The Obamas are leaving the White House, at least some of the Trumps will be moving in, and federal agencies have until mid-January to implement the outgoing administration’s policies and directives before the tide moves in what may be a very different direction under the new regime. Although Donald Trump’s presidential campaign indicated very little about how the long-time real estate developer’s housing policy might take shape, it will be interesting for the real estate and property management industries to have one of their own in the Oval Office.
Until then, several changes to regulations were made this past fall, and legal decisions across the country have raised new precedents—along with some new questions—on both the state and federal levels.
HUD and Owner-Occupancy
This past October, the Department of Housing and Urban Development (HUD) issued new and ostensibly less stringent guidelines on owner occupancy rules for condominium developments seeking financing from the Federal Housing Administration (FHA).
When compared to those for single-family homes, federally-financed mortgages in the condominium market have been relatively rare. FHA and other federal authorities have displayed a reluctance over the years to take on what they perceive as the additional risk condo units represent. The thinking goes that if an association were to fall into financial insolvency through catastrophic loss or mismanagement, the responsibility for the mortgages in the building would all fall on the FHA.
The worry from the feds predates the Great Recession. Prior to 2008, owner-occupancy rate requirements were as high as 80 percent. They were lowered to 51 percent amid the feverish activity of the pre-bust housing bubble. Now, to qualify for FHA-backing, HUD has said condominiums can carry an owner occupancy as low as 35 percent under certain guidelines, such as reserves equaling at least 20 percent of the association’s total budget, and no more than 10 percent of of total units can be in arrears.