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FHA reduces multifamily housing insurance rates to support energy efficiency

Supports growing movement toward solar energy

The Federal Housing Administration announced a new plan to reduce multifamily insurance rates in order to encourage capital financing of affordable and energy-efficient apartments, according to a press call this morning. 

This marks a major move from the government to support energy efficiency, which has been gaining momentum in the industry.

Nautilus Solar CEO Jim Rice said in an interview with HousingWire last year that people are more broadly starting to accept the asset class, and banks are coming into the market.

The rate reductions will take effect on April 1, 2016, and will directly impact FHA’s Multifamily Housing Programs and properties housing low- and moderate-income families and/or developments installing energy-efficient systems or building within federal energy guidelines.

As a result, the FHA said it expects the multifamily insurance rate reductions to cause the rehabilitation of an additional 12,000 units of affordable housing per year nationally.

“Families across the country are struggling through an affordable housing crisis,” said Housing and Urban Development Secretary Julian Castro.

“By reducing our rates, this administration is taking a significant step to encourage the preservation and development of affordable and energy efficient housing in communities large and small. This way, hard-working families won’t have to make the false choice between quality or affordable housing,” he added.

The FHA also announced that it is reducing upfront premiums to support its affordable housing and energy efficiency goals. Upfront insurance rates will be set at 25 basis points for Broadly Affordable and Energy-Efficient properties and 35 basis points for Mixed-Income properties.  Upfront premiums for market rate properties that are not energy-efficient will remain unchanged.

"HUD's decision today is a positive step toward helping support the need for affordable and more cost efficient rental housing. Specifically, the reduction in Mortgage Insurance Premiums for FHA loans on multifamily affordable and energy efficient properties may help build more apartments and allow for more families and individuals to access affordable and energy efficient housing," David Stevens, president and CEO of the Mortgage Bankers Association.

"This is one significant element to expand the availability of affordable and workforce rental housing in America and we will continue to advocate for other measures toward these critically important objectives," he said.  

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