HUD Seeks to Serve Middle Income Housing

Posted on November 21, 2024 by Bobbie Guidry

At the end of October, HUD proposed a new Mortgagee Letter (ML) to create a new set of underwriting thresholds for middle income housing as part of the Federal Housing Administration's (FHA’s) Multifamily Housing Programs' underwriting standards and guidelines.

Middle-Income Option

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 new Middle-Income Housing 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 Due Nov. 25

Comments on the draft are due Nov. 25. 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 notable federal event.