For some, talk of an affordable-housing crisis may seem overblown. After all, the U.S. economy has rebounded significantly since the 2008 reces- sion, the financial markets are hitting record highs and unemployment is at its lowest level in a decade. But those indicators fail to reflect a
growing hardship facing millions of Americans — namely, the inability of working
families to find safe, decent and affordable housing.
The affordable-housing crisis is one that transcends age, race and geography.
And it’s a crisis that is growing. In 2015, the Joint Center for Housing Studies at
Harvard University found that 27 percent of all renters were severely “rent burdened,” meaning they spent more than half their income on rent. This compares
to 20 percent of renters in 2000 and only 12 percent in 1960.
A perfect storm of circumstances brought us to this point. Demand for rental
housing continues to be very strong. In virtually every demographic cohort, from
millennials to baby boomers, renter households are poised to grow because of a
range of economic and demographic factors. This demand is not being met by
increased supply, however. Freddie Mac research confirms that, even when taking single-family housing starts into account, the U. S. is facing an annual shortfall
of about 400,000 housing units.
Those looking for affordable-housing options find themselves in even more
dire straits. Nationally, there are only 7. 3 million affordable rental units to serve
11.2 million households living on very low incomes. Historically, roughly 90 percent of the multifamily loans Freddie Mac finances in any given year support
workforce housing, which are low- and moderate-income households that earn
no more than their area’s median income.
In 2008, Congress challenged the GSEs to do more. The Housing and Economic
Recovery Act established direction for Freddie Mac and Fannie Mae to increase
liquidity and improve the distribution of capital available for mortgage financing
in three specific underserved markets — rural housing, manufactured housing
and affordable-housing preservation. Freddie Mac’s overseer, the Federal Housing Finance Agency (FHFA), began implementing this requirement last year,
when the agency published its Duty to Serve final rule.
Regarding multifamily properties, the rule directed Freddie Mac to develop loan
products and flexible underwriting guidelines that will facilitate a secondary market in the three underserved markets. This year, Freddie Mac published a proposed
plan, a three-year blueprint for working with the multifamily housing industry and
other stakeholders, to provide working families with expanded rental opportunities
in these underserved areas. It followed months of outreach and dialogue with key
stakeholders to better understand and address the needs of these sectors.
Manufactured homes serve more than 17 million Americans and are an important source of workforce housing. According to Prosperity Now, formerly known
as the Corporation for Enterprise Development, 12 percent of low-income households live in manufactured housing.
Freddie Mac Multifamily purchased its first manufactured-housing community
(MHC) loan in October 2014. Since then, it has provided $2.1 billion in financing,
making housing available for more than 53,000 families in more than 265 MHCs
across 31 states. Today, Freddie Mac Multifamily is one of the top sources of funds for
the nearly 38,000 MHCs nationwide, according to Datacomp’s JLT market reports.
The Duty to Serve rule calls on Freddie Mac to continue supporting MHCs, with
a specific focus on resident-owned manufactured communities (ROCs). These
arrangements give families an ownership role in their communities; may protect
them against excessive rent increases; and encourage maintenance, investment
and pride in their homes and neighborhoods. Freddie Mac’s plan includes steps
to conduct research, promote a greater understanding of the market and help
to attract private capital, while also using this research to pilot new ROC-specific
loan products and increase purchase opportunities.
During a series of public sessions about underserved-market proposals, tenant
rights were named as one factor for creating a stable tenant base which, in turn,
will create stability in the market. Duty to Serve includes undertaking a research
effort to identify tenant-protection frameworks across all 50 states, and a report
on the gaps between those protections and the ones identified in the Duty to
Serve regulations. Freddie Mac also will look to create a pilot program for borrowers who implement qualifying-tenant protections.
Affordable housing is essential to the stability, economic development and
viability of rural communities. While rural areas are socially, economically and
geographically diverse, they face many common challenges.
The presence of industries that historically supported local economies and
growing populations — such as manufacturing, lumber and agriculture —
have diminished, for example, resulting in economic hardship. In addition, rural
populations are aging as younger generations leave in search of job opportunities.
As a result, rural areas have disproportionately high rates of unemployment,
underemployment and poverty.
David Leopold is vice president for affordable-housing production and investments at Freddie Mac Multifamily.
Leopold manages relationships, transactions and negotiations, and has extensive national leadership experience
in multifamily lending and tax-credit equity products, as well as established relationships with many Freddie Mac
customers. Leopold leads Freddie Mac’s targeted affordable-housing business and acts as a thought leader on
issues related to affordable-housing policy and innovation. Reach him at (703) 714-2557.
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<< Freddie Mac continued from Page 31
“Even when taking single-family housing
starts into account, the U.S. is facing an annual
shortfall of about 400,000 housing units.”