Washington, D.C. — The Consumer Federation of America (CFA) released a new report, A Loan Program in Need of Repairs: The Unmet Promise of FHA 203(k) Renovation Loans, finding that use of the Federal Housing Administration’s (FHA) primary renovation mortgage, a loan that allows homebuyers to buy fixer-upper properties, has declined by 77 percent over the past decade, even as the nation’s aging housing stock makes renovation financing more critical than ever. 

Drawing on 2024 Home Mortgage Disclosure Act data and 15 in-depth interviews, the report concludes that structural barriers, not lack of demand, are driving the program’s collapse. The 203(k) loan is failing to reach first-time homebuyers, is rarely used in rural communities, and faces unusually high application friction, with more loans withdrawn (41 percent) than successfully originated (36 percent). Borrowers also face difficulty finding eligible properties, appraisal gaps in distressed markets, and reluctance among lenders and contractors to navigate the program’s complexity. 

Sharon Cornelissen, Director of Housing at the Consumer Federation of America, said: “Buying a fixer-upper has become out of reach for most first-time homebuyers, partly because of a lack of good mortgage options. The FHA renovation loan carries lots of promise, but the Department of Housing and Urban Development (HUD) needs to modernize this mortgage to make it workable for homebuyers seeking to buy and renovate a house.” 

The report finds that a nationwide shortage of U.S. Department of Housing and Urban Development (HUD)–approved consultants has made the program effectively unavailable in many states. While recent FHA updates increasing loan limits and extending repair timelines are positive steps, CFA calls for broader reforms, including expanded outreach, rebuilding the consultant workforce, particularly in rural areas, linking home repair grants to 203(k) financing, and piloting an expansion of the HUD Mortgagor program to better support nonprofit-led rehabilitation.