HUD Announces that Non-Profits May Retain Sales Proceeds
The U.S. Department of Housing and Urban Development (HUD) issued Notice H-2011-31, which permits non-profit sellers to retain sales proceeds free from HUD's continuing regulation, provided that several conditions are met to ensure that affordability restrictions will remain and that the new owner will address the physical and financial needs of the property.
This notice clarifies the circumstances under which nonprofit owners may retain the proceeds from the sale of a project, and the processing oversight that will be provided by HUD. With the new HUD policy, nonprofit owners can now anticipate selling property at market prices, which should sales to a buyer pledged to maintain long-term affordability.
According to the notice, nonprofit organizations own 39% of all Section 236 and Section 221(d) (3) properties with maturing mortgages. Currently, more than 700 nonprofit-owned Section 236, Section 231 and Section 221(d)(3) properties have mortgages that will mature within the next 10 years, representing roughly 80,000 affordable units, including 42,000 units with project-based rental assistance.
As the mortgages mature on these properties, the underlying use and affordability restrictions also expire, placing the long-term affordability of the properties at risk.
Many nonprofit owners of projects that have FHA-insured or Secretary-held, formerly FHA-insured mortgages are selling their properties to purchasers who will maintain the longterm affordability of the project.