Federal Housing Administration Clears Way for More Walkable Development

Over the last five years America has seen an historic housing downturn, but the prevailing trend hasn't sapped demand for walkable, urban development, especially in many larger metros.

Until recently, however, Federal Housing Administration regulations made it difficult for developers to provide the kind of housing consumers are demanding. Now, thanks in large part to the efforts of groups like Congress for the New Urbanism and the National Association of Realtors, the feds are revising outdated regulations that have hampered the growth of mixed-use housing.

Last month, FHA loosened a restriction that forbade government-backed loans from supporting condominium projects that contained more than 25 percent commercial space. New rules will allow credit to flow to projects with up to 35 percent commercial space -- or 50 percent in certain cases where the developer applies for an exemption.

"This is one indication that FHA is making big strides," said CNU spokesperson Benjamin Schulman. "We view this as the first step in this long process to reform the regulation."

Next CNU would like to see the commercial share threshold raised for multi-family housing projects administered by HUD, he said.

Better Cities and Towns reports that the restrictions on commercial space were grandfathered in from the 1930s, when mixed-use buildings were placed in a higher-risk category. Since then, a "form follows finance" phenomenon, led by federal agencies like FHA, helped turn America into a nation of  suburban, single-family-housing dwellers.

According to the LA Times, the new rules could be a big boost for the nation's condo market, which has been performing well below expectations.