Hello Georgianne,

HUD has several requirements the project must meet, but a minimum number of units used as rentals is not one of them.  I have included a link to the HUD condo processing manual here:  https://www.hud.gov/sites/documents/11-22MLGUIDE.PDF.  Start on Chapter 2, page 29 of the manual. You will begin on the basic project requirements, and unless your project is brand new, is considered unique, or is still controlled by the developer, most of the information before that will not pertain to you. 

A minimum number of units is required, restrictions on investor ownership, and plenty of other requirements HUD will make of the project (especially concerning budgetary, legal, and insurance issues). Still, you will be hard-pressed to find anything that says the project will only qualify if rented units are rented.  Simply put, 100% owner occupancy is not a reason for HUD to decline a project and is considered a good thing, not bad.

It would be better for someone at the HOA or the association board to contact a service that handles project approvals rather than try to call FHA directly.  Firstly, reaching anyone at HUD who will even talk to you about a project approval is difficult. If they came away with this, I am afraid they may have misinterpreted the conversation. 

One such company with whom our borrowers have successfully worked in the past is http://fhacondosapproval.com.  We are not affiliated with this company, and I would always encourage borrowers to check with more than one service to compare. Still, I do know that this company advertises that they do not charge a fee if they are unable to obtain approval for your project, so possibly your project can discuss the qualifications with them (and it might not be a bad idea for you to be involved as well if they will let you).