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Housing Program to Lower Mortgage Insurance Costs For “Green” Certified Residential Healthcare Properties

by | Aug 25, 2022

Owners of Federal Housing Administration-insured assisted living, nursing homes and other residential healthcare facilities will soon be able to trim operating costs while supporting environmental initiatives under a proposed change in a federal housing program.

The Department for Housing for Urban Development (HUD) recently announced plans to significantly lower upfront and annual mortgage insurance premiums (MIPs) for FHA-insured care facilities that meet certain energy- and water-efficiency building regulations. The program is scheduled to go into effect on October 1, 2022.

This initiative modifies the FHA’s existing Section 232 MIP for residential care facilities that insure loans to finance construction, rehabilitation, acquisition or refinancing of assisted living facilities, skilled nursing homes, and board and care homes. The housing agency implemented a similar “green” MIP-reduction program for multifamily properties several years ago.  

Under the new program, federal housing officials expect the reduced MIPs for these facilities should entice owners to “adopt higher standards for construction, rehabilitation, repairs, maintenance, and property operations” that have higher energy efficiency and sustainability than traditional methods. This is designed to further improve efficiency among existing and newly built care facilities participating in the program.

In a written statement, HUD Deputy Secretary Adrianne Todman said the program would serve a dual purpose: promoting energy and water efficiency that is aligned with the Biden administration’s climate change objectives as well as improving the quality of residential healthcare. “We are lowering costs for achieving modern, energy-efficient facilities that will combat climate change while enhancing the safety and well-being of Americans requiring ongoing care,” Todman said.

The program reduces those facilities’ capitalized upfront MIPs by 75 basis points from an existing 100 basis points for mortgages that meet specific “green” requirements. Additionally, annual MIP rates, which typically range between 45 and 77 basis points, would be lowered to 25 basis points for approved properties.

Besides meeting the FHA’s “meaningful, measurable” energy- and water-efficiency requirements”, applicants seeking “green” MIP reductions for care facilities also need to meet certain conditions, such as:

  • Properties that have achieved a specified “green” building standard certification and refinancing with the lower MIP must use the proceeds to complete more efficiency upgrades in order to achieve the next level of green certification standards.
  • Property-owners must certify that have or plan to achieve and maintain an ENERGY STAR score of 75 or better, using EPA’s requirements for a senior-care community building type. An ENERGY STAR score uses a scale between 1 and 100 to provide a comprehensive snapshot of a building’s energy performance.  
  • Borrowers won’t be allowed to modify Section 232 loans, both initially or finally endorsed, in conjunction with interest rate reductions or with loan modifications.    

Eligible residential care facilities interested in participating in this program should seek the services of an established firm with extensive experience and thorough knowledge in assessing a healthcare facility’s environmental performance and working with federal housing agencies on various lending programs.

BBG is uniquely qualified for helping companies meet the rigorous requirements of these types of commercial housing lending programs. BBG offers a proven track record in providing environmental and energy, engineering assessment expertise in HUD-insured assessments for residential care facilities, multifamily and other commercial sectors. BBG’s HUD Services and Energy & Sustainability Services teams offer specialized expertise in these areas. For more information, contact www.bbgres.com.