Last February, Strong Towns spent a week highlighting the findings of a report from the Regional Plan Association called “The Unintended Consequences of Housing Finance.” We discussed the ways that federal financing laws discourage the creation of multifamily, mixed-use housing in favor of single-family homes and the negative impact this has on America’s towns and cities.

The Regional Plan Association recently released a promising update (written by Chris Jones) on the federal financing discussed in their report. Richard Oram, whose foundation supported the creation of the original report and has a strong interest in housing issues said, “Careful use of the new financing options can help restore vibrant, mixed-income neighborhoods, and secure affordable units.” That’s something to get excited about.


Main Street Gets a Boost From Washington

by Chris Jones

Mixed-use developments have long existed in big cities, but getting a mortgage for similar projects in smaller downtowns has been a struggle.

Mixed-use development is getting a fresh look in Washington, D.C.

Federal housing programs that support multi-family housing have started to make it easier to get loans for projects that combine residential space with ground-floor retail. Much remains to be done, but there is welcome progress.

Mixed-use developments have long existed in big cities, but getting a mortgage for similar projects in smaller downtowns has been a struggle, largely due to outmoded rules that sought to separate housing from commercial development.

Attention to these issues increased substantially with the release in February of the Regional Plan Association’s report, The Unintended Consequences of Housing Finance, which explained the consequences of these decades-old regulations and practices. The report furthered efforts by the Congress for the New Urbanism, Smart Growth America, National Housing Conference, Fund for Environment and Urban Life, RPA and other groups that have addressed this topic for a number of years. The recent changes in policy and practice are limited, but there is an opportunity for more consequential change in 2017 from congressional or executive actions.

Freddie Mac now has a small loan program that is particularly suitable for small mixed-use loans.  Freddie’s Small Balance Loan program allows up to 40% non-residential use. Fannie Mae’s Small Apartment Loan Program allows 25%. Both make exceptions to go higher under some circumstances, such as when projects provide more affordable housing. Fannie and Freddie are also more aggressively marketing their programs for mixed-use projects.

“Small multifamily buildings, […] a critical piece of our housing stock, tend to be older, in need of investment and where most low- to moderate-income families live," comments Michael Skrebutenas, Senior Vice President at The Community Preservation Corporation. "Freddie Mac’s Small Balance Loan product, tailored to the needs of small building owners, offers a flexible tool that helps fill the gap for this segment of the housing stock.” 

The federal government needs to do more to help support these types of developments. In January, the Federal Housing Administration published new guidelines for its multi-family programs that increased the amount of non-residential space in projects qualifying for loan guarantees. But non-residential income remained capped at 15% for the most important program, known as 221(d)(4), preventing most projects with less than seven or eight stories from participating. Increasing the income cap to at least match the 25% space cap would be a significant improvement. Ultimately, programs specifically designed to promote mixed-use development would be the most effective remedy.

(Top photo by Daniel Case)


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About the Author

Christopher Jones directs research and planning for Regional Plan Association. Since joining RPA in 1994, he has led many multidisciplinary initiatives to improve economic, social and environmental conditions in the New York-New Jersey-Connecticut region. See more of Chris's writing on the RPA website.