What is an Affordable Property?
Affordable properties are those that have rents set at a rate that is considered affordable for low-to-moderate and low-income residents. These include properties constructed using tax subsidies to provide below-market rents for low-income people, seniors and/or individuals with disabilities.Better Financing Starts with More Options$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
Affordable Properties and the HUD 221(d)(4) Loan Program
Affordable properties are those that have rents set at a rate that is considered affordable for low-to-moderate and low-income residents. These include properties constructed using tax subsidies (like the Low-Income Housing Tax Credit, or LIHTC) to provide below-market rents for low-income people, seniors and/or individuals with disabilities. Other affordable properties may take advantage of the HUD’s Section 8 program, which provides housing subsidizes to low-to-moderate and low-income residents.
Properties financed with HUD 221(d)(4) loans are eligible for both LIHTC and the Section 8 program, though the requirements of each program can vary. In general, affordable properties receive more favorable terms for HUD 221(d)(4) loans; as they have more relaxed LTV and DSCR requirements.
To learn more about HUD multifamily construction loans like the HUD 221(d)(4) loan, fill out the form below and a HUD lending expert will get in touch.
What is an affordable property?
An affordable property is a multifamily property that provides below-market rents and takes advantage of either the HUD Section 8 program or Low Income Housing Tax Credits (LIHTCs). These properties are typically intended for seniors, low-income people, disabled individuals, or other disadvantaged groups. Affordable properties using the HUD Section 8 program are sometimes operated by non-profit groups, including some 501(c)(3) organizations.
For more information, please visit www.hud223f.loans/glossary/affordable-properties and www.hud223f.loans/hud-223f-faqs/hud-section-8.
What are the benefits of owning an affordable property?
Owning an affordable property can provide many benefits. According to HUD Loans, one of the biggest benefits is the ability to deliver consistent income to landlords. The Department of Housing and Urban Development agrees to cover any difference between a contracted, subsidized rental rate and what a resident can pay through the use of HAP contracts. This means that, even if a resident becomes unemployed, the government will pick up the tab in ensuring rent is paid.
According to Multifamily Loans, other benefits of owning an affordable property include:
- Lower-cost properties can house multiple renters, which means more income for you, which can be used to pay down the property faster.
- Affordable housing is considered to be a safe investment for investors.
- These types of properties are often in high demand.
- Having more units and more renters tends to mean a steady cash flow coming into the property.
- When the rents are predictable, you can more easily predict how much you are going to be earning.
What are the eligibility requirements for an affordable property?
Eligibility requirements for an affordable property depend on the type of program used. For properties using the HUD Section 8 program, eligibility is based on the tenant's income and family size. For properties using the Low Income Housing Tax Credits program, eligibility is based on the tenant's income and the area median income.
For more information on eligibility requirements for HUD Section 8, please visit this page. For more information on eligibility requirements for Low Income Housing Tax Credits, please visit this page.
What types of affordable properties are available?
Affordable properties are typically intended for seniors, low-income people, disabled individuals, or other disadvantaged groups. Investors and developers who use a HUD 223(f) loan to acquire or refinance a multifamily property have the choice to make that property affordable. Typically, this involves providing below-market rents and taking advantage of either the HUD Section 8 program or Low Income Housing Tax Credits (LIHTCs).
What are the tax benefits of owning an affordable property?
Investors or developers may be able to take advantage of HUD’s Low-Income Housing Tax Credit (LIHTC) program, which offers tax incentives that can cover either 30% or 70% of a rehabilitation or development project’s costs. Additionally, investors or developers may also be in a strong position to utilize additional credits if a property or development is located within an Opportunity Zone.
How can I find an affordable property?
You can find an affordable property by taking advantage of either the HUD Section 8 program or Low Income Housing Tax Credits (LIHTCs). You can also look through county auditor websites for the areas in which you are interested in purchasing property, or look at apartment rental listings and use the owner contact information listed in order to determine if they are interested in selling. It is generally recommended to avoid contacting owners who have purchased a property in the last 1-4 years, as they are less likely to want to sell to you at a below-market price.