Two national advocacy groups that support community housing initiatives are urging the Trump administration to extend Federal Housing Administration (FHA) insurance coverage for mortgages on condominium units approved by Fannie Mae and Freddie Mac.

During a Labor Day breakfast interview with the Washington Examiner, U.S. Treasury Secretary Scott Bessent suggested that the Trump administration “may declare a national housing emergency” as soon as this fall to address a chronic housing affordability crisis.

Meanwhile, Democratic senators have petitioned Bill Pulte, director of the Federal Housing Finance Agency, which regulates the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, with policy suggestions they believe could lower housing costs and expand access to affordable housing.

In collaboration with the Community Home Lenders of America (CHLA), a trade group that works on behalf of mostly small and midsize mortgage lenders, the Community Associations Institute (CAI), an advocacy body supporting condo associations, homeowners associations (HOAs) and housing cooperatives, seeks to add an agenda item to any national housing emergency declaration that may be invoked.

“For millions of Americans, especially in high-cost markets, condominiums represent the most attainable path to homeownership,” the groups wrote in a joint statement published Wednesday, citing Zillow data indicating that condos in the 25 largest U.S. metros were 54% more affordable on average than single-family homes in 2024. The CAI and CHLA request FHA loan flexibility for condos eligible under the GSEs’ revised condo guidelines.

“Since condominiums are typically more affordable than freestanding homes, a simple but effective action to add to an emergency housing list would be to allow FHA to insure condos in projects approved by Fannie and Freddie — but not by FHA,” said Scott Olson, executive director of the CHLA, in the statement.

Assessing FHA feasibility

The simplicity of changing the guidelines may be overstated though, says Orest Tomaselli, a condo compliance professional who has partnered with builders, developers, lenders, community leadership and government agencies on condo inspection projects for thousands of properties around the U.S.

“It would be a wonderful idea,” Tomaselli tells Scotsman Guide. “The only caveat would be it’s a very long road if FHA were to amend their guidelines.” Many disclosures and lending requirements required of the FHA are not required of Fannie Mae and Freddie Mac as quasi-private entities.

Take, for example, fair housing considerations baked into the National Housing Act of 1934 that established the Department of Housing and Urban Development (HUD) and the Office of Housing, more commonly known as the Federal Housing Administration, within HUD. The GSEs must obey federal and state anti-discrimination laws — but not in the same way.

“Those laws render thousands of condo associations around the country ineligible because the associations have bylaws for screening prospective tenants by their credit history or to perform criminal background checks,” Tomaselli explains. Those types of covenants have been used to reject applicants on the basis of matters independent of mortgage eligibility, which can run afoul of FHA fair lending guidelines, but not those of the GSEs.

“There are several provisions for legal documents that would be necessary,” he adds, across a range of lending conditions that exist because of distinct missions at the FHA and the GSEs. “It would be very difficult.”

The CAI and CHLA did not immediately respond to Scotsman Guide’s requests for comment.

Mounting condo costs

The CAI and CHLA suggest condos provide a clear path to affordability for FHA borrowers, but condo mortgage lending has experienced a rough-and-tumble ride for the past four years following the 2021 collapse of the Champlain Towers South complex in Surfside, Fla., which killed 98 people.

Fannie Mae and Freddie Mac intensified scrutiny of individual complexes, eventually amending their guidelines to stop buying loans for condos in complexes where major repairs have been deferred or where condo associations have been ordered by local authorities to remedy unsafe conditions. A so-called “condo blacklist” was established for properties ineligible to receive conventional GSE mortgage financing.

These shifts pushed condo associations and HOAs to significantly increase monthly fees for existing owners and prospective buyers to satisfy new post-Surfside maintenance requirements, build reserves and cover spiking insurance costs. New regulations in Florida aimed at preventing a repeat of the Surfside collapse have introduced steep costs to cover additional inspections as well as new condo-owner association reserve fund requirements.

“Interestingly, GSE requirements on critical repairs and deferred maintenance are more rigid now than the FHA regulations for the same things,” Tomaselli notes.

In major condo markets in Florida and Texas, jacked-up fees have loaded downward pressure on condo prices, especially in contrast to single-family home prices near all-time highs. National condo prices declined annually in April 2025 for the first time in a decade, sliding 0.26%, according to Intercontinental Exchange data.

“CAI strongly supports reciprocity between the U.S. Department of Housing and Urban Development’s Federal Housing Administration condominium certification process and the government-sponsored enterprises, Fannie Mae and Freddie Mac,” said Dawn M. Bauman, chief executive officer at CAI, in Wednesday’s joint statement.

Sustaining affordable homeownership

The statement also notes far fewer condo projects are FHA-certified than those approved by the GSEs. However, extending FHA lending guidelines for GSE-eligible condos as a path to affordable homeownership for FHA borrowers may be more nuanced, as aligning condo certification guidelines does not necessarily address a mismatch in FHA and GSE borrowers’ credit profiles.

FHA borrowers generally present as less creditworthy as a function of their credit score, less liquid as a function of lower downpayments, or both. Single-family home-price gains rendering condo prices more attractive belie the rising costs of ongoing condo homeownership and deteriorating asset quality in key condo markets.

Florida, California and Texas have some of the highest concentrations of condos in the U.S. and have experienced some of the largest increases in homeowners insurance costs in recent years. The cost of homeowners insurance — required for mortgage borrowers with federally backed home loans — rose to nearly 10% of average monthly mortgage payments in July.

Rising flexible costs of homeownership disproportionately impact less-liquid borrowers with lower downpayments. Affordability pressures have doubled for condo owners due to the surge of condo and HOA assessment fees. The asset quality of condos has thus deteriorated, as has owners’ ability to maintain condo homeownership.

Deteriorating asset quality has put downward pressure on prices at the same time condos have become more difficult to sell because of associated homeownership costs and stricter government lending guidelines. After rapid price acceleration during the pandemic, the supply of condos nationwide has far outpaced demand, rising to a four-year high in July and softening prices further, according to a recent report by Realtor.com.