Hi Georgianne,

Good news here.  HUD does not have a minimum rental unit requirement for condo project approval.  No rule says a project must have a certain number of rentals to qualify.  In fact, 100% owner occupancy is viewed as a positive factor, not a reason for denial.  If someone told your HOA or condo association that the project was denied because too many units are owner-occupied, that information is almost certainly wrong or was misinterpreted somewhere along the way.

What HUD actually requires for condo project approval

To be eligible for Condominium Project Approval, the project must:

• Be primarily residential in nature and not intended for transient or hotel purposes
• Consist only of one-family dwelling units
• Be in full compliance with all applicable federal, state, and local laws regarding zoning, fair housing, and accessibility.
• Be complete and ready for occupancy
• Be reviewed and approved by the local jurisdiction

Beyond those basics, there are financial stability requirements, insurance requirements, owner occupancy thresholds, and limits on units in arrears.  But again, none of those penalize a project for having too many owner-occupied units.  That is not a thing under HUD policy.

You can review the full requirements starting at PDF page 777 of the current HUD Handbook 4000.1 here: HUD Handbook 4000.1.  Most of the earlier sections apply to new construction or projects still under developer control, so page 777 is the right starting point for an existing project.

Getting the project approved

Rather than trying to work directly with FHA, your HOA will likely have better luck working with a professional condo approval service.  Getting to the right person at HUD directly is genuinely difficult, and miscommunication is common.  One company that has helped borrowers navigate this process is FHA Condos Approval.  We are not affiliated with them, but they do offer a no-fee guarantee if they cannot obtain approval, which makes them worth looking into.  Compare your options, and if your HOA moves forward with anyone, stay involved in the process.

Reference: HUD Handbook 4000.1, Section C - Condominium Project Approval, General Requirements (PDF page 777).