FHA Cut May Spur Multifamily Energy Rehabs

January 29, 2016

The Federal Housing Administration announced Thursday it would reduce multifamily insurance rates in an effort to encourage more affordable and energy-efficient apartments nationwide.

FHA estimates that the multifamily insurance rate reductions will lead to rehabbing an additional 12,000 units of affordable housing per year. Over the next three years, that means nearly 40,000 families are estimated to be helped by more affordable housing, according to FHA.

“Families across the country are struggling through an affordable housing crisis,” says Julián Castro, secretary of the U.S. Housing and Urban Development. “By reducing our rates, this administration is taking a significant step to encourage the preservation and development of affordable and energy-efficient housing in communities large and small. This way, hard-working families won’t have to make the false choice between quality or affordable housing.”

For example, under the new rate reductions, properties that meet energy-efficient guidelines could see lower annual rates to 25 basis points, a 20 to 45 basis point reduction. Meanwhile, multifamily insurance rates for market-rate properties that are not energy efficient will stay the same, FHA says. Rate reductions will go into effect April 1.

HUD notes that every year the U.S. loses more than 300,000 affordable housing units. HUD hopes that the multifamily rate reductions will help boost affordable housing by making the rehab of existing units more cost-effective. The majority of the affordable housing in the U.S. was built prior to 1980.

The retrofits can also reduce the burden on tenants and the environment, according to the agency. About a quarter of U.S. households live in multifamily housing units and spend a combined $40 billion in energy costs each year.

“Making these housing units 20 percent more energy efficient would save $8 billion per year and cut greenhouse gas emissions by over 430 million tons,” HUD notes. “The lower multifamily insurance rate for energy-efficient projects will contribute to this effort by encouraging owners to adopt higher standards for construction and rehabilitation, resulting in greater energy and water efficiency, reduced utility costs, and improved indoor air quality.”

Source: U.S. Department of Housing and Urban Development