WASHINGTON – Nov. 29, 2012 – Developers are hoping that an FHA change – one friendlier to mixed-use developments – will help to revive condo sales.

In September, FHA approved a rule change allowing permits for government-insured condo mortgages in mixed-use buildings that are 35 percent commercial. That’s an increase from a previous 25 percent limit. But FHA says it may be willing to grant exceptions to projects with up to 50 percent of space designated commercial.

“The new FHA ruling strengthens the attractiveness of condos as an option, because it increases the field of potential condo buyers,” Katharine Kelly, a director development in Atlanta, told The New York Times. The FHA insures mortgages and offers programs for first-time homebuyers, which include low downpayment requirements of 3.5 percent.

Some industry experts see the move as a big step forward in helping mixed-use developments, which many younger and older buyers seem to prefer.

“We’ve learned that this mixing of development makes a better urban design, so towns and cities are designing codes to encourage it – and the market is showing interest,” says John K. McIlwain, a senior resident fellow at the Urban Land Institute. “We’re going to see a lot more mixed use, whether it’s in the urban central city or suburban town centers.”

Other changes also became effective in September, including a rule that allows FHA loans in developments where investors own up to 50 percent of the units, compared to 10 percent previously. However, the rest of the building must be owner-occupied.

Source: “Regulatory Break for Mixed-Use Projects,” The New York Times (Nov. 27, 2012)

© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688