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The goal of Cityscape is to bring high-quality original research on housing and community development issues to scholars, government officials, and practitioners. Cityscape is open to all relevant disciplines, including architecture, consumer research, demography, economics, engineering, ethnography, finance, geography, law, planning, political science, public policy, regional science, sociology, statistics, and urban studies.

Cityscape is published three times a year by the Office of Policy Development and Research (PD&R) of the U.S. Department of Housing and Urban Development.


 
  • Housing Tenure and Financial Security
  • Volume 22 Number 1
  • Managing Editor: Mark D. Shroder
  • Associate Editor: Michelle P. Matuga
 

Project Approval for Single-Family Condominiums

Daniel Marcin
U.S. Department of Housing and Urban Development

Alastair McFarlane
U.S. Department of Housing and Urban Development

Disclaimer: The views expressed in this article are those of the authors and do not necessarily represent the official positions or policies of the Office of Policy Development and Research, the U.S. Department of Housing and Urban Development, or the U.S. Government.


The purpose of the Project Approval for Single-Family Condominiums final regulation is to reduce regulatory barriers and provide equal access to Federal Housing Administration (FHA)-insured loans for borrowers for the purchase of condominiums. This regulation is potentially beneficial to lower-income households in high-density areas, as condominiums can be an affordable form of property there. Since 2001, approximately 84 percent of borrowers insured by FHA have been first-time homebuyers. Despite the advantages of condominiums, however, FHA’s share of condominium loans declined to 2.1 percent of all FHA-insured loans in 2018 from a high of 8.4 percent in 2001. In comparison, the condominium share of all Fannie Mae loans is just under 10 percent and has been since 2014. FHA’s condominium share is at a post-2000 low, while Fannie Mae’s condominium share of its portfolio is just a few tenths of a percent off of its post-2000 high. Currently, FHA must approve condominium projects to allow borrowers to use an FHA-insured loan to finance the purchase of a condominium unit in that project. The terms will be described later. Only one-fourth of all condominium projects that have been approved for FHA-insured loans retain that approval, which requires reapplication every 2 years. The decline in FHA-approved condominium projects tracks the decline of FHA-insured condominium loans. This regulation, which simplifies the FHA condominium project approval process, may address the discrepancy in the level of scrutiny given to FHA-insured condominium lending versus other types of property.


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Note: Guidance documents, except when based on statutory or regulatory authority or law, do not have the force and effect of law and are not meant to bind the public in any way. Guidance documents are intended only to provide clarity to the public regarding existing requirements under the law or agency policies.