HUD Finance Reform

American land use changed rapidly in the 20th century, from streetcar suburbs to gated communities, supplanting the traditional mixed-use residential-commercial districts that were the norm in the pre-World War II era. Before the growth of federal housing initiatives in the 1930s and the creation of FHA in 1934, traditional streets composed of a mix of commercial and housing—specifically, Main Streets—were common partly because lenders appreciated that risk was spread over different types of real estate.

Today, most lenders look at traditional districts as adding risk—"one use or the other could fail so better not to allow it at all." As a largely unintended result, the signal to investors and developers is if you want financing, avoid residential-commercial districts and stick to single-use. Despite this regulatory stance, the desire for traditional districts has steadily gained popularity in recent years. Demographic and consumer preference changes over the last decade have created greater demand for walkable, urban real estate in communities complete with mixed residential and commercial uses. New development has not served this demand partly because of federal policies and practices that discourage such settlement.

CNU’s work on HUD Finance Reform engages policymakers to remove federal finance impediments to mixed commercial-residential development. Updating the current financing restrictions to better reflect today's marketplace could expand affordable housing options, deliver livability goals, and spur economic development.