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HUD 223(f) FAQs
1 min read

Do Davis Bacon Wage Requirements Apply to HUD 223(f) Loans?

Davis Bacon wage requirements mandate that workers on projects that use federal programs, such as HUD multifamily mortgage insurance, are paid the prevailing wage for that area. These rules apply to certain HUD multifamily construction loans, such as HUD 221(d)(4) loans , but do n

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Davis Bacon Wage Requirements and HUD 223(f) Loans

Davis Bacon wage requirements mandate that workers on projects that use federal programs, such as HUD multifamily mortgage insurance, must be paid the prevailing wage for that area. These rules apply to certain HUD multifamily construction loans, such as HUD 221(d)(4) loans, but do not typically apply to HUD 223(f) loans. This is because HUD 223(f) financing does not allow for the construction or substantial rehabilitation of multifamily properties. It is only intended for acquisitions and refinances with minor property repairs. 

While typical HUD 223(f) loans don't require that borrowers follow Davis Bacon regulations, Rental Assistance Demonstration (RAD) public housing conversions (RAD I) transactions are subject to Davis-Bacon, even if the borrower is using a HUD 223(f) loan. 

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Related Questions

What are the Davis Bacon wage requirements?

The Davis-Bacon Act of 1931 established requirement for public works projects in which workers must be paid the locally prevailing wages, typically referred to as Davis-Bacon wages. Compliance with the Davis-Bacon Act is required by many HUD programs and overseen by HUD’s Office of Labor Relations. Specifically, Davis-Bacon wages are required for HUD 221(d)(4) loans and HUD 232 construction and substantial rehabilitation loans. Davis-Bacon wages are not typically required for HUD 223(a)(7) refinances, as they do not usually involve any construction or substantial rehabilitation work (only minor repairs).

Established by the 1931 Davis-Bacon Act and required by many HUD programs, some public works projects must pay workers the local prevailing wages. It is overseen by HUD’s Office of Labor Relations Davis-Bacon compliance division. HUD 232 new construction and rehabilitation loans are typically beholden to Davis-Bacon wage requirements, however, HUD 232/223(f) loans for property acquisition and refinancing typically are not.

Are Davis Bacon wage requirements applicable to HUD 223(f) loans?

No, Davis Bacon wage requirements are not typically applicable to HUD 223(f) loans. This is because HUD 223(f) financing does not allow for the construction or substantial rehabilitation of multifamily properties. It is only intended for acquisitions and refinances with minor property repairs. Source

If you are refinancing a property with a HUD 223(f) loan, and you plan to do some light renovation work, you would generally not be required to pay Davis-Bacon prevailing wages. Only if the work is substantial would these requirements go into effect — say, for a gut rehab or the addition of extra buildings — but this level of activity is not covered by a HUD 223(f) loan. Source

HUD 232/223(f) loans for property acquisition and refinancing typically are not beholden to Davis-Bacon wage requirements. Source

What are the consequences of not meeting Davis Bacon wage requirements for HUD 223(f) loans?

Davis Bacon wage requirements mandate that workers on projects that use federal programs, such as HUD multifamily mortgage insurance, must be paid the prevailing wage for that area. These rules apply to certain HUD multifamily construction loans, such as HUD 221(d)(4) loans, but do not typically apply to HUD 223(f) loans. This is because HUD 223(f) financing does not allow for the construction or substantial rehabilitation of multifamily properties. It is only intended for acquisitions and refinances with minor property repairs.

While typical HUD 223(f) loans don't require that borrowers follow Davis Bacon regulations, Rental Assistance Demonstration (RAD) public housing conversions (RAD I) transactions are subject to Davis-Bacon, even if the borrower is using a HUD 223(f) loan.

If a borrower does not meet the Davis Bacon wage requirements for a HUD 223(f) loan, they may be subject to fines and penalties. The exact consequences will depend on the specific circumstances of the loan and the project.

What are the benefits of meeting Davis Bacon wage requirements for HUD 223(f) loans?

The benefits of meeting Davis Bacon wage requirements for HUD 223(f) loans are that it ensures that workers on projects that use federal programs, such as HUD multifamily mortgage insurance, are paid the prevailing wage for that area. This helps to ensure that workers are paid fairly for their work. However, Davis Bacon wage requirements typically do not apply to HUD 223(f) loans, as they are only intended for acquisitions and refinances with minor property repairs. Davis-Bacon wage requirements do apply to Rental Assistance Demonstration (RAD) public housing conversions (RAD I) transactions, even if the borrower is using a HUD 223(f) loan.

How can I ensure that I meet Davis Bacon wage requirements for HUD 223(f) loans?

Davis Bacon wage requirements are typically not applicable to HUD 223(f) loans, as they are only intended for acquisitions and refinances with minor property repairs. However, Rental Assistance Demonstration (RAD) public housing conversions (RAD I) transactions are subject to Davis-Bacon, even if the borrower is using a HUD 223(f) loan. To ensure that you meet Davis Bacon wage requirements for HUD 223(f) loans, you should consult the HUD Office of Labor Relations Davis-Bacon compliance division.

In this article:
  1. Davis Bacon Wage Requirements and HUD 223(f) Loans
  2. Related Questions
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