How Does Radon Impact Multifamily Housing Lenders? 

When evaluating a loan application on a multifamily housing unit, you may already be tracking occupancy rates, building age, and loan-to-value ratios. Nevertheless, there’s one more thing lenders can’t afford to overlook: radon. The presence of this invisible gas can lower property value and threaten loan security. This guide explores how radon impacts multifamily housing lenders, giving you all the necessary facts before approving a mortgage. 

Health and Safety Concerns 

Radon is a major cause of lung cancer in the United States. This gas seeps into buildings from the ground and accumulates undetected since it is colorless and odorless. Protecting tenant health matters, which is why lenders also stand to lose if owners face lawsuits or negative publicity following a health scare.  

For example, buildings with elevated radon could experience an increase in resident complaints and legal claims. When tenants become sick, occupancy drops. Properties can quickly spiral into risky loan territory. Requiring radon testing during the lending process can help tenants feel safer, protect against future lawsuits, and keep occupancy stable. 

Property Value Protection 

Your collateral depends on the property value staying strong. When a building tests high for radon, repair and mitigation costs can stack up. Property investors are becoming more aware of radon risks, and high radon levels can be a deal-breaker. Lenders who verify testing and mitigation can reduce radon-related surprises if an asset goes to market or foreclosure. Avoiding a radon-flagged property helps protect your bottom line throughout the duration of the loan. 

Regulatory Compliance 

Fannie Mae and Freddie Mac now require radon testing in most multifamily housing loan deals because they recognize the risk of radon to lenders, property owners, and residents. Beyond that, some states—including Maine, Colorado, and Illinois—mandate radon testing or disclosure during acquisitions or financing for multifamily homes and apartment buildings.  

You could face fines, delayed closings, or even denied claims if a property falls short of these rules. Lenders who keep track of these requirements help clients avoid legal snags and protect both parties from financial fallout.  

Loan Risk Mitigation 

Unchecked radon can lead to high tenant turnover, and it can drive up maintenance costs if additional mitigation becomes necessary. Higher vacancies mean less income to cover debt payments and the potential to push a loan into default territory.  

Screening for radon issues helps lenders spot high-risk investments. As multifamily lending has surged recently, it’s more important than ever to ensure these loans are sound investments. 

Sustainability and Marketability 

Today’s renters want healthier, greener spaces, and radon mitigation aligns with both trends, especially if property owners keep mitigation systems eco-friendly. Lenders who encourage or require radon-safe buildings don’t just protect their borrowers; they also position their portfolios for long-term success.  

By understanding how radon impacts multifamily housing lenders, you can safeguard your investment, satisfy evolving regulations, and meet rising expectations for safety. Take steps now to check radon risk, and you’ll find your investments and lending relationships stronger for it.