springs Apartments. The celebration, an old Scandinavian tradition, marks the building construction reaching its highest point. The building will be completed later this year and provide affordable homes for 104 households as well as APAH’s new headquarters.
“APAH purchased this site in 1997,” said APAH Board member, Susan Bell. “Nine of APAH’s 14 properties are in North Arlington. The redevelopment of The Springs expands APAH’s presence in this wonderful Ballston location, just ½ mile from metro and close to so many jobs and services.”
“Arlington Partnership for Affordable Housing is one of our key community partners,” said Libby Garvey, Chairman of the Arlington County Board. “Today only 9,600 Arlington apartments are affordable to the 17,000 low income families looking for housing in our community. With the targets set in the County’s Master Plan, we are committed to keeping Arlington a place where people from across the socioeconomic spectrum can live and work comfortably.”
Closing the celebration, Nina Janopaul, APAH President and CEO stated “Gratitude is what today is all about. Without the support of everyone—from the Arlington County Board to citizen commissions to our talented construction team—The Springs would not be possible. Thank you all.”
The event concluded with the 40+ attendees signing a commemorative beam that will be installed in the penthouse of the new building.
For more information, visit www.apah.org.
CohnReznick has recently issued “The Low-Income Housing Tax Credit Program at Year 30: Recent Investment Performance (2013-2014).” This is the fourth in a series of published reports that provides detailed analysis of the performance of properties financed with federal low-income housing tax credits (housing tax credits) and the investment funds organized to acquire interests in such properties.
The report includes:
…and more!
CohnReznick also invites all who are interested to participate on an industry-wide webinar on Thursday, January 21 and join the study authors as they review the highlights of the report. Register today.
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Ad Submission: The artwork for advertisements should be submitted to annualmeeting@handhousing.org. You can download the ad spec sheet here. Deadline for ad submission is April 13, 2020.
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Door Prizes: Are you interested in donating a door prize to this year’s Annual Meeting? Email annualmeeting@handhousing.org to coordinate with our team.
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