Congress Gives Attention to Antiquated FHA Policies
FHA requirements that condominium property be at least 50% owner occupied continues to limit the ability for potential purchasers to finance the acquisition of condominiums. This policy is antiquated and bad for home ownership. As credit becomes more difficult to obtain for home buyers generally, more condominium owners are forced to sell their units. This makes it difficult for buildings to achieve the 50% requirement, forcing more condo owners to rent and taking more units off the market. And in markets like Miami where many buildings are full of investor owners, condominiums can’t even be considered for FHA certification, and therefore, financing, leaving non-cash buyers in the cold.
Representative Blaine Luetkemeyer (R, MO) recently introduced HR 3700, the Housing Opportunity Through Modernization Act of 2015 which, if passed, will address this, and other out-dated FHA policies. The Act would require the FHA to reform the condominium recertification process by making it less burdensome than the process for certification itself and lengthening the time between each recertification. Therefore, once a project is certified, it would not have to jump through so many hoops to recertify. In addition, the FHA would be required to replace its policy on transfer fees with FHA’s “less restrictive mode”. FHA would also streamline its exemption process for its rule prohibiting certification of condominium projects with more than 25% commercial space. And, most importantly, the owner occupied requirement would be lowered from 50% to 35%.
National Association of Realtors President Chris Polychron, in recent testimony before the House Financial Services Committee, said that the reduction in owner occupied requirement would allow current condo owners and potential buyers access to affordable financing and more choices of affordable condominiums. If passed, the Act could have the effect of increasing home sales numbers right away, thus having a positive effect on the overall economy in many communities.
In addition, on October 13, 2015, 69 members of Congress sent a letter to Secretary of Housing and Urban Development Julian Castro, urging that HUD remove barriers to homeownership by enhancing FHA’s condominium rules. The Representatives specifically pointed out that the owner-occupancy ratio is very difficult to meet and should be addressed.
It is a good sign that Congress is addressing these ancient policies from both a legislative and administrative front and that this problem is being attacked from both sides of the aisle. If homeownership is truly the American Dream, then regulatory roadblocks need to be removed in order to allow more people to achieve the dream.