I have posted twice on this subject before, in September and November. Clearly based upon this news story from the Associated Press, Condo rules could shut out buyers, hit builders, FHA must be having a difficult time making a decision and sticking with it.
This issue of lending practices for Condominium Projects deals a very significant blow to some affordable housing programs. In Dennis we have several projects that could be adversely affected as larger and larger shares of units must be sold prior to FHA committing loans for a project. In fact, given the 30% and 50% commitment figures, it would appear that affordable housing projects will see the affordable units back-loaded. This would make them the last units constructed, or at least part of the second half of construction, as people qualifying for affordable for-sale housing will be kept out of the project without the FHA loans. Most affordable housing by-laws work from the opposite angle, wanting a proportional number of affordable and market rate housing units made available during project construction.
The FHA proposal lends itself as well to abuse – proposing a project of 50 units, building the first 25 and selling them all as market rate units to meet the FHA lending guidelines, then walking away from the project. This FHA policy will clearly many unknown affordable housing impacts.