WASHINGTON, D.C. (March 13)—In an immediate effort to address the growing affordable housing crisis for low- and moderate-income families, a new coalition is urging Congress to increase the limits on multifamily loans insured by the Federal Housing Administration (FHA)– a move that could benefit tens of thousands of working families.

The Coalition for Affordable Rental Housing today released data showing that new construction of FHA affordable rental housing has all but disappeared in several large cities where there is a critical need for affordable housing. The figures show that in New York City, Boston and San Francisco there were no new units of FHA multifamily housing produced in 2000. Dallas, Los Angeles and Washington, D.C. each saw only one new multifamily development. Other major cities with no new FHA housing in 2000 included Akron, Baltimore, Birmingham, Cincinnati, Norfolk, Oakland, Providence, Rochester, Salt Lake City, San Jose, Syracuse and Tampa. Each of these cities has tens of thousands of working families facing a "critical housing need," meaning the family pays more than 50 percent of their income for housing or lives in severely inadequate housing.

The slowdown in affordable rental housing production comes as America’s working families are increasingly unable to find decent, affordable homes in the communities where they work. Nationwide in 1997, according to the National Housing Conference, 13.7 million households, including 7.5 million renters faced critical housing needs. A review of more recent Census Bureau figures released last month by the Mortgage Bankers Association of America (MBA) and the National Housing Conference confirms the continuing crisis for low-income families and also reveals that the number of moderate-income families facing a critical need for rental housing has grown alarmingly in recent years – increasing by 64 percent between 1997 and 1999, from 433,000 to 711,000 families. Yet, according to recent FHA statistics, only 748 FHA multifamily new-construction or substantial-rehabilitation loans, producing just 127,409 units, were made nationally over the past four years. There is a significant gap between the demand for and the supply of affordable rental housing.

The Coalition, whose formation was announced today at a National Housing Summit hosted by MBA, called on Congress to increase by 25 percent the base amount FHA can insure for multifamily housing. The FHA provides insurance to back financing of multifamily housing development. The insurance limits have not been raised since 1992, and as a result, the programs have not kept pace with the increased costs of building new rental housing affordable to low- and moderate-income working families.

"Although homeownership may be the American dream, finding affordable rental housing is often a nightmare for many working families," said Andrew D. Woodward, president of MBA. "We are facing an affordable rental housing crisis in this country. Raising the FHA multifamily loan limits is an important first step in solving this problem. This change will have an immediate impact by allowing the FHA and its housing partners to increase the supply of affordable housing for working families."

In addition to MBA, other groups in the Coalition include the AFL-CIO Housing Investment Trust, America’s Community Bankers, the National Apartment Association, the National Association of Home Builders, the National Leased Housing Association, the National Multi Housing Council, the National Association of Realtors and the U.S. Conference of Mayors.

Under the FHA multifamily programs, lenders obtain insurance on mortgages to build or refinance apartment buildings, up to a maximum mortgage amount per unit set by Congress. In addition to a base insurable amount, the insured loan can be higher in certain high-cost areas. The Coalition wants the base to be raised throughout the country and the high-cost limit to be raised in several cities where the limit is already at its maximum of 210 percent of the base.

These increases would help offset the rise in land, construction and other costs that have occurred since 1992. A 25 percent increase in the base, for example, would mean that the maximum loan amount the FHA would insure for a multifamily building with two-bedroom units and an elevator in a city with a high-cost limit of 150 percent would increase from $68,375 per unit to $85,468 per unit. The additional insurance could provide more incentive for housing partners to develop new affordable housing units.

"It's extremely expensive and difficult to build multifamily projects, and the resulting rents are often higher than what working families can afford," says Bruce Smith, president of the National Association of Home Builders and a home builder from Walnut Creek, CA. "Our builders want nothing more than to be able to meet this great demand, but they are hindered by the FHA loan limits. Raising the cap on FHA-insured multifamily loans would help to finance the construction of affordable rental housing, particularly in high-cost urban areas, where it is desperately needed."

The artificially low FHA loan limits, coupled with rising costs, have contributed to a dearth of affordable rental units. In Boston, for example, almost 300,000 households had "critical housing needs" in 1998 and the city’s apartment vacancy rate now stands at an extremely low 2.7 percent. Yet there have been no FHA multifamily new-construction or substantial-rehabilitation loans made in the past four years.

"Raising the multifamily loan limits should prompt the construction or rehabilitation of thousands of properties around the country," said Steve Coyle, CEO of the AFL-CIO Housing Investment Trust. "This change will help thousands of working families meet their housing needs."

Raising FHA’s multifamily loan limits is just the first step toward increasing the production of affordable FHA multifamily housing. The housing coalition will also work on other solutions to the affordable housing crisis, including developing a market-based new production tool that will: