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Multifamily | June 17, 2021

Growing and Scaling Equitable Outcomes in the Multifamily Business

Amanda Nunnink
By
Amanda Nunnink, Vice President, Equity in Multifamily Housing*

Did you know there are 44 million renter households in the United States? That's 44 million different homes with large and small families, people living alone or with roommates. While these households may not have much in common, what they share is an opportunity to benefit from Freddie Mac's efforts to bring equity to the multifamily industry.

As housing industry professionals, we have a great challenge before us – how do we disrupt a legacy of historical discriminatory housing practices and policies? And how can we provide more opportunities for wealth creation for low-income families, the majority of which are minorities?

Freddie Mac's mission is already dedicated to affordable and workforce housing, making us uniquely positioned to find the solutions that advance equitable outcomes for renters. To start, Freddie Mac Multifamily is initially focused on three areas: tenant advancement, borrower advancement, and advancing affordability in the industry.

Tenant advancement: Bettering the lives of tenants

A key initiative of tenant empowerment is credit building. Our conversations with credit bureaus indicate that less than 10% of on-time rent payments are currently reported – meaning most renter households see no impact to their credit score from their largest monthly payment.

Renters average credit scores are in the low- to mid-600 scores compared with homeowners who average low- to mid-700 scores. Homeowners automatically have their mortgages reported to credit agencies, but rent payments are largely invisible. Freddie Mac is working with fintech company Esusu on how their technology platform, which reports rents directly from the property management to the credit bureaus, can help tenants build credit. And later this summer, Freddie Mac will roll out updates to our financial empowerment and education tool, CreditSmart, with new resources to support renters.

Borrower advancement: Supporting diverse borrowers to help them grow and scale

One of our early projects is to define "diverse borrower" to get a better sense of who is financing multifamily buildings. The goal is to ensure that our borrowers represent the diverse demographic of the nation's renters.

In May, we hosted our first in a series of networking sessions with diverse borrowers, to develop relationships so that we can help these firms grow and scale their businesses. We also recently updated the Multifamily Seller/Servicer Guide to include a classification to indicate entities owned or partially owned by women, minorities, veterans and those who identify as LGBT or individuals with disabilities.

Affordability advancement: Creating and preserving affordable housing

Freddie Mac knows that creating and preserving safe and affordable places to live is core to our equity efforts. To support wealth building, we must make housing more affordable. By reducing their rent burden, families are in a better position to afford necessities like food, clothing and childcare, and possibly save for the future.

We are exploring ways to replicate and scale some of our unique financing structures, such as our tenant advancement commitment, through which we've provided about $1 billion in liquidity to support affordable housing. With this product, borrowers pledge to maintain affordable rents on workforce housing. 

While we mention just a few efforts here, there is far more in the pipeline. You can read more about our efforts at this link. In multifamily, Freddie Mac has always raised the stakes. And collectively if we get this right, we will make real, sustainable change in rental housing.