Do HUD 232 Loans Allow for Commercial Development?

HUD 232 Loans and Commercial Development Limits 

HUD 232 loans allow for a small amount of commercial development, the exact amount of which varies by loan type. For HUD 232 new construction and substantial rehabilitation loans, commercial space is limited to "10% of the gross floor area of the project and 15% of the gross project income." If a space is only intended to serve the project's residents, it won't be counted towards the 10% area limit and 15% income limit. 

In comparison, for HUD 232/223(f) acquisitions or refinances, commercial space is limited to a "maximum of 20% of the gross floor area of the project and 20% of the gross project income." For both HUD 232 new construction/substantial rehabilitation loans and HUD 232/223(f) acquisition or refinance loans, borrowers need to use at least 20% project occupancy when calculating the income limits. 

Borrowers Must Get OCRF Approval for Commercial Leases 

In addition to abiding by the floor area and income limitations mentioned above, borrowers need to provide any proposed commercial leases to the Office of Residential Care Facilities (OCRF) for approval. The OCRF, in turn, may require more documentation before granting a final approval. 


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