Should I be concerned about a new HUD housing development?

Question

I own a rental property (a single family house) on a street where they're building a large "HUD 221(d)(4)" multifamily housing development across the street from the house.  It's a nice up and coming centrally located neighborhood with high property values that can attract high end tenants who are willing to pay for the more high end housing.

I'm wondering what this HUD housing will likely be, and will it affect property values on the street?  Is this a "housing project" for low income renters that may scare away some home buyers / renters and lower property values and rental income around it?

Phil G. · Answer

I used 221(d)(4) to fund a historic mill reuse market-rate project some years ago.  We developed really nice loft apartments rented by qualified professionals with rents near the top of the MSA sub-market we were in.   The program can also be used to develop low income housing, say in combination with LIHTC or mixed-income.  So the mortgage program alone doesn't necessary tell you what the project is about.  If its a for-profit developer, as Wayne suggested, they're likely to be trying to build for highest and best use.

Jim P. · Answer

Thanks for the reply.  I guess I really don't understand what it is then.  If the tenants don't get subsidies, why is it a government funded program?  What is the purpose of the program?

Wayne Brooks · Answer

No, it’s not the same as section 8.  HUD 221D4 is for “median” apt rents for the area....just not luxury, above surrounding market rates.  The tenants are regular tenants and get no subsidies.  Trust me, the developers tweaked the market data to be able to get the highest rents possible.