HUD 232 Update on Restoring Longstanding Practice Regarding Repairs

HUD, through its Federal Housing Administration (FHA), announced at the end of April that it is restoring longstanding practice regarding 232/223(f) repairs. Recall that on November 14, 2024, HUD announced a narrow interpretation of the Section 223(f)(4) statutory phrase “necessary costs of refinancing” as it applies to repair costs in a 232/223(f) transaction. HUD stated that, to be compliant with this statutory language, lenders could only include:

The cost of repairs that are necessary to comply with requirements related to life,

health, and safety of occupants (e.g., installation of smoke detectors and radon

mitigation measures), environmental requirements, associated issuance of permits,

and/or federal, state and local regulatory requirements. 

At that time, HUD stated that it was working on further guidance. HUD did subsequently include more detailed guidance as draft edits to the Section 232 Handbook — draft edits that drew industry comments expressing strong concern. Had that legal opinion stood, LTC operators would not be able to fully fund certain capital projects and would leave them with no choice but to delay or reconsider much needed facility upgrades.

Good News: HUD, through FHA, announced that, effective April 30, 2025, HUD will return to its longstanding practice regarding repairs (both critical and noncritical) in Section 232/223(f) transactions, consistent with the currently effective Section 232 Handbook and controlling documents.