|Another new subdivision for Union County, N.C., just south of Charlotte. Photo: Nancy Pierce|
Feds promoting sprawl? That might surprise people who believe (wrongly, let me state) that the government is trying to push everyone, kicking and screaming, into high-rise apartments. But this article from Governing magazine last month shows that, in fact, the feds incentivize single-family housing at the expense of more dense development. The result is that some multifamily and mixed-use developments are pricier than they should be to buyers.
"Since its 1934 inception," writes Scott Beyer, "the FHA [Federal Housing Administration] has insured mortgages for more than 34 million properties, facilitating mass homeownership over several generations. But only 47,205 of these plans have been for multifamily projects. This is due to longtime provisions that make it harder for condos to get FHA certification. As late as 2012, 90 percent of a condo’s units had to be owner-occupied and only 25 percent of its space could be for businesses."
The FHA has eased that rule a bit in the past two years, Beyer reports, but even so: "These policies mean that, although practically every single-family home can be FHA-insured, only 10 percent of condo projects nationwide qualify. This makes condos less affordable, since prospective buyers seeking private financing without FHA backing face higher borrowing costs and typically must make 20 percent down payments rather than the 3.5 percent typically required of FHA-backed mortgages."
Click here to read his full report, "FHA Policies Discourage Density."