The Department of Housing and Urban Development is reducing the mortgage insurance premiums it charges on multifamily mortgages to encourage the renovation of affordable housing units and promote energy-efficient upgrades.
Starting April 1, the Federal Housing Administration will reduce the annual MIPs nearly in half to 25 basis points.
"Families across the country are struggling through an affordable housing crisis," HUD Secretary Julian Castro said during a Jan. 28 call with reporters. "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."
The FHA estimates that the multifamily insurance rate reductions will spur the rehabilitation of an additional 12,000 units of affordable housing per year nationally and 40,000 over the next three years.
Most of the units in these eligible properties must be covered by Section 8 project-based assistance or meet the affordability standards under the low-income housing tax credit program.
The FHA is also lowering its annual premium 10 basis points on mixed-income properties, to 35 basis points.
A year ago,
Castro noted that the cost of utilities accounts for roughly 25% of multifamily operating expenses. So energy efficient upgrades will reduce costs for tenants and owners.
Federal banking regulators recently warned that
"Even with these reductions, we project that we are going to continue to generate positive returns for the federal government," Castro said.
