Sponsors (2)
The bill expands housing supply and homeowner income opportunities by enabling FHA-backed basement-to-rental conversions, but it raises fiscal exposure and safety/infrastructure risks if hazard mitigation, local planning, and regulatory barriers are not adequately addressed.
Renters and low-income households: the bill could create up to ~150,000 new habitable rental units over five years, increasing available affordable rental supply in high-demand areas.
Homeowners: allows owners to use FHA-insured 203(k) loans to finance converting basements into habitable rental units, enabling additional rental income and making conversions financially feasible.
Renters and homeowners in high-risk areas: requiring HUD to consult FEMA/NOAA to prioritize hazard-prone areas focuses resources and improvements where resilient housing and safety upgrades are most needed.
Renters: allowing basement conversions in hazard-prone areas could expose tenants to flood, mold, or other safety risks if mitigation and local protections are insufficient.
Taxpayers: the bill authorizes unspecified sums for HUD to insure mortgages and operate the pilot, creating potential but undefined fiscal costs for federal taxpayers.
Local communities and governments: converting owner-occupied basements into rental units may increase local density and strain parking, utilities, and neighborhood services without additional local planning or investment.
Based on analysis of 2 sections of legislative text.
Creates a 5-year HUD pilot to insure up to 150,000 FHA 203(k) mortgages to finance converting basements into habitable rental units, with HUD rules and a post-pilot report to Congress.
Creates a five-year HUD pilot program to insure up to 150,000 owner-occupied mortgages under the FHA 203(k) rehabilitation insurance authority to help homeowners convert basement space into safe, habitable rental units that meet state/local building codes and HUD rules. HUD must consult FEMA and NOAA to identify hazard-prone areas (which may be prioritized), issue implementing regulations, and report to Congress after five years on program results and recommended next steps. Funding is authorized as "such sums as may be necessary."
Official title: To establish a pilot program for the Secretary of Housing and Urban Development to evaluate the effectiveness of insuring mortgages made to finance improvements to convert basement spaces into safely habitable dwelling units, and for other purposes.
Introduced May 15, 2026 by Gregory W. Meeks · Last progress May 15, 2026