The Federal Housing Administration  is proposing a new rule for condominium developments that the agency says is intended to be more flexible, less prescriptive and more reflective of market conditions.

The agency is proposing to reinstate spot approvals in unapproved condominium developments and require condo projects to re-certify their approval status every three years rather than the current two.

The Federal Housing Administration currently stipulates that approved condominium developments have a minimum of 50% of the units occupied by owners. To respond to future market changes, the agency is proposing to establish an allowable range between 25% and 75%.

Regarding commercial/nonresidential space within an approved condominium development, Federal Housing Administration currently requires that this should not exceed 50% of the project’s total floor area. The agency anticipates maintaining this requirement in the near term, but to achieve added flexibility Federal Housing Administration is proposing to establish a range of between 25% and 60% via subsequent notice.

View HUD’s press release and Federal Housing Administration’s proposed rule.