On March 16, 2010, HUD announced that the cost of land will no longer be included in the calculation of per-unit mortgage loan limits for FHA insured developments.
In a notice to its mortgage lenders, the Department says that although land costs have traditionally been included in those calculations, the statute does not require it and has "inadvertently prevented the development of needed housing in areas where the cost of land suitable for multifamily development is very high."
The new interpretation applies to the 221(d)(4) and 223(f) and other programs listed in the notice.
This important change will substantially increase the amount of loan proceeds apartment firms can obtain with FHA loans, particularly in high-cost areas where FHA financing has been unavailable. The current base loan limit for a two-bedroom apartment in a high-rise building for the 221(d)(4) program is $68,070, and the garden apartment limit is $62,026. In a high cost market the maximum elevator limit is $214,421 while the non-elevator limit is $195,382.