FHA Change Could Encourage Mid-Rise, Mixed-Use Development

From a MultiFamily Executive post:

Before WWII, one of the basic ingredients for an active Main Street was ground-floor retail in residential projects. Federal regulations changed after the war, and for decades the Federal Housing Authority (FHA) restricted the commercial component of a residential project to no more than 25 percent of the gross floor area/net rentable space or gross income from a project. 

“Developers of apartments or condominiums were discouraged from medium-rise mixed-use projects because they weren’t eligible for financing, housing preservation credits, and low-income tax credits,” says John Norquist, president and CEO of the Congress for New Urbanism (CNU) and ECOHOME’s 2013 Vision 2020 chair for Sustainable Communities…

CNU and its partners created the “Live/Work/Walk: Removing Obstacles to Investment” initiative to inspire policy reform. In September 2013, the effort received a significant boost when FHA raised the restriction to 35 percent and up to 50 percent on a sliding scale of factors. CNU is hoping that Fannie Mae, Freddie Mac, and HUD’s 221d4 and 220 programs will follow suit this spring with an increase in percentages. 

“We aren’t advocating that there would be retail on every street—it should be a zoning issue for local governments,” says Norquist. “Raising the cap opens the doors to more efficient, environmentally friendly, walkable centers and expands housing options for lower-income people. It delivers both environmental and public benefits.”