Freddie Mac and Workforce Housing
You may have noticed that lately we’re talking more about workforce housing. Why? Because workforce housing is essential for our business, Freddie Mac’s mission – and for most U.S. renters.
The Housing Challenge
Today in the U.S., the need for adequate, affordable rental housing is greater than ever. It’s especially great near major employment centers where the cost of housing is especially high. In these cases, residents are typically “rent burdened”, meaning they often are forced to pay more than 30% (and in many cases as high as 50%) of their income for household expenses. The alternative is not much better – as living farther out means long commutes and high transportation costs.
Why is Workforce Housing Important?
Because it’s home to people who serve our communities and play a vital role in our lives: teachers, nurses and firefighters. It’s also home to seniors, low-income households that do not qualify for rent subsidies, and aspiring homebuyers. All tend to rely on workforce housing. And workforce housing is important to our customers, as around 85% of annual origination activity can be considered to fall into this category.
But What is Workforce Housing?
Broadly speaking, it’s multifamily housing, without rent subsidies, that’s affordable for households with low- to moderate-incomes. Workforce housing is located everywhere – from the urban core to suburban communities to tertiary towns. But it generally has some or all of the following characteristics:
- Rental rates that are lower than the market average
- Class B or C properties with limited amenities
- Any property type, but most commonly garden style
- Typically older construction
- Rental rates that are generally affordable to people making less than 100% of area median income (AMI)
(With respect to this last bullet, it’s generally recognized that most renters do indeed earn less than area median income. And because renters in major metro markets are rent burdened as noted above, the imperfect methodology to define workforce housing in these high and very high cost markets is to simply adjust the AMI threshold to 120% and 150% respectively.)
Recent Example of Workforce Housing
Recently in Los Angeles, we funded an $878 million loan, originated by HFF for Prime Residential, to help renovate Park La Brea – the largest apartment community West of the Mississippi. The complex provides quality, affordable homes to more than 10,000 residents.
You’ll hear more about workforce housing from us in the months ahead. It’s part of our business, our mission – and Freddie Mac’s commitment to moving housing forward.
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