On February 29, NMHC and NAA responded to HUD’s recent decision to cut Federal Housing Administration (FHA) multifamily mortgage insurance rates in order to spur the financing of affordable housing and energy-efficient apartments. The decision is anticipated to result in the rehabilitation of an additional 12,000 units of affordable housing each year. FHA’s multifamily programs account for 9.2 percent of the total multifamily mortgage market.
Specifically, we applauded the decision and also offered comments clarifying and adjusting certain aspects related to inclusionary zoning, fee caps and energy-efficiency.
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. FHA is also reducing upfront premiums to support the goals of the announcement. Importantly, the upfront premiums will remain unchanged for market rate properties that are not energy-efficient.
HUD anticipates that lowering multifamily insurance rates will leverage over $400 million in new mortgage financing for affordable housing and energy-efficient development. This is expected to encourage owners to adopt higher standards for construction and rehabilitation. The rate reductions take effect on April 1, 2016.