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WASHINGTON, Nov. 12 - The 25 percent increase in the Federal Housing Administration's (FHA) multifamily loan limits included in the VA-HUD appropriations bill enacted by Congress will spur the creation of thousands of apartment units and play a critical role in meeting America's housing needs, according to the National Association of Home Builders (NAHB).

"Increasing the FHA loan limits has been one of NAHB's highest priorities," said Andrew Chaban, chairman of NAHB Multifamily and CEO of Princeton Properties, Inc. "We applaud Congress for this action, which should significantly help reduce the gap between the supply and demand of affordable apartments."

NAHB has long argued that the 25 percent increase is essential if the FHA's multifamily mortgage insurance program is to remain viable as a housing finance mechanism. FHA insurance provides backing for financing the new construction and substantial rehabilitation of apartments, but the inadequate loan limits had prevented many apartment developers from using the program, especially in high cost areas.

In fact, according to FHA statistics, only 748 FHA-insured multifamily loans for new construction or substantial rehabilitation were made nationally over the past four years, producing just 127,409 units. Even worse, in at least 15 major cities where costs are the highest, not a single apartment unit was constructed or substantially rehabilitated under the FHA program last year, and in more than half of those cities, not a single unit was produced with FHA insurance during the past four years.

The new loan limits cap will help offset the rise in land, construction, and other costs that have occurred since 1992-the last time when the loan limits were increased-and will make it more attractive for developers to use FHA insurance to finance apartments.

NAHB also praised other provisions in the VA-HUD appropriations bill that will provide needed housing assistance, including nearly $144 million for new vouchers under the Section 8 program and $25 million for rural housing and economic development. The bill also fully funds the renewal of all expiring Section 8 housing assistance contracts, another provision that NAHB strongly supported.

In addition, the bill instructs the Department of Housing and Urban Development to work with the Office of Management and Budget to review the current calculation for FHA multifamily mortgage insurance premiums. HUD increased the premiums earlier this year to make up for a shortfall in credit subsidy. NAHB has maintained that a review of the economic model used to calculate credit subsidy would show that premiums could remain at the lower level without jeopardizing the program.

The National Association of Home Builders is a Washington-based trade association representing more than 205,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. Known as the "voice of the housing industry," NAHB is affiliated with more than 800 state and local home builders associations around the country. NAHB's builder members will construct about 80 percent of the more than 1.5 million new housing units projected for 2001. During a typical year, residential construction accounts for about five cents of every dollar spent in the U.S. economy, making home building one of the largest and most influential industries in the country.

Donna Reichle
Assistant Staff Vice President, Media Relations
National Association of Home Builders
[email protected]

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