Congress gave housing co-op financing a big boost with S. 811, passed in December. The bill contains a provision long sought by the National Association of Housing Cooperatives (NAHC) to get FHA mortgage caps for co-ops on a par with caps on rental buildings. The caps for non-elevator co-op buildings are increased by 10%, and mobile home park co-ops caps were increased by 60%. The bill also addresses the reality of high construction costs in many metropolitan area by raising all per-unit multifamily mortgage caps in high cost areas by nearly 30%.

“These increases erase an inequity and make co-op development and financing with FHA feasible again,” said NAHC Executive Director Doug Kleine. “New townhouse and garden style co-ops in high cost areas can be financed at up to $175,000 a unit with a 2% down payment, and rural mobile home parks can be converted to co-op with financing of up to $17,000 per pad. The improvement in financing, when combined with the other savings inherent in and exclusive to the co-op form of development, make co-ops a powerful tool to deliver affordable homeownership to moderate income families who have few choices in today’s overheated housing markets,” Kleine emphasized.

The legislation was part of President Bush’s American Dream Down Payment Assistance Act. The act also allows first time homebuyers to use its down payment assistance provisions to buy into a housing co-op.

Previous per-unit mortgage limits were so low that there had been few or no new FHA multifamily mortgages in many metropolitan areas in recent years. Legislation pushed by NAHC in 2001 raised limits by 25% across the board, and another bill in 2002 put the limits on an automatic cost of living increase schedule. Before the 2001 action, there had been no increase since 1991.