FHA Helps Save Money
In case you missed it, the FHA has cut insurance premiums for certain multifamily mortgages. The changes took effect on April 1, 2016 and place an emphasis on energy efficiency. The change also impacts affordable and mixed-income communities with reductions for housing affordability. FHA expects the reductions to spur the rehabilitation or production of 12,000 additional apartment units every year and reduce rent and utility costs for residents. It also displays major support from the government for multifamily to get green. So what are the qualifications and details exactly? Could your project be up for a rate reduction? Here are the main details you need to know, provided by housingonline.com‘s magazine, Tax Credit Advisor:
- FHA is lowering its multifamily insurance premiums to 25 basis points a year for energy-efficient properties. That’s a reduction of 20 or 25 basis points for many existing properties, with even larger savings for new construction deals. These properties must commit to meet an industry-recognized green building standard. Owners must also keep their buildings in the top 25% of multifamily buildings nationwide for energy performance, as determined using the Environmental Protection Agency’s Portfolio Manager 100-point score.
- FHA is also lowering its annual multifamily insurance premiums to 25 basis points for “broadly affordable” housing. That includes properties where at least 90% of the units are covered by a Section 8 contract or the affordability requirements of the federal Low-Income Housing Tax Credit (LIHTC) program.
- FHA is lowering its annual multifamily insurance rates to 35 basis points for properties that mix affordable housing with market-rate housing. That’s a reduction of 10 to 35 basis points from current rates. That includes properties that have set aside units based on affordability under programs including LIHTC, Section 8, inclusionary zoning, or other local affordability programs.
Win/Win For All!
Take note that insurance premiums won’t change for properties not meeting any of the criteria. For those that do qualify, the annual savings are substantial and owners and managers should look to see if they can take advantage of this powerful new incentive. The FHA has taken steps to help everyone in multifamily. Property owners can save money and renters have greater access to affordable rents and healthy units. Plus, going green and competitive pricing are great ways to market your community. With this initiative, everybody wins!