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HUD Secretary Announces Insurance Rate Reductions for Affordable and Green Housing

Lauren Sega Lauren Sega HUD Secretary Announces Insurance Rate Reductions for Affordable and Green HousingPhoto via City of Columbus / CTV.
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U.S. Department of Housing and Urban Development (HUD) Secretary Julian Castro made an announcement in Columbus last week about a measure intending to boost capital investment in affordable and energy efficient housing.

“Families across the country are struggling through an affordable housing crisis,” said Secretary Castro in a press release. “By reducing our rates, this Administration is taking a significant step to encourage the preservation and development of affordable and energy efficient housing in communities large and small. This way, hard-working families won’t have to make the false choice between quality or affordable housing.”

As of April 1, 2016 FHA annual insurance rates for affordable and energy efficient housing will be 25 basis points (basis point = one hundredth of a percent), a 20-25 point reduction for affordable housing from current rates, and a 20-45 point reduction for green housing.

The department considers green housing “those committed to industry-recognized green building standards, and committed to energy performance in the top 25 percent of multifamily buildings nationwide.”

HUD consulted several studies before taking this action, according to the docket. “America’s Rental Housing: Expanding Options for Diverse and Growing Demand,” by Harvard University and “An Opportunity Agenda for Renters,” by the Center for American Progress present data and analysis on affordable housing supply, demand, quality and affordability,

Homeownership is declining, the report finds. Due to factors like the housing crisis (8 million homes lost to foreclosure since 2004), household income shrinking to 1995 levels, and limited access to mortgage credits people have started choosing rent over mortgage. It’s gained popularity by being a relatively low-risk investment, with fewer moving expenses and usually free property maintenance.

“In mid-2015 43 million families and individuals lived in rental housing, up nearly 9 million from 2005,” the study reports.

One in five of these renters make roughly $15,000 annually, necessitating affordable housing with rent under $400. Someone with a budget allowing for moderately priced rent would need a place that costs between $400 and $799.

Nationally, between 2003 and 2013 the supply of low and moderately priced housing fell dramatically short of the demand, according to the Harvard study. Supply rose by 10 and 12 percent, respectively, while demand grew by 40 and 31 percent.

This discrepancy has been felt in Columbus, said Maude Hill, Vice President of Communications and Government Relations for Homeport, a non-profit Central Ohio affordable housing producer.

“We’re looking at what the supply need is, and there’s a 54,000 unit need for affordable housing,” she said. “We’re excited for these kinds of opportunities to come up to increase supply.”

With the news of the rate reduction still fresh, Homeport and other real estate investors are still figuring out what opportunities they’ll be able to take advantage of. Bruce Luecke, interim President and CEO of Homeport, said one of the first steps will be to consult with city and county leaders to create strategies for new and better shelters, and affordable and supportive housing.

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