FHA policy announcement will encourage purchase and rehabilitation of homes in distressed neighborhoods

WASHINGTON – U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson today announced that the Federal Housing Administration (FHA) will offer a new incentive for borrowers interested in rehabilitating homes in Opportunity Zones. FHA is effectuating this through an expansion of its Limited 203(k) Rehabilitation Mortgage Insurance Program (available to owner occupant homebuyers and existing occupant homeowners for the purchase and/or rehabilitation of single family homes) for homes located in Opportunity Zones across the nation. Read today’s Mortgagee Letter.

Beginning December 16, homebuyers seeking to purchase a home in a qualified Opportunity Zone can use the Limited 203(k) program to finance rehabilitation costs up to $50,000 into the total mortgage amount. This is an increase of $15,000 over the Limited 203(k) rehab maximum amount of $35,000 allowed through the program on single family homes not located in Opportunity Zones. Existing homeowners with homes in Opportunity Zones can also use the larger allowable rehabilitation amount when refinancing to rehabilitate their existing homes.

“Providing this opportunity means that the families seeking affordable homeownership or to improve their homes in distressed neighborhoods – where rehabilitation is needed the most – have a path to financing that makes it realistic to do the repairs and improvements that will uplift the entire community,” said HUD Secretary Ben Carson.

FHA’s Limited 203(k) program permits homebuyers and homeowners to finance rehabilitation costs into their mortgage to repair, improve, or upgrade their home, allowing them to tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an appraiser. Allowable improvements include connecting to public water and sewage systems, repairing or replacing plumbing, heating, air conditioning or electrical systems, and covering lead-based paint stabilization costs.

As of September 30, 2019, FHA had active insurance on over 623,000 mortgages for eligible homes located in Opportunity Zones. This represents eight percent of FHA-insured mortgages nationwide. The incentive announced today will be limited to the first 15,000 mortgages secured by properties in Qualified Opportunity Zones each calendar year. The incentive will expire on December 31, 2028.

Opportunity Zones

Created under the 2017 Tax Cuts and Jobs Act, Opportunity Zones are designed to stimulate economic development and job creation in distressed low-income communities by incentivizing long-term capital investment.  The program offers capital gains tax relief to those who invest in these targeted distressed areas. This program is anticipated to spur approximately $100 billion of private capital investment in Opportunity Zones. There are more than 8,700 census tracts designated as Opportunity Zones in all 50 States and in the U.S. territories. Read more about the Opportunity Zones program.


HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.
More information about HUD and its programs is available on the Internet
at www.hud.gov and https://espanol.hud.gov.