An Alternative to Homeownership
The holiday season is a time for reflection. A time to celebrate our blessings. A time to take stock of what we have learned. Today, too many homeowners are coping with too many mortgage delinquencies. As a result, we as a nation are rediscovering the importance of apartment housing.
About one in three U.S. households rent rather than own. People rent for a variety of reasons. For example, Baby Boomers might rent as a lifestyle choice to downsize or heighten their mobility. Younger individuals or families often rent as a stepping-stone towards homeownership.
But most renters live in apartments for economic reasons: they do not have enough money for a downpayment and closing costs, the ongoing expenses of home maintenance, or simply to pay a mortgage. Thus, in many respects apartment living is affordable housing.
Because Freddie Mac's broad mission is to support residential housing, not just homeownership, we have a multifamily business that finances mortgages for apartment buildings. And affordable housing is very much at the center of this business.
More than 90 percent of the multifamily mortgages we finance support individuals or families earning the local area median income – and in most cases, a lot less. Even though our business volume typically represents just a few percentage points of Freddie Mac's overall volume, multifamily mortgages contribute almost one-third of our company's affordable housing units.
During the housing crisis, our role has been focused on keeping multifamily markets liquid with mortgage funding. Between Freddie Mac and Fannie Mae, we have been financing as much as 84 percent of all multifamily mortgages. By maintaining responsible credit standards and working with an experienced network that manages apartments through all market cycles, we have kept mortgage delinquencies low. Indeed, at 12 basis points, our serious loan delinquencies are among the lowest in the industry, if not the lowest.
Longer term, we look to help policymakers as they better balance federal priorities involving homeownership and rental housing. After all:
- Those who rent more than own – such as Echo Boomers and new immigrants – are becoming central to household growth
- Aging Baby Boomers are seeking new kinds of housing and medical assistance
- Green housing can be advanced through the rehabilitation of older apartment housing stock
- Any slowdown in urban sprawl will depend on a modernization of apartment living, one that does not lose sight of the need for affordability
Through our everyday business, we are addressing these and other issues. And we are learning from our experiences. From the newest types of student housing to the latest in continuous care for seniors housing. And lots more.
Because lessons learned don't always have to be about bad things gone awry. They also can be about good things yet to come. And a brighter future for U.S. rental markets is what we in Freddie Mac's multifamily business are working to build.
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