FHA Opens Multifamily Financing to Build-to-Rent Communities

On October 14, the Federal Housing Administration (FHA) published guidance allowing build-to-rent (BTR) communities to qualify for FHA-insured multifamily financing. BTR communities are rental properties made up of detached single-family homes, duplexes, or triplexes, and can include both site-built and manufactured homes. Effective immediately, these properties will be treated under the same terms as traditional multifamily rental developments, subject to specific requirements.

FHA’s multifamily programs have historically focused on developments with buildings containing four or more units, such as garden-style or mid-rise apartments. HUD describes the new policy as a response to the January executive order Stopping Wall Street from Competing with Main Street Homebuyers, which directed HUD to create narrow exceptions for BTR properties that are planned, permitted, financed and constructed as rental communities.

BTR properties are now eligible under two programs:

• Section 221(d)(4) for construction of new BTR communities
• Section 223(f) for purchasing or refinancing recently constructed BTR communities

To qualify, a community must have at least five homes on a single, contiguous site operated as one professionally managed rental property, with no privately owned homes mixed in. Individual homes or lots cannot be sold separately during the life of the insured loan, and any homeowners association rules cannot interfere with HUD requirements or the owner's control of the property. The Fair Housing Act's multifamily accessibility design and construction requirements do not apply to the individual detached homes, duplexes or triplexes, although common areas and site amenities must still meet applicable accessibility requirements.