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September 1, 2014

New FHA Rule to Help Spark More Condo Sales?

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New FHA Rule to Help Spark More Condo Sales?

Developers are hoping that a new FHA change that is more friendly toward allowing mixed-use developments will help to revive condo sales, The New York Times reports. 

In September, the FHA approved a rule change that permits government-insured mortgages for condos in mixed-use buildings containing commercial of up to 35 percent. That's up from a previous 25 percent limit. But the FHA says it may even be willing to grant exceptions to projects that have as much as half of their space designated as commercial.  

“The new FHA ruling strengthens the attractiveness of condos as an option, because it increases the field of potential condo buyers,” Katharine Kelly, director of such a development in Atlanta, told The New York Times. The FHA insures mortgages and offers programs for first-time home buyers, which include low down payment requirements such as of 3.5 percent.

The move has been viewed by some in the industry as a big step in helping to spread the development of mixed-use developments that both younger and older buyers have shown recent preferences for. 

“We’ve learned that this mixing of development makes for a better urban design, so towns and cities are designing codes to encourage it, and the market is showing interest,” says John K. McIlwain, a senior resident fellow at the Urban Land Institute. “We’re going to see a lot more mixed use, whether it’s in the urban central city or suburban town centers.”

Also among some of its recent changes effective this September, the FHA has recently increased the number of units that investors can own in a development to 50 percent -- that’s compared to 10 percent previously. However, the rest of the building must be owner-occupied. 

Source: “Regulatory Break for Mixed-Use Projects,” The New York Times (Nov. 27, 2012)

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