LEGISLATIVE AFFAIRS: Victory for Realtors as Condo Legislation is Signed Into Law
Philip Weiden | August 2016
President Obama has signed Condo legislation that was approved by both houses of the Congress, into law. This is a big victory for Realtors as well as for future buyers as purchasing a condo is often a more affordable housing option.
The new law mitigates current FHA regulations surrounding existing condominium projects, including streamlining project certification rules and reducing owner-occupancy requirements. Easing restrictions will assist first-time homebuyers as well as condo owners who want to sell their condo and move up to a single-family detached home. HUD will publish a notice to get the condo provisions moving as soon as possible. The owner occupancy rate for condominium communities will go from 50% down to 35%.
There are also provisions related to private transfer fees wherein a fee is charged to the new buyer. Oftentimes these fees go to developers. Fannie Mae and Freddie Mac rules state that private transfer fees are allowable when passed on to the association for upkeep of the property and not to a developer. The law also directs the FHA to have the same rules for private transfer fees as do Fannie and Freddie. The bill also modifies rules for leasing to people with Section 8 vouchers and makes that process easier.
The changes affect commercial space and smart growth initiatives by allowing lender approval of the property if it is above a 25% commercial space threshold. Currently the FHA prohibits that. The legislation will also shore up the rural assisted housing program.
“Condominiums often represent an affordable option that’s just right for first-time and low-to-moderate income home buyers,” said National Association of Realtors President Tom Salomone. “Overly burdensome restrictions on condo financing have for too long put that option out of reach for many creditworthy borrowers. This legislation meets those restrictions head on, putting the dream of home ownership back in reach for more Americans.”
More than 100,000 Realtors responded to a call for action from NAR. Sen. Tim Scott (R-SC) and Sen. Robert Menendez (D-NJ) co-sponsored the legislation. Rep. Blaine Luetkemeyer (R-MO) and Rep. Emanuel Cleaver (D-MO) co-sponsored the House version, which passed on Feb. 2.
The law will also streamline inspection requirements in the Housing Choice Voucher Program, and will allow voucher holders to move into their units more quickly. The changes will level the playing field for voucher holders who are competing with market-rate renters who can move into a unit immediately and allows the contract terms of HUD’s Section 8 Project Based Housing Choice Voucher program to be extended from 15 to 20 years. This will help facilitate the use of project-based vouchers within Low Income Housing Tax Credit properties and protect Section 8 Housing Choice Voucher residents from displacement due to fluctuations in the Fair Market Rent, which determines payment standard amounts for the voucher program. This protects voucher holders from economic factors beyond their control and allows owners to retain good tenants.
If you have any questions on the new law please call me at (914) 681-0833. Thank you to all the Realtors who responded to the call for action.