On October 14, HUD announced in a Mortgagee Letter that build-to-rent (BTR) communities — rental properties made up of detached single-family homes, duplexes or triplexes, including manufactured and modular homes — are eligible for FHA multifamily mortgage insurance effective immediately. BTR communities now fall under the same terms and conditions as “traditional multifamily rental developments.” HUD previously excluded BTR properties, citing Fair Housing Act accessibility, valuation and underwriting concerns. The change responds to a January 20 executive order directing HUD to include “narrowly tailored exceptions” for BTR properties.

Eligible properties may be financed under Section 221(d)(4) for new construction and Section 223(f) for the acquisition or refinancing of properties with a certificate of occupancy dated less than three years before application. To qualify, a property must, among other things, have five or more units on a single contiguous site, be operated and professionally managed as one rental property, and allow no sales or partial releases of collateral during the loan term. The letter also sets underwriting standards specific to BTR communities, reflecting, according to the agency, BTRs’ slower lease-up and their novelty to HUD’s platform. HUD clarified that detached homes, duplexes and triplexes are not “covered multifamily dwellings” subject to certain Fair Housing Act design requirements, though common areas and site amenities must still be accessible.