To the Point With Bob–Amid Grand Visions, MBA is Tackling Housing Shortage One Program at a Time

(To the Point with Bob is a periodic blog by MBA President & CEO Bob Broeksmit, CMB. You can view this and past blogs here)

The lack of affordable housing is a big issue this election year. A week before accepting the Democratic presidential nomination, Vice President Kamala Harris unveiled a multi-billion-dollar plan to build 3 million new homes, provide $25,000 in downpayment assistance for first-time homebuyers, and make housing more plentiful and affordable.

While program specifics are light at this stage of the game, there will be ample time to dissect and debate these and other ideas. We also know that ambitious federal housing initiatives often bump up against a web of state and local regulations and restrictions related to housing–not to mention market forces. Even if it is possible to work around these realities, it will not happen overnight.

As policymakers and elected officials consider options, MBA is leaving no stone unturned to maximize the potential of existing programs that can help narrow the gap between supply and demand. For example, we have been instrumental in bringing about a needed update and expansion of the FHA 203(k) loan program, which enables homebuyers to finance the cost of a home purchase and simultaneous renovation of that home with funds borrowed based on the after-renovation (i.e., future) value of the house.

Simply put, the 203(k) program expands the number of marketable homes nationwide by facilitating the rehabilitation of older and/or outdated “fixer upper” homes that are not quite turnkey today but merely require a bit of capital infusion. While the GSEs have similar renovation programs, the FHA’s program has not kept pace with market realities and today represents only around 4,000 loans per year. But that is about to change.

Thanks in no small part to MBA’s advocacy, in November, the maximum renovation draw amount will more than double from $35,000 to $75,000 nationwide for the Limited 203(k) program–the first increase in nearly two decades. The maximum allowable period for undertaking rehabilitation or renovation will be extended to twelve months for the Standard 203(k) program and nine months for the Limited 203(k) program. Increased compensation for 203(k) renovation consultants will increase the number of consultants available, and for the first time ever, their fee can be financed into the loan.

HUD will review the renovation draw caps annually and consider other programmatic changes to ensure the 203(k) program continues to grow and attract more participants–both borrowers and lenders. Over the past month, FHA has also put together several training sessions for lenders to walk through the changes.

As a nation, we need to build more housing. But we also need to unlock the massive amount of outdated housing to make it marketable once again. Updating and improving the FHA 203(k) program is just one of the ways MBA is working to make housing more available and affordable as elected officials grapple with overarching policies that could shape the housing market.