FHA Significantly Cuts Costs for Opportunity Zone Investors
The Federal Housing Administration (FHA) announced today that it is reducing fees to provide greater incentives for multifamily developers to invest in Opportunity Zones across the nation.
Created as part of the Tax Cuts and Jobs Act of 2017, Opportunity Zones provide tax incentives for investors with capital gains to invest in underserved areas affected by poverty and unemployment.
FHA announced that property owners applying for multifamily mortgage insurance programs for the development or rehabilitation apartment units in Opportunity Zones will now pay $1 per $1,000 of the requested mortgage amount for transactions that are defined as “broadly affordable,” down from the current application fee of $3 per $1,000. Broadly affordable is defined as developments in which at least 90% of the units are Section 8 or deemed affordable under the Low-Income Housing Tax Credit program.
For “market rate” and “affordable” transactions, FHA will reduce application fees from $3 to $2 per $1,000 of the requested mortgage amount. Affordable means that at least 10% of the units are Section 8 or deemed affordable under the LIHTC program. An average sized affordable or market rate development would see its rate reduced from $71,377 to $47,583 — a savings of about $24,000.
“When more investors can apply for the benefits in Opportunity Zones, more investors can supply benefits in Opportunity Zones. And that’s exactly the intention of today’s notice,” said HUD Secretary Ben Carson.
The new incentives offered by FHA are available immediately for applicants of market-rate properties that have not yet submitted a pre-application, and for applicants for affordable properties that have not yet applied.