FHA is about to adopt new rules explicitly encouraging home buyers to purchase single-family, detached housing in the suburbs rather than attached (condos) in urban cores:
Until now, almost any condo development could apply to FHA for “approved” status, therefore making FHA financing available in that development. In addition, in developments that were not approved, “spot approvals” were sometimes available for individual units. (The lender applied for an approval for the unit you wanted to buy, in spite of the development not being approved).
2. All development not considered primarily residential are out. For instance, a development with more than 25% of the total floor area dedicated to commercial business use is out.
3. Noise issues is a new concern, so any development within 1,000 feet of a highway, freeway, or heavily travelled road, 3,000 feet of a railroad, 1 mile of an airport, or 5 miles of a military airfield will become ineligible for approval.
4. If the property has an “unobstructed view , or is located within 2000 feet of any facility handling or storing explosive or fire prone materials, it is not insurable - we're not talking just fireworks factories here. A gas station 2 blocks away can disqualify this development.
11. All current condominium project approvals will be invalid (with the exception of projects approved on or after October 1, 2008) and projects must be re-approved under the new options available.
But these new regulations seem purposely designed to push new homeowners out of dense, urban areas to the suburbs. They exclude many mixed-use developments (#2). In a central city, it is hard to find a condominium not within 1,000 feet of a highway, freeway, or heavily travelled road, 3,000 feet of a railroad, or one mile from an airport (#3). Allowing developers to tap into FHA guarantees for entire single-family subdivisions but only 30% of condominium units naturally will encourage developers to shift to single-family subdivisions. These new regulations are fundamentally anti-urban.
Even if it is somehow possible to defend our existing scheme of suburban subsidies, is it really possible to defend introducing new market distortions?
The last thing I expected from Obama is an anti-urban, and obviously explicitly anti-Chicago pro-Schaumbourgeoisie policy. What is going on here?
Somebody phone da mare!