Better Housing: FHA Title I Property Improvement Loans

Kevin A. Park
U.S. Department of Housing and Urban Development

The views expressed in this article are those of the author and do not represent the official positions or policies of the Office of Policy Development and Research, the U.S. Department of Housing and Urban Development, or the U.S. government.

The Federal Housing Administration (FHA) has helped finance home alterations, repairs, and improvements since its creation in 1934. Despite accounting for the majority of FHA-insured loans early in its history, the Title I property improvement program has declined substantially over time. Some of the decline is explained by difficulty regulating the quality of improvement contractors and the growth of conventional financial alternatives but also because Title I loan limits and underwriting procedures have not changed in nearly 30 years. Nevertheless, Title I is still disproportionately used by lower-income borrowers, borrowers with lower credit scores, and borrowers with lower-valued homes. Title I also has a higher share in rural and distressed markets. Reforming the Title I program may help improve the energy efficiency of the residential sector and ameliorate the lack of affordable housing.