HUD delegates to state and local housing finance agencies the authority to originate, underwrite, and service loans for the new construction, substantial rehabilitation, purchase, or refinancing of affordable multifamily housing. The section 542(c) program provides Federal Housing Administration insurance for loans on affordable multifamily properties that are originated, underwritten, and serviced by these agencies.

Housing finance agencies must be approved by HUD to participate in the risk-sharing program. Under the risk-sharing program, housing finance agencies use their own standards and procedures. HUD approves projects under the traditional programs, and housing finance agencies approve projects under the risk-sharing program.

Under traditional programs, HUD-approved lenders prepare and submit loan applications for Federal Housing Administration insurance in accordance with HUD’s uniform standards and procedures. Traditional programs may be used for both affordable and market-rate projects, while the risk-sharing program may be used only for affordable projects.

According to HUD officials, around half of the projects under the traditional programs are market rate. Three traditional HUD mortgage insurance programs selected for comparison each financed more multifamily housing than the risk-sharing program.

In general, a unit is considered affordable if rent plus utilities does not exceed 30 percent of household income. Senate Report 119-47 includes a provision for the Government Accountability Office to review HUD’s risk-sharing program.

Why It Matters

The risk-sharing program represents a specific mechanism within the broader federal effort to support multifamily housing. While it accounted for 7 percent of the total units financed by traditional and risk-sharing programs combined from fiscal years 2016 through 2025, it remains restricted to affordable projects. This contrasts with traditional programs, which serve both affordable and market-rate developments.

The program's structure allows housing finance agencies to share from 10 percent to 90 percent of the loss on a loan with HUD. As of July 2026, 37 agencies had received approval to participate. The collective output of these programs reached nearly 1.3 million multifamily units during the same ten-year period, showing the scale of federal involvement in this sector.

Timeline

Section 542 of the Housing and Community Development Act of 1992 directed the Federal Housing Administration to demonstrate the effectiveness of new forms of federal credit enhancement for multifamily housing loans. The risk-sharing program was initiated as a pilot program in 1994. The risk-sharing program was made permanent in 2001.

On June 25th, 2007, the U.S. Senate Permanent Subcommittee on Investigations released a report on the Amaranth debacle, entitled, “Excessive Speculation in the Natural Gas Market.” From fiscal years 2016 through 2025, housing finance agencies underwrote over $12 billion, adjusted for inflation, in Federal Housing Administration-insured multifamily loans under the risk-sharing program. Loans under the risk-sharing program from fiscal years 2016 through 2025 helped finance 776 projects expected to produce or preserve about 93,670 rental units. The risk-sharing program accounted for 7 percent of the total units financed by traditional and risk-sharing programs combined from fiscal years 2016 through 2025. Traditional HUD mortgage insurance programs and the risk-sharing program collectively helped finance projects expected to produce or preserve nearly 1.3 million multifamily units from fiscal years 2016 through 2025.