Bill Seeks FHA Multifamily Loan Limit Indexing

October 1, 2002

Future increases to FHA multifamily loan limits would be automatic if a bill, introduced in the U.S. Senate in August, becomes law. The bill would peg limit increases to the U.S. Census Bureau’s annual construction cost index.

S. 2841 builds on a multifamily loan-limit increase enacted by the federal government late last year. NAR analysts say that increase, the first in many years, was a critical boost for affordable rental housing development. The higher limits make long-term, low-cost financing usable to rental housing developers in more markets.

Affordable housing advocates consider the new indexing push critical, too. If loan limits are allowed to drop to levels below local construction costs, developers can’t make FHA-financed deals pencil out. The Senate bill would also help developers in high-cost markets by increasing existing loan limits in those areas from 110 percent to 140 percent of the national limit. The bill would give HUD discretion to allow loans of up to 170 percent of the limit on a case-by-case basis.

The indexing provision, under consideration in the Senate Banking, Housing, and Urban Affairs Committee—and also part of a larger affordability package being considered in the House—is strongly supported by NAR.

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