FHA and the GSEs have different rules for the sale of a condominium versus a stand-alone single-family home. The reason for these rules goes back to a long-held belief that condominiums are more risky than single family structures. These rules have hampered the ability of homebuyers to purchase a condo, and make it much more difficult to sell condominiums. The rules include limits on the number of units that can be rented; limits on the number of units that can be delinquent in dues - regardless of the financial standing of the property; unreasonable burdens on properties to be approved; and limits on commercial space.
Condominiums are often the most affordable homeownership option for first time buyers, small families, single people, and older Americans. On August 14, 2019, the U.S. Department of Housing and Urban Development (HUD) released the long-awaited final rule on project approval for single-family condominiums insured by the Federal Housing Administration (FHA). For many years, NAR urged HUD to finalize changes to the previous rule that would ease restrictions on FHA financing for condominiums, thus enabling more first-time buyers, older adults, and low to moderate-income families to achieve the dream of homeownership. NAR continues to work with FHA and Freddie Mac and Fannie Mae to insure that people who wish to purchase a condominium have safe affordable access to mortgage credit.
For additional information about the final rule, visit NAR's FHA Condo Rule Assessment.
What is the fundamental issue?
While the Federal Housing Administration (FHA) has loosened its condominium approval requirements in recent years, many properties continue to struggle to meet overly stringent criteria and the majority of properties are being denied.
I am a real estate professional. What does this mean for my business?
Buyers and sellers of condominiums may find the property is ineligible for FHA financing, restricting the pool of buyers for that property.
Condominiums continue to be the most affordable homeownership option for many first time buyers, small families, single people, and older Americans. NAR believes that loosening FHA’s condominium rules will ensure that more homeowners will be able to sell their units, and homebuyers will have more opportunities to buy affordable properties. Furthermore, FHA promotes high density, urban living in many of their Smart Growth initiatives; easing condo restrictions should be part of this effort.Legislative/Regulatory Status/Outlook
On August 14, 2019, the U.S. Department of Housing and Urban Development (HUD) released the long-awaited final rule on project approval for single-family condominiums insured by the Federal Housing Administration (FHA). For many years, NAR urged HUD to finalize changes to the previous rule that would ease restrictions on FHA financing for condominiums, thus enabling more first-time buyers, older adults, and low to moderate-income families to achieve the dream of homeownership.
- The return of single unit approval, also known as spot loans, for units in non-FHA approved properties
- Increased certification period from two to three years, plus a six month grace period to submit re-certification materials
- Increased acceptable commercial space to 35 percent of total area
- Reduced requirement for owner-occupancy percentage exceptions
For additional information about the final rule, visit NAR's FHA Condo Rule Assessment.NAR Committee
Federal Financing and Housing Policy Committee
NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require a password.
Condo vs. Co-ops
Before condominiums there were co-ops—short for cooperative housing project. While common in New York (80% of the market) co-ops are also found in most large cities. There are differences between the two, as shown below.
Condo: title, same as a house
Co-op: own shares of a corporation
Condo: unit owners taxed separately
Co-Op: typically lower taxes
Condo: same as a house
Co-op: few lenders willing to give a mortgage
Deductions at Tax Time
Condo: same as a house
Co-op: more complicated
Condo: includes maintenance
Co-Op: includes maintenance, property taxes
Condo: same as a house
Co-op: less costly; sale not recorded (no title)
Source: Condo or Co-op? What's the Difference? (ChicagoDownTownLiving Blog)
For Dumbo, a Different Kind of Condo (The New York Times, Apr. 29, 2019)
Making a Profit on a Condo? D.C. Man Shares His Strategy (Washington Post, Apr. 18, 2019) E
New Condo Development for DTC (The Villager, Apr. 3, 2019)
Feast or Famine in Detroit Condo Market: Pair of Projects Shelved as Another is Nearly Sold Out (Crain’s Detroit Business, Apr. 1, 2019) E
Million-Dollar Condos on Old Skid Row: No Sooner Did One West Loop Developer Sell Out of Dozens of Units at $1 Million-Plus Than Another Announced a Plan to Build Two Dozen More (Crain’s Chicago Business, Mar. 18, 2019) E
High-Priced Condos Sell at a Loss More Often Than Non-Luxe Apartments (Curbed New York, Feb. 18, 2019)
High-End Condominium Market Becomes Cat-and-Mouse Game (Miami Today, Feb. 12, 2019)
High-End Condos Eating Up Energy (Crain’s New York Business, May 14, 2018)
Existing-Home Sales (National Association of REALTORS®)
Making the Case for Condo Hotels: Condo Hotels Seek Their Own Category (VRMintel, Mar. 13, 2019)
An Upscale Condo for Hudson Yards (The New York Times, Feb. 28, 2019)
Tax Incentive Eyed for Blue Mountain Condo Hotel (LVB.com, Nov. 29, 2018)
Club Pins Hope on Condo Hotel for Year-Round Resort Business (VT Digger, Oct. 3, 2018)
Williamsburg Will Get a New 26-Story Condo-Hotel Hybrid (Curbed New York, Feb. 26, 2018)
Are Condo Hotels a Smart Investment? (SkyFive Properties Blog, Jan. 7, 2018)
Condo Association Issues
HOA Responds to Gulf Shores Condo American Flag Flap (ABC News 4, May 2, 2019)
Gender-Segregated Pool Schedule for Seniors Condo Discriminates Against Women, 3rd Circuit Says (ABA Journal, Apr. 24, 2019)
When Condo Boards and Residents Clash, Legal Bills Mount (The New York Times, Mar. 29, 2019)
Killington Condo Association Fined for Failing to Respond to Elevated Lead Levels in Drinking Water (Vermont Biz, Mar. 13, 2019)
New Jersey Condo Association Charged with Disability Discrimination (HousingWire, Oct. 29, 2018)
Project Approval for Single-Family Condominiums [Final rule] (Federal Register, Aug. 15, 2019)
Voice for Real Estate: New Condo Rules Championed by NAR Will Open Doors for Homebuyers all Across America (National Association of REALTORS®, Sep. 3, 2019)
Condo Rule Opens Door to Homeownership for Middle Income Americans (National Association of REALTORS®, Aug. 22, 2019)
FHA Single Family Housing Policy Handbook - Condo Project Approval (United States Department of Housing and Urban Development, Aug. 14, 2019)
National Association of Realtors® Applauds Long-Awaited FHA Condo Rule (National Association of REALTORS®, Aug. 14, 2019)
NAR Assessment: FHA Final Condo Rule (National Association of REALTORS®, 2019)
VA Condo Approval (United States Department of Veterans Affairs)
FHA Approved Condos — Complete 2019 Guidelines and Updates (Department of Housing & Urban Development)
Condominiums (Department of Housing & Urban Development) — Search by city
Living in a Housing Cooperative (National Association of Housing Cooperative) — FAQs
Condominium Project Reviews (Freddie Mac)
eBooks & Other Resources
The following eBooks and digital audiobooks are available to NAR members:
Condo Owner's Answer Book (Kindle, eBook)
Make Money with Condominiums and Townhouses (Kindle, eBook)
Tips & Traps When Buying A Condo, Co-Op, or Townhouse (Kindle, eBook)
Books, Videos, Research Reports & More
The resources below are available for loan through Member Support. Up to three books, tapes, CDs and/or DVDs can be borrowed for 30 days from the Library for a nominal fee of $10. Call Member Support at 800-874-6500 for assistance.
Condos and Co-ops (Chicago, IL: Dearborn Real Estate Education, 2006) HD 1377 M48c
Everything You Need to Know Before Buying a Co-op, Condo, or Townhouse (New York, NY: AMACOM, 2006) HD 1341 R74
Condominiums: The Pros and Cons of Ownership (Port Orchard, WA: Windstorm Creative, 2005) HD 1377 L16
Make Money with Condominiums and Townhouses (Hoboken, NJ: John Wiley, 2003) HS 1377 E2
How to Invest in Condominiums: The Low-risk Option for Long-term Cash Flow (New York, NY: John Wiley & Sons, 2002) HD 1377 V81
The Condo and Co-op Handbook: A Comprehensive Guide to Buying and Owning a Condo or Co-op (New York, NY: Macmillan, USA, 1998) HD 1377 W86
How to Buy an Condominium or Townhome: with Sample Forms and Worksheets (Naperville, IL: Sourcebooks, 1997) HD 1377 Ir9
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