On a Mission to Keep Housing Affordable: The Multifamily View
[Editor’s note: Freddie Mac’s mission includes providing financing that helps families buy or rent decent, affordable housing. In a two-part series, Mike Dawson, VP of Single-Family Customer Business Services, and Kim Griffith, VP of Multifamily Affordable Sales and Investments, explore how we help make home affordable for homebuyers and renters across the United States.]
Part Two of Two
(Read Part One)
Homeownership has long been considered part of the American Dream, but renting is the right housing option for many U.S. households. A fast-growing number of families are becoming renters, either by choice or necessity. The convergence of the housing crisis, demographic trends, and a return to stricter credit standards for residential mortgages is expected to create a surge in demand for rental housing that will last for years. By the end of this decade, there likely will be more than 10 million additional new renter households in the United States than there were before the recent recession. Freddie Mac is working to keep affordable multifamily rental housing available, for today and tomorrow.
Supporting affordable housing reflects our dedication to our public mission – we do it because it’s who we are. Freddie Mac’s Multifamily business currently finances a significant amount of the multifamily market. Last year, we provided more than $20 billion in liquidity to this multifamily market, financing 1,300 properties comprising 321,000 rental units. Through the first quarter this year, we’ve provided $5.74 billion. More than 90 percent of the properties funded offer rents affordable to lower- and middle-income households (those earning at or below area median income levels).
Working closely with multifamily property owner/borrowers and a network of lenders, we apply our expertise to structure financings in a way that lets us offer very competitive, long-term rates. As a result, owners benefit from overall lower costs of ownership and tenants can benefit from lower rents.
Through our Targeted Affordable Housing (TAH) program, for instance, we finance properties that receive federal or state support. Many of these owners receive low-income housing tax credits (LIHTC) that help in minimizing the permanent debt they take on, and they agree to charge tenants rents affordable for income levels at or below 60 percent of the local area median income.
As part of our effort to boost the housing market’s recovery, we’ve focused intently over the last few years on making the most of the U.S. Treasury Department’s Housing Finance Agency (HFA) Initiative, which we co-administered with Fannie Mae. The New Issue Bond Program (NIBP) has enabled state and local HFAs to provide loans for the development or rehabilitation of affordable properties that have committed to keep rents affordable for tens of thousands of renters. Often the redevelopment includes enhancing the property or adding special features that benefit tenants and the community, like recent redevelopment efforts we helped to finance in California, Hawaii, and New York.
Preserving the affordability of existing LIHTC properties is another priority. We’re sharpening our focus on providing preservation financing to properties that originally were developed with LIHTC 10 or more years ago. As a result, the owners receive low-cost financing for the balance of the LIHTC compliance period; they also have the opportunity to seek new LIHTC allocations at the end of the period and, thus, maintain the property as affordable for many years into the future.
Knowing that certain populations have special needs, we’ve increased our support for seniors and student housing. Demand for housing suitable for seniors is rising fast. The first Baby Boomers turned 65 last year, and millions more are right behind. Despite concerns about a recent drop in college enrollment, the student housing segment has continued to grow. We offer tailored financing products and work with lenders specializing in these markets. Last year, we provided $1.8 billion in liquidity to the seniors and student housing markets. So far this year, we’ve provided more than $800 million.
We are proud of our role in supporting the nation’s renters, multifamily property owner/borrowers, and their communities. And we are committed to helping to meet the rapidly growing demand for rental housing, while keeping these homes broadly affordable.
- “Putting Multifamily in Context” Executive Perspectives blog post
- October 2011 Monthly Economic Outlook: “Rental Housing on an Upswing”
- “Freddie Mac and Your Mortgage” video
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