FHA Raises Cap on Financing Limits of Commercial Space

CNU's Live/Work/Walk Initiative Progresses as FHA Resets Rules

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Responding to demographic changes expressing market preference for mixed-use developments in walkable, urban areas, FHA recently revised rules that limited the cap of commercial space in mixed-use condo buildings from 25% to an updated 35% commercial use, with possible waivers for developments with up to 50% commercial space. (For full coverage, see "FHA Eases Burdensome Condo Financing Rules" - Los Angeles Times, 09/23/2012)

With the action, FHA is recognizing the economic benefits of mixed-use development and taking steps towards aligning federal financing housing policy with the goals of the HUD/USDOT/EPA Partnership for Sustainable Communities. The new rules allow the marketplace more room to develop and deliver the type of walkable, urban product that is in demand in cities and suburbs alike, and sends an encouraging signal to private banks to finance mixed residential-commercial projects as the stigma of mixed-use lessens. As a result of the changes, a greater number of condo developments and thereby potential buyers will be eligible for FHA-backed financing, unlocking hurdles to the continuing housing recovery and allowing the market to meet pent-up demand. 

Since 2010, through its Live/Work/Walk: Removing Obstacles to Investment initiative, CNU has been advocating for FHA, Fannie Mae and Freddie Mac to revise the regulations on the amount of commercial space allowed in mixed commercial-residential areas. The recent FHA change not only represents a victory for CNU and its allies, but for the places that are increasingly where people want to live: connected, compact communities that deliver public health, environmental and economic benefits.

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New Guildlines: HUD Mortgagee Letter: 2012-18, September 13, 2012

Recent Press on Updated FHA Guidelines:

"Federal Housing Administration Clears Way for More Walkable Development" - Streetsblog, 10/16/12

"FHA loosens mixed-use standards: Main Street could benefit" - Better! Cities and Towns, 10/15/12

"New FHA rules loosen association requirements" - Chicago Tribune, 09/27/12

"FHA Eases Burdensome Condo Financing Rules"- Los Angeles Times, 09/23/2012

"CAI Confirms Support for New FHA Guidelines" - M Report, 09/18/2012

"FHA Releases Revisions to Condominium Approval Guidelines" - Tinnelly Law Group, 09/13/2012