The Department of Housing and Urban Development announced Tuesday that it wants to increase by 25% the size of FHA multifamily loans it will insure.

The proposal is included in the fiscal 2002 budget request that HUD Secretary Mel Martinez will present to Congress for consideration.

“Skyrocketing construction costs have resulted in a virtual halt in the building of multifamily homes across America,” Mr. Martinez said. “Our proposal, combined with the President’s homeownership initiatives, will provide thousands of Americans new opportunities for a place to call home.”

The current maximum for FHA loans varies by region and averages just over $40,000. In certain areas it can be as high as $96,000.

Andrew Woodward, president of the Mortgage Bankers Association, said in a press statement that the proposed increase “will create a tremendous tool for addressing the affordable rental housing crisis in this country. Secretary Martinez has acted swiftly and decisively, early on in his administration, to make confronting this crisis a top priority.”

Mr. Martinez said that, since the last time FHA loan limits were last raised, in 1992, construction costs in some areas of the United States have risen 25% or more. Those increases and the loan ceilings have driven developers away from multifamily construction to more lucrative projects, he said.

Nearly five million American families have substandard housing or no housing at all, or are using more than half their income to pay rent, Mr. Martinez said. A 25% loan-limit increase would help spur multifamily dwelling construction, he said.

“This is a great example of federal, state, and local governments working with the private sector to tackle the dual problem of housing affordability and availability in America,” Mr. Martinez said.

The announcement followed a public request for such a move last week by a newly formed housing coalition. Last week, during its National Housing Summit, the MBA announced the formation of the Coalition for Affordable Rental Housing, which includes representatives from the MBA, the National Association of Home Builders, and the U.S. Conference of Mayors.

Mr. Martinez was one of the featured speakers at the summit the day the coalition was unveiled.

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