HUD 223(f): a strategic refinancing tool

Many owners of multifamily housing face mounting pressure from maturing debt, slowing rental growth and elevated expenses. With recent interest rate cuts, however, they have options. For some middle-market borrowers, a viable refinancing path may be a government program that helps them lock in durable capital while also preserving flexibility. 

Known as HUD 223(f), the program is designed specifically for acquiring or refinancing existing multifamily properties—including market‑rate, affordable and subsidized properties. HUD 223(f) loans are fully amortizing and fixed‑rate, with terms of up to 35 years. They can materially reduce annual debt service compared with typical 5 to 10‑year commercial loans.

“This refinancing option is emerging as a timely and strategic tool for owners of stabilized multifamily assets heading into 2026,” says Artin Anvar, Capital One’s senior vice president of agency financing. 

Key benefits of HUD 223(f) refinancing include:

• High leverage and lenient coverage. HUD 223(f) allows significantly higher loan‑to‑value ratios—as much as 80 percent for market‑rate properties, with even higher ceilings for affordable or rent‑subsidized properties. Proceeds can be maximized based on property performance, valuation, and other underwriting factors that compare favorably with typical bank or agency alternatives. 

• Better protection and lower costs. These are non‑recourse loans, so sponsors can protect their broader balance sheets while still accessing institutional‑scale leverage. The length of the terms also can lower annual debt service and reduce the frequency of future refinancings. 

• Attractive refinance mechanics. Under the program, eligible costs such as existing debt and transaction expenses can be financed, subject to standard HUD 223(f) underwriting limits and appraisal based loan sizing. The program also permits limited cash‑out, allowing owners to recapitalize, fund reserves or redeploy equity while still locking in long‑term, fixed‑rate financing.

• Assumability and exit flexibility. A key selling point of HUD 223(f) loans is that they’re fully assumable, allowing future buyers to take on favorable long-term financing without starting a new process. This can strengthen pricing and liquidity at exit, especially if rates have risen since origination. 

Because 223(f) is designed for existing properties, underwriting focuses on current operations and realistic near‑term performance. While eligible loan sizes vary, the program has proven particularly attractive for sponsors in the $10 million to $60 million range.  

“It's important to note that HUD 223(f) is not intended for new construction,” Anvar says. “While some repairs are permitted, the program is best suited for stabilized properties with limited renovation needs.” 

A different program, known as HUD 221(d)(4), finances new construction and major rehabilitation. 

The 223(f) program, on the other hand, is ideal for owners who endured construction risk between 2020 and 2023 and now are navigating higher operating expenses, limited rent growth and lingering costs from the post‑Covid construction surge. The benefits are especially timely because many loans originated or repriced between 2020 and 2023 are coming due. 

The Federal Reserve’s recent rate cuts are helping to ease borrowing costs across mortgage and corporate markets, and fixed‑rate HUD 223(f) loans will let borrowers lock in those better rates while sidestepping the refinance risk that comes with shorter‑term bank debt or floating‑rate financing. If rate cuts continue, these benefits will become even more compelling. 

Additional Fed rate cuts may translate into even lower coupons for long‑term real‑estate debt compared with 2024 and 2025, though they may remain above 2021 levels. 

For HUD 223(f) borrowers, that backdrop creates a tactical window: as benchmark rates ease and spreads shrink, loan proceeds will increase, improving equity returns, particularly on assets where net operating income has stabilized. Because the loans are fixed and fully amortizing, sponsors this year may secure long‑run debt service that compares favorably with floating‑rate options as well as potential future cycles of repricing and volatility.  

A common belief is that HUD financing is only for deeply affordable or heavily subsidized housing. This is not true. Much of the 223(f) program serves market‑rate properties. The program was built to cover both conventional and affordable multifamily projects if they meet HUD’s underwriting and physical standards.

Another misconception is that HUD deals are slow and bureaucratic, with unpredictable reviews and endless rules and requirements. While HUD 223(f) loans require more documentation than a typical bank refinancing, experienced HUD lenders and repeat sponsors working with straightforward assets can expect about five months from application to closing—especially if environmental, physical access, and compliance issues are addressed early.

To help mitigate these challenges, the Capital One Commercial Real estate Finance team provides dedicated support throughout the HUD 223(f) process—streamlining documentation and reducing common roadblocks from application to closing. 

While HUD 223(f) isn’t a universal solution, it can be powerful in specific situations. For owners holding existing assets with moderate capital needs and clear operating histories, the program can reduce portfolio risk by replacing short‑term or higher‑cost debt with long‑term, non‑recourse financing without sacrificing exit flexibility. 

“For multifamily owners looking to turn a refinancing challenge into a strategic capital reset, HUD 223(f) stands out as one of the few tools that simultaneously addresses rate risk, leverage, and personal liability in 2026’s volatile market,” says Anvar. 

Sponsors who value long‑term, non‑recourse debt but don’t want to surrender flexibility by locking into rigid mortgage structures or negotiating extensive recourse with traditional financial institutions, may find HUD 223(f) a compelling middle ground. The program works particularly well for owners who can tolerate a more intensive upfront process in exchange for three decades of rate and payment stability.  

 

Explore how Capital One’s Commercial Real Estate Experts can help you navigate HUD 223(f) and other refinancing strategies tailored to your portfolio goals.