HUD’s Multifamily Initiatives

Episode 28 | The Construction Lending Podcast

In this episode, we sit down with Ethan Handelman, the Deputy Assistant Secretary of Multifamily at HUD. Ethan discusses HUD’s role in providing safe and affordable multifamily rental housing, highlighting recent updates to increase housing supply and address the climate crisis. The episode also explores broader issues like exclusionary zoning, community planning, and the ongoing challenges of housing affordability. Learn about the complex interplay between policy, housing affordability, and environmental sustainability at the heart of the housing crisis.

Episode Recap

Navigating the Future of Multifamily Housing: Insights from HUD’s Ethan Handelman

HUD’s Multifamily Priorities and Progress
In this episode of The Construction Lending Podcast, we discuss multifamily housing with guest Ethan Handelman, the Deputy Assistant Secretary of Multifamily at HUD. We’re guided through numerous aspects of HUD’s multifamily initiatives, exploring recent updates, policy implementations, funding mechanisms, and the multifaceted challenges of maintaining and increasing housing affordability in today’s high-cost environment.

HUD’s Role in Multifamily Housing
Handelman provided an in-depth look at HUD’s Office of Multifamily and its vital role in maintaining and expanding America’s rental housing stock. This office handles rental housing policies, providing rental assistance, financing, and grants to ensure the availability of safe and affordable living spaces. While the majority of properties are owned by private entities, HUD’s support system remains essential for broadening access to quality housing.

Distinction Between Multifamily and Single-Family Housing
One crucial distinction discussed was between multifamily and single-family housing. Multifamily properties, unlike single-family homes, operate as commercial enterprises involving rent collections, capital improvements, and debt servicing. This complexity requires a more engaged approach with property owners, managers, and lenders. On the other hand, single-family lending is primarily tied to the individual borrower’s financial profile. This distinction underscores the varied strategies HUD employs to address the needs of different housing markets.

Recent Multifamily Updates: Affordability and Supply
Handelman highlighted HUD’s focus areas for multifamily housing, including affordability, increasing supply, and addressing the climate crisis. One significant update is the Federal Financing Bank Risk Sharing Initiative, which provides low-cost capital to state and local housing finance agencies, with an added benefit of interest rate stability for new construction projects. This initiative acts similarly to a construction-to-permanent loan, offering developers the long-term financial certainty needed in a high-interest rate environment. The positive feedback on this initiative suggests its pivotal role in current market conditions.

Innovative Financing Mechanisms
HUD’s multifamily financing strategy includes risk-sharing mortgage insurance. Under this mechanism, FHA insures the loan, allowing the Federal Financing Bank, a part of the Treasury Department, to purchase it. This partnership with Housing Finance Agencies ensures a shared risk agreement and is a testament to HUD’s innovative approaches to financing.

Green and Resilient Retrofits Program
Another highlight of the conversation was the Green and Resilient Retrofits Program, funded by the Inflation Reduction Act. This program targets multifamily housing for energy efficiency upgrades and resilience against natural disasters. With over $800 million allocated specifically to properties with rental assistance under Sections 8, 202, and 811, the goal is clear: to enhance energy efficiency, improve safety, and upgrade living conditions.

Types of Projects Under Retrofit Program
The retrofit program supports various project types, including Quick Integration Projects that add green features to ongoing recapitalizations, the Leading Edge Cohort aimed at achieving net-zero carbon emissions, and comprehensive projects addressing significant needs to deliver impactful resilience and efficiency changes. Selected consultants guide property owners through energy audits, assessments, and retrofit processes, ensuring a focused and effective execution.

Overcoming Challenges with Efficiency Standards
Handelman addressed the challenges faced by homebuilders in states that have not updated building codes to 2019 or 2021 standards. By engaging consultants for certification, developers can ensure compliance with FHA mortgage insurance standards despite outdated local codes. This proactive approach allows new constructions to meet high-efficiency standards and contribute to long-term sustainability goals.

Exclusionary Zoning and Housing Justice
Zoning has always been a contentious issue in urban planning. One standout topic was exclusionary zoning, where historical and still prevalent zoning practices limit the availability of multifamily housing, causing disparities in housing access. Handelman emphasized the need for diverse stakeholder involvement in community planning to ensure equitable and sustainable development.

Massachusetts 40B Law: A Case Study
Massachusetts’ 40B law provides a powerful example of legislative action to address zoning challenges. This law allows for the production of affordable housing by enabling developers to override local restrictions when the community falls short of affordable housing requirements. Such policies significantly impact local economies by reducing traffic times and increasing proximity to essential services, ultimately benefiting the broader community.

Financial Structure and Program Implementation
Handelman explained the financial structures supporting these programs, involving both loans and grants to encourage comprehensive improvements while requiring partial cost-sharing by owners. HUD has moved swiftly, with substantial portions of the allocated funds already deployed, emphasizing the urgency of addressing these multifaceted housing issues. The overall funding made possible by the Inflation Reduction Act plays a crucial role in these efforts, aiming for maximum impact.

Long-Term Solutions for Housing Affordability
The issue of housing affordability remains a multi-decade challenge, one that can’t be resolved quickly but requires consistent and collective efforts across all levels of government. Incremental improvements today are essential for securing future generations’ housing needs. Wholesale removal of bureaucratic hurdles and increased funding flexibility are critical steps in this direction.

Tackling Housing Supply and Demand
Increasing the supply of privately financed rental housing is vital for tackling affordability issues. Handelman emphasized the need for economic policies that align housing costs with income levels. This balance will be a key indicator of progress in addressing the housing crisis.

Addressing Perceptions and Community Involvement
The conversation briefly touched on the misconceptions surrounding affordable housing, illustrating the broad necessity across diverse population groups. There’s a pressing need for community education and involvement in planning processes to dismantle exclusionary practices and foster inclusive growth.

A Path Forward
Throughout the conversation, the complex interplay between policy, housing affordability, and environmental sustainability became evident. The initiatives discussed provide hope and direction, but the path forward requires ongoing dedication and collaboration. HUD’s multifamily strategies, along with federal, state, and local efforts, form the backbone of tackling one of the most pressing issues of our time.
Handelman concluded by highlighting the importance of continued dialogue and action, inviting listeners to stay informed and engaged through HUD’s communication channels. The journey to a more equitable, affordable, and sustainable housing landscape is underway, and everyone has a role to play.

Connect with Ethan Handelman and HUD

LinkedIn

Website