WASHINGTON -- At the urging of the housing lobby, the Bush Administration will seek a 25 percent increase in the Federal Housing Administration's multi-family loan limits.

While the ceiling on single-family loans insured by the FHA rises annually, the limit on apartment loans hasn't been raised since 1992. And as a result, serious shortages of affordable rental units have developed in many markets throughout the country.

"Skyrocketing construction costs have resulted in a virtual halt in the building of multi-family homes across America," said Secretary Mel Martinez of the Department of Housing and Urban Development.

Under the law, the FHA can back loans only up to $40,248 for a two-bedroom apartment in non-elevator buildings. That amount may vary by region, and may be multiplied by up to 240 percent in some high cost areas. Nevertheless, production of federally-insured rental housing that's affordable by working families has all but disappeared in some spots.

According to several housing trade organizations, which have banded together under the banner of "The Coalition for Affordable Rental Housing," no new FHA-insured apartments were built in New York, Boston and San Francisco last year.

Only one such project was developed in Los Angeles and Washington, and production is next to nothing in Baltimore, Birmingham, Cincinnati, Norfolk, Oakland, Providence, Rochester, Salt Lake City, San Jose, Syracuse and Tampa.

Yet, in each of the cities, tens of thousands of families face a "critical housing need," meaning they pay more than half their incomes to put a roof over their heads or they live in severely substandard dwellings.

In fact, according to recent FHA statistics, only 748 loans producing just 127,500 units have been made nationally over the last four years, and some of those were to developers who wanted to rehabilitate older buildings rather than create new ones.

"Although home ownership may be the American dream, finding affordable renal housing is often a nightmare for many moderate-income families," said Andrew Woodward, president of the Mortgage Bankers Association, who applauded the White House's decision to ask Congress to up the limit.

"It's extremely expensive and difficult to build multi-family projects, and the resulting rents are often higher that what working families can afford," added Bruce Smith, president of the National Association of Home Builders, noting that construction costs have increased 25 percent since the FHA ceiling was increased last.

Under the FHA's multi-family production programs, lenders obtain insurance on mortgages to build apartment buildings, up to a maximum amount set by Congress.

Under the current ceiling, the maximum loan amount the agency can insure for a two-bedroom unit in a building without an elevator in the Nation's Capital, which has a high cost limit of 195 percent of the maximum, is current $67,000. But under the budget request submitted to Congress, the ceiling would rise to $83,650 per unit.

While the housing lobby is thrilled that HUD is seeking a higher multi-family loan ceilings, it also wants lawmakers to allocate enough money to keep the program going once production starts rolling. Last summer, FHA stopped backing rental mortgage because it lacked sufficient funds to meet demand.

Besides the MBA and NAHB, other members of the Coalition include the AFL-CIO Housing Investment Trust, National Apartment Association, National Leased Housing Association, National Multi-Housing Council, National Association of Realtors, and the U.S. Conference of Mayors.

For more articles by Lew Sichelman, please press here.

Published: March 26, 2001

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.