HUD Seeks to Serve Middle Income

On October 29, the Department of Housing and Urban Development (HUD) proposed a new Mortgagee Letter to create a new set of underwriting thresholds for middle income housing as part of the Federal Housing Administration's Multifamily Housing programs' underwriting standards and guidelines.

The proposal would add a middle income option within HUD's 221(d)(4) multifamily mortgage loan insurance program.

"Many households with incomes above levels usually targeted and defined as affordable (i.e., LIHTC, Section 8, etc.) face lack of available housing affordable to them. Defining this Middle Income housing segment can help investors, lenders, governments, and other stakeholders target their activities to these challenges," the draft mortgagee letter says.

In the draft letter, HUD proposes to define, for the purposes of its Middle Income Housing new underwriting criteria, middle income housing as housing that is affordable to individuals and families with incomes from 60% to 120% of area median income (affordable is defined as housing costs not exceeding 30% of household income). Comments on the draft are due November 25.

"As part of the Biden-Harris Administration's commitment to create additional housing, both affordable and market rate, FHA is introducing specific policy changes to support expansion of Middle Income Housing. These changes respond to market need using the existing FHA 221(d)(4) loan program," the draft letter says. under the 221(d)(4) program, HUD insured mortgages for 105 projects with 17,222 units, totaling $2.5 billion, in fiscal year 2023.

Read the draft mortgagee letter here. Read more about the 221(d)(4) program here.

While LeadingAge does not typically work on this mortgage insurance program, there has been a significant and growing interest in developing middle income housing over the past few years and HUD's revision of its main multifamily housing mortgage insurance program identifying and addressing these needs is a significant federal event.