HUD Expands Multifamily Mortgage Insurance to Built-to-Rent Developments

The Department of Housing and Urban Development (HUD) issued a mortgagee letter to announce it is revising its policy to expand access to HUD-insured Federal Housing Administration (FHA) financing for BTR developments. The move is intended to align with evolving market dynamics, increased demand for rental housing for families unable to purchase homes, and the growing prevalence of professionally managed built-to-rent (BTR) communities.

“America needs more affordable housing,” said Secretary Scott Turner in a press release. “We’re eliminating barriers to spur development, expand rental options, and improve housing affordability for hardworking American families.”

HUD’s Office of Multifamily Housing has traditionally limited its insured loans to developments with buildings containing four or more units — such as garden-style, mid-rise or high-rise apartments. BTR properties were excluded due to their single-family design and subdivision-style layout that raised concerns about Fair Housing Act compliance (particularly, accessibility design requirements) and valuation and underwriting challenges. 

To qualify, BTR properties must meet certain conditions, including the following:

• Five or more dwelling units developed on a single cohesive contiguous site and operated as one multifamily rental property.
• Professionally managed similar to comparable multifamily projects in the market, including other BTR projects, and demonstrate successful experience developing and operating similar projects in type and scale.
• Include amenities and services consistent with the market, including accessible routes, entries, and other features under the Fair Housing Act that are required for common use areas and site amenities, the same as for typical multifamily properties.
• Apply building codes and safety standards appropriately, including meeting Fair Housing Act accessibility design and construction requirements, the Americans with Disabilities Act, and Section 504 of the Rehabilitation Act of 1973 (if federally funded).

The policy update is effective immediately.