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March 20, 2001
BUSH ADMINISTRATION RAISES LOAN LIMITS ON FHA-INSURED MULTI-FAMILY CONSTRUCTION
WASHINGTON - In a dramatic move to spur construction of much-needed multi-family rental housing across the country, U.S. Housing and Urban Development Secretary Mel Martinez today proposed that HUD raise the FHA loan limits by 25 percent. The loan limits were last increased in 1992.
�Skyrocketing construction costs have resulted in a virtual halt in the building of multi-family homes across America,� said Martinez. �Our proposal, combined with the President's homeownership initiatives, will provide thousands of Americans new opportunities for a place to call home.� Martinez spoke to the National Council of State Housing Agencies annual legislative conference in Washington.
Under law, HUD can only provide FHA insurance for a two-bedroom apartment up to approximately $40,248. That figure may vary by region, and in certain high cost areas may be multiplied by up to 240 percent.
Since loan limits were last increased, construction costs in some areas have risen by 25 percent or more. These increasing costs, coupled with the static loan limits, have driven developers to more lucrative projects.
As a result many Americans have been left to scramble for suitable housing. A recent HUD report reveals that nearly five million American households suffer from worst case housing needs. These families are defined as renters who receive no federal housing assistance, have incomes below 50 percent of their area's median family income and who pay more than half of their income for rent and utilities or live in severely substandard housing.
A 25 percent increase, however, when combined with the existing ability to multiply loan limits by up to 240 percent, will mean that FHA multifamily insurance will be available to help increase production in virtually every region of the country.
Martinez said that the increase and other Administration initiatives such as the American Dream Downpayment Fund and an increase in the number of rental assistance vouchers, is a comprehensive approach to improving both the affordability and availability of housing.
Martinez also noted that additional state and local programs, including tax exempt bond financing, HUD's HOME program and the low income housing tax credit, will further the enhance the impact of this program. "This is a great example of federal, state and local governments working with the private sector to tackle the dual problem of housing affordability and availability in America," he said.
The new FHA multi-family loan limits increase is included in the FY 2002 budget request and now goes to Congress for consideration.