Feds come to Philly to roll out changes to house rehab program

New windows gleamed in the sunshine on a stiflingly hot Tuesday morning at Kasan and Ikea Simmons’s Point Breeze rowhome.

Remodeling work is almost complete at the property, which the couple purchased earlier this year through the Federal Housing Administration’s 203(k) Rehabilitation Mortgage Insurance Program. The program allows those buying or refinancing a home to add the cost of renovations into the mortgage – combining the payments into a single loan.

Kasan and Ikea had been renting the home from Ikea’s father, and it has been in her family for 100 years. Through the 203(k) program, they are, among other projects, replacing the electrical, plumbing and HVAC systems.

“I never imagined that we would be able to have this home and have it change into the home that we wanted,” Kasan Simmons said. “We were able to reconfigure all the rooms. We were able to modernize everything.”

Officials from the U.S. Department of Housing and Urban Development gathered outside the Simmons’s home Tuesday to roll out changes to 203(k) in the hopes that the program can benefit more homeowners.

“This program has actually been around for quite some time, and for many years, it served as a powerful tool to help homebuyers achieve affordable homeownership by buying that fixer-upper,” said Julia Gordon, assistant HUD secretary, federal housing commissioner and a Philadelphia native. “Unfortunately, the program didn’t keep up with changing market conditions, and it kind of fell into disuse.”

203(k) is divided into two sections. The “standard” program is for major rehabilitations, while the “limited” version funds more minor repairs.

On Tuesday, HUD increased the maximum amount a homeowner can borrow under the limited 203(k) from $35,000 to $75,000, and Gordon committed to reviewing that number to keep up with the market. There is no cap for the standard program.

In addition, the federal department expanded the construction window; began allowing borrowers to finance the fee for 203(k) consultants; and bumped up the fee consultants can charge property owners.

Homeowners enrolled in the standard program are required to hire a FHA-approved consultant to help them navigate the process. Gordon said recruiting those consultants has been difficult because the fee they are allowed to collect has not been increased in nearly 30 years.

Mayor Cherelle Parker, speaking at Tuesday’s event, said she utilized the 203(k) program to finance renovations when she bought a house in 2003. She said she believes the initiative can help residents stay in neighborhoods with an aging housing stock, particularly in areas experiencing development pressures.

Parker has set out to build or preserve 30,000 units of affordable units during her first term.

“This program is one more tool, Philadelphia, in the toolbox of federal, state and local programs that we will employ the use of to make good on that commitment,” she said.

Tuesday’s event was the second time in less than a month that top HUD leaders traveled to the city for an announcement.

On June 26, Acting HUD Secretary Adrianne Todman was in Kensington to discuss $85 million in funding provided to localities nationwide to remove barriers to affordable housing. Philadelphia received a $3.3 million grant, and Parker has said that her administration will release a housing plan in the fall.