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Our Focus on Rental Housing Affordability

Multifamily SVP David BrickmanMore than one-third of U.S. households rent their homes, the most since 1997. Between 2004 and 2011, we gained 5.4 million net-new renter households. Today, 15 million households live in multifamily apartment properties (five or more units) and demand for rental housing is expected to rise for years to come, driven by a range of factors.  Among them:

  • Demographic trends
    • Baby Boomers no longer wanting the responsibilities of homeownership
    • Younger people waiting longer to buy homes
    • Echo Boomers (Generation Y) tending to opt for more urban living
    • Former homeowners who couldn't sustain homeownership
    • Newcomers to the United States
  • Household formations
  • A return to higher credit standards for residential mortgages
  • Attitude changes toward homeownership in light of the single-family housing crisis

Yet finding adequate, affordable rental housing is a challenge for people across the country. A unit typically is deemed affordable if the gross rent (rent plus tenant-paid utilities) equals no more than 30 percent of household income. According to the U.S. Census Bureau's American Community Survey 2000-2011, more than half of all U.S. renters spend more than 30 percent of their income on housing, up from around 40 percent of renters in 2000. Nearly 30 percent of renters spend at least 50 percent of their income on housing and low- and very low-income households tend to spend even larger portions of their incomes on rent. High rental-cost burdens leave families with less to spend elsewhere.

Freddie Mac's dedication to supporting affordable, adequate rental housing is in our DNA. It's who we are. In good economic times and bad, Freddie Mac's Multifamily business contributes substantially to rental-housing affordability across the country. In contrast, private funding sources (such as life insurance companies, banks, and conduits) tend to focus mainly on high-end properties and top-tier markets along the U.S. coasts. And in times of economic stress, private sources tend to leave the market altogether.

Working closely with multifamily property owner/borrowers and our network of lenders, Freddie Mac Multifamily structures financings in a way that lets us offer very competitive, long-term rates. Owners realize lower costs of ownership and the benefits are typically passed on to tenants through sustainable, viable properties and lower rents than might otherwise be available.

From 2005 through 2012 alone, Freddie Mac Multifamily purchased a total of more than $150 billion in mortgage loans, financing nearly 2.6 million rental units. On average each of those years:

  • More than 90 percent of the units we financed were affordable to middle-income households (earning 100 percent or less of local-area median income).
  • Nearly 80 percent were affordable to lower-income households (earning 80 percent or less of local AMI).

Many of the properties we finance likely would have trouble securing funding elsewhere. A large majority of these properties are more than 10 years old, and many are in need of capital improvements. And they are located in cities of all sizes across the country. We also finance newer, higher-end properties in major cities.

Freddie Mac's consistent support for the entire multifamily rental housing market provides significant confidence to private apartment developers and construction lenders. In turn, this helps ensure a strong and stable pipeline of new apartment communities to accommodate the growing demand for affordable rental housing.

And our support extends to special segments of the population. From 2005 through 2012, we financed more than $7.3 billion in seniors housing and about $5.7 billion in student housing. We also financed nearly $17.4 billion in targeted affordable housing, which includes properties subject to low-income housing tax credits, receiving federal subsidies, or receiving credit enhancement on a mortgage that backs tax-exempt bonds.

Research shows that access to decent, affordable, sustainable housing benefits – among other things – childhood development, performance in school, health outcomes, and the economy overall. By helping to make rental housing available and affordable, Freddie Mac helps strengthen communities nationwide. More than that, we help enhance quality of life – today and tomorrow.


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