HUD’s Scott Turner opened 40-year FHA loans to build-to-rent communities

HUD Secretary Scott Turner announced on Oct. 14 that FHA will insure loans on build-to-rent communities of single-family homes, duplexes and triplexes ^[1]. Turner said HUD is “eliminating barriers to spur development,” and the change took effect the same day ^[1].

Section 221(d)(4) covers new construction, with up to three years of interest-only payments followed by a fixed-rate, fully amortizing 40-year loan ^[3]. Section 223(f) covers buying or refinancing communities finished less than three years before the application, with fixed terms of up to 35 years ^[2][3].

Frank Cassidy, a former FHA commissioner now at Walker & Dunlop, called those terms “unheard of in the conventional markets” ^[3].

HUD wants at least five units on one site, run as one property

Mortgagee Letter 2026-12 sets the rules ^[2]. FHA had generally limited these programs to buildings with four or more units, which left out subdivision-style rentals ^[5].

HUD also expects higher operating costs and replacement reserve deposits than for a standard apartment complex, along with professional management that has experience with similar projects ^[2].

Built-for-rent starts fell 16% over the past year

Builders started about 15,000 single-family built-for-rent homes in the second quarter, compared with about 18,000 a year earlier, according to NAHB’s analysis of Census data ^[4]. The four-quarter total was 63,000, and built-for-rent homes made up just under 7% of single-family starts, against a 1992 to 2012 average of 2.7% ^[4].

Turner also moved on factory-built homes

On Oct. 7, HUD released an action plan to rewrite manufactured housing rules for homes built without a permanent chassis ^[6]. The 21st Century ROAD to Housing Act dropped that requirement in July, and Multifamily Dive reported that it had added up to $10,000 to the cost of a new manufactured home ^[8]. On Oct. 22, HUD said Turner and the FHFA director will co-chair a federal task force on manufactured housing ^[7].

How to use this

For build-to-rent developers

1. Ask a HUD-approved lender for a concept meeting and bring your site plan and any homeowners association documents, since HUD wants governing documents disclosed at that meeting ^[2].
2. Budget the operating deficit escrow before you size the equity. On a $20 million loan, the 3% floor is $600,000 by our math, and four months of debt service sets the amount if that figure is higher ^[2].
3. Plan to exit by selling or refinancing the whole community, because the letter bars selling individual homes or releasing parcels during the loan term ^[2].
4. Add time to the schedule. Rebecca Robertson of John Burns Research and Consulting told HousingWire that FHA approval is “notoriously slow” and pointed to prevailing wage requirements ^[3].

For land sellers

1. Market contiguous tracts that fit at least five rental units to rental developers, since HUD will not insure sites broken up by privately owned parcels ^[2].
2. Ask a buyer using FHA financing whether its offer depends on HUD approval, and set a firm outside date in the contract to cover the review time Robertson described ^[3].

For investors buying finished rental communities

1. Check the certificate of occupancy date first. Section 223(f) only covers communities whose certificate is less than three years old at application ^[2], with fixed terms of up to 35 years ^[3].