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EXECUTIVE SUMMARY
Multifamily rental housing accounts for a sizable share of Americas housing stock,
TABLE OF CONTENTS
1
Executive Summary
future market conditions including the ongoing economic and housing recovery,
renting point to a growing need for rental housing, especially affordable rentals.
with an estimated 15.2 million occupied multifamily rental units. Current and
Fannie Mae has long played a significant role in the multifamily rental housing
sector, and continues to do so, largely by packaging multifamily loans into
31 Bibliography
32 Contacts
MULTIFAMILY
MORTGAGE
BUSINESS
There are six key points regarding the multifamily sector and
workforce households.
of AMI.
will only offer one rent level for its units; in other words, a
landlord will price all units for tenants earning 60% of AMI. In
subsidized rents.
global investors.
York City.
have stepped in to fill the void and have become the primary
MULTIFAMILY
MORTGAGE
BUSINESS
5. FANNIE MAES MULTIFAMILY BUSINESS MARKET
in the wake of the currency crisis in 1998 and again after 9/11
and the 2001 recession, Fannie Mae and Freddie Mac stepped
to share the risk of loss on each loan. The company also has
late 2007, and as the Harvard Joint Center report noted, Both
housing sector.
Subsidized,
and Conventional Market Rate Housing. All three
homes in this cycle will need to relyWHAT
on rentalIShousing
in the
AFFORDABLE
RENTAL HOUSING?
near term and possibly longer.
Multifamily rental housing is a large and diverse sector and is generally defined as properties consisting of five or more individual
housing units. To present the current state of the multifamily rental housing sector, this paper discusses how affordable housing
is defined, how much rental housing is available, whether there is enough rental housing to satisfy demand, what the state of
lending in the multifamily market is today, and what role Fannie Mae plays in the multifamily rental housing sector.
Multifamily rental housing accounts for a significant amount of the affordable housing available today. There are three primary
segmentsaoffuller
the multifamily
market: Public
Housing,
Subsidized, and Conventional Market Rate Housing. All three types of
Public
Housing
The following sections of this paper provide
discussion
multifamily housing can be considered affordable as demonstrated in the chart below.
is the most
well-known type of affordable
multifamily
housing.
It is rental
thatpublically-funded
is both publically-funded
and
housing.
It is rental
housing
thathousing
is both
and
experience in the market as a leading This
provider
of multifamily
housing finance.
publically-owned.
publically-owned.
One common, yet narrow, definition for affordable multifamily is a unit in a multifamily property that receives some form
of government subsidy, such as a rental subsidy from HUD. These types of subsidies can include federal programs such as
WHAT IS AFFORDABLEHousing
RENTAL
Choice vouchers issued to tenants, low-income housing tax credits issued to developers, or state or local programs
such as tax abatements and subordinate financing.
HOUSING?
Multifamily rental housing
Conventional
Market Rate
Multifamily Housing
6.7M units (Estimated)
Privately owned rental housing
that does not receive any subsidy
(renters pay no more than 30%
of income; limited here to income
groups at 100% of AMI or below)
Subsidized
Multifamily Housing
3.9M units (Estimated)
Privately owned rental
housing that receives public
subsidies in exchange for
affordability restrictions
Public
Housing
1.2M units
(Estimated)
55
MULTIFAMILY
MORTGAGE
BUSINESS
Government-Issued Incentives and Subsidies
subsidies include:
1.
Workforce
RentalRate
Housing
andHousing
Gaps
Conventional
Market
Rental
Workforce rental housing is a subset of all affordable rental housing. As defined by ULI, workforce households are those
According to ULIs J. Ronald Terwilliger Center for Workforce Housing, a workforce housing gap persists in high-cost areas
individuals
entities
charge
rents consistent
the
According
to ULIs
J. Ronald Terwilliger Center for Workforce
thatorare
major that
centers
of employment,
such aswith
Washington
DC, San
Francisco,
and Boston.
amenities offered by the property and local housing market
As the following map illustrates, the Fair Market Rent on a two-bedroom apartment in most high-cost states requires significant
income.
Currently,
theproperty
federal minimum
wage isreceive
$7.25 an hour;
state laws
mandate a higher
minimum
wageDC,
in
conditions.
In general,
these
owners usually
arelocal
majororcenters
of employment,
such as
Washington
Washington, DC and in 14 states including California. It is likely that many households in these high-cost areas are spending
Housing Wage
Source: National Low Income Housing Coalition Out of Reach 2010 June Update
MULTIFAMILY
MORTGAGE
BUSINESS
As the map illustrates, the Fair Market Rent on a two-bedroom apartment in most high-cost states requires significant income. Currently,
the federal minimum wage is $7.25 an hour; local or state laws mandate a higher minimum wage in Washington, DC and in 14 states
including California. It is likely that many households in these high-cost areas are spending more than 30% of income on rent.
Affordable
Rental
Housing
Sector
Substantial Subsidies Are Necessary to Keep Rental Units Affordable for the Lowest Income Tenants
Substantial
Subsidies are
Aresharing
Necessary
to Keep
Affordable
for
Lowest
Income
Tenants
Since
multiple households
the same
parcelRental
of land,Units
multifamily
housing
is the
generally
more
affordable
than singlefamily
Nevertheless,
affordable
the lowest-income
levelsincome
thosetobelow
of AMI
can be
for
Since housing.
multiple households
areunits
sharing
the sametoparcel
of
rental
cover 60%
operating
expenses.
Aschallenging
a result, these
developers to build or preserve. At 30% of AMI, most multifamily housing owners find it nearly impossible for rental income
land, multifamily housing is generally more affordable than
types of affordable units usually require multiple propertyto cover operating expenses. As a result, these types of affordable units usually require multiple property-specific subsidies
single-family housing. Nevertheless, units affordable to the
specific subsidies from several sources. In many cases, despite
from several sources. In many cases, despite these subsidies, rents may still not be affordable to the lowest income households.
lowest-income levels those below 60% of AMI can be
these subsidies, rents may still not be affordable to the lowest
challenging for developers to build or preserve. At 30% of AMI,
most multifamily housing owners find it nearly impossible for
income households.
WHY IS IT IMPORTANT TO PRESERVE earning under 50% of AMI. As a result, there is ongoing effort
A Subsidized Affordable multifamily property incorporates a regulatory agreement or recorded restriction that limits rents, sets
SUBSIDIZED AFFORDABLE RENTALS? by Subsidized Affordable multifamily participants to develop
forth income qualifications for tenants, or places other restrictions on the use or occupancy of the multifamily property all
Subsidized
Affordable
Multifamily
Definition
and preserve
properties
with
subsidies
maintain theproperty
stock
of
which are designed
to make
the property
affordable. While government
entities
generally
impose
thesetorestrictions,
owners
sometimes
voluntarily
record
these restrictions
in an attempt
to preserve
multifamily
affordable
housing
for the
future.
A Subsidized
Affordable
multifamily
property
incorporates
of safe
and affordable
housing
for the lowest
income
tenants.
In
essence, subsidized
is privately
owned rental housing that receives public subsidies in exchange for
a regulatory
agreementaffordable
or recordedhousing
restriction
that
affordability restrictions.
limits rents, sets forth income qualifications for tenants,
Subsidized Affordable Multifamily Participants
Subsidized
Affordable
housing
a significant
housing
for those
with lower
incomes,Affordable
particularly those
or places other
restrictions
on theprovides
use or occupancy
of amount ofEntities
providing
financing
for Subsidized
earning under 50% of AMI. As a result, there is ongoing effort by Subsidized Affordable multifamily participants to develop
the multifamily property all of which are designed to
multifamily properties assume credit risk either by providing
and preserve properties with subsidies to maintain the stock of safe and affordable housing for the lowest income tenants.
make the property affordable. While government entities
credit enhancement to the financing asset or by holding the
Reinvestment
are incomes,
tasked specifically
developing
and preserving
Larger entities
tend to
of housing for Corporation
those with lower
particularlywith
those
restrictions,
but in affordable
the currenthousing.
lending environment,
these
keep loans in portfolio, although they may sell a pool at a later date.
Investors:
Purchase securities
(generally take interest
rate risk, but not credit risk)
MULTIFAMILY
MORTGAGE
BUSINESS
loans are originated primarily for Community Reinvestment
sale of the tax credits reduces the amount of debt that must
then tax credits worth about 70% of the net present value
of the property must be issued. In other words, it takes a
family development.
10
Households
fair market rent amount for that local area. Tenants must apply
rent. Overall, HUD has estimated that there are 2.2 million
less. Fannie Mae has financed about half a million rental units
that have these types of layered subsidies.
11
MULTIFAMILY
MORTGAGE
BUSINESS
Multifamily properties (defined as having five or more units) with about 15.2 million occupied units.
Multifamily
properties (defined as having five or more units) with about 15.2 million occupied units.
units; and
RENTAL UNITS SEGMENTED BY AMI FOR AFFORDABLE ESTIMATE
Source: Data provided by HUD based on
RENTAL UNITS SEGMENTED BY AMI FOR AFFORDABLE ESTIMATE
compilation of 2009 American Housing
Affordable to:
Affordable to:
(C) = Cumulative
Estimated Single
Family Rental
30%< Income (1-4
50%units)
of AMI
(C) = Cumulative 1
(C)
Income 30% of AMI
Estimated Single
Family Rental
(1-4 units)
(C)
50%< 3.1M
Income 60% of AMI
3.2M
2.5M
4.2M
3.1M
Estimated
Estimated
Multifamily
Multifamily
Rental
Rental(5+
(5+units)
units)
(C)
11.5M
2.5M
3.0M
0.4M
3.5M
30.0M
9.8M 1.3M
affordable
atsegmented
the Veryinto
Low
Income
Units
Single
and
15.8M
2.6M
(<=50%Multifamily
of AMI);rentals
therefore
units
basedtotal
on standard
17.3M
13.9M
1.4M
32.6M
Fannie
Mae definitions
of Single
and
3.2M
3.0M
0.2M
6.4M
affordable
to Very
Low Income
under
50%< Income 60% of AMI
1.5M
1.3M
0.0M
2.8M
Multifamily. Units affordable to Income
Income > 100% of 11.5M
AMI
9.5M
1.2M
22.2M
Category is 2.5M +
the Multifamily
18.8M
15.2M
1.4M
35.4M
> 100% of AMI or higher represent
4.0M = upscale
6.5M. rental beyond a markets
4.2M
3.5M 18.8M
0.1M
7.8M
60%< Income 80% of AMI Total Market
15.2M
1.4M
35.4M
affordability.
15.7M
13.0M
1.3M
30.0M
Units segmented into Single and
1.6M
0.9M
0.1M
2.6M
80%< Income 100% of AMI
Multifamily rentals based on standard
17.3M financing on 13.9M
1.4M
32.6M
Fannie Mae has provided
nearly four million
of the estimated
total 15.2
million
Fannie
Mae occupied
definitionsmultifamily
of Single andunits in
0.0M
2.8M
1.5M
1.3M
Multifamily. Units affordable to Income
Income > 100% of AMI the U.S. That
is about
one-quarter of the
nations total estimated
rental units. As seen in the following table, the
1.4M multifamily
35.4M
18.8M
15.2M
> 100% of AMI or higher represent
rental
beyond a markets
majority
of
these
units
are
affordable
to
households
with
incomes
between
50%
andupscale
100% of
AMI.
1.4M
35.4M
18.8M
15.2M
Total Market
5.2M
8.3M
80%< Income 100%
of AMI
4.0M
1.6M
15.7M
6.5M
0.6M
9.5M
0.4M
Estimated
Manufactured
Housing Units
(C)
0.9M
13.0M
1.0M
0.1M
affordability.
Fannie Mae
(5+ Units)
(5+ Units)
Multifamily
Multifamily Rental
Units units.
Mae share
of
the U.S. That is about one-quarter of the nations total estimated multifamily
rental
As Rental
seen Units
in the Fannie
following
table,
the
Multifamily Market
Based on
Based on
Estimated Cumulative
Units
Units
Available to 5+ units
Available to
(Millions)
AMI
AMI
Category
Category
Estimated
Cumulative
majority of these units are affordable to households with incomesEstimated
between 50%
and 100%
of Cumulative
AMI.
5+ units
(Millions)
5+ units
Units
Available to (Millions)
AMI
Category
6.5
6.5
0.7
0.7 10.8% 10.8%
Fannie
3.0
9.5 Mae0.9
1.6 30.0% 16.8%
Units 2.8
Multifamily
Fannie34.3%
Mae share21.5%
of
Affordable to 60% of AMI< income
80% of AMI Rental Units3.5Multifamily
13.0 Rental
1.2
(5+ Units)0.6
Multifamily
Affordable to 80% of AMI< income 100% of(5+
AMIUnits)
0.9
13.9
3.4
66.7%Market
24.5%
Based on
Cumulative Estimated Cumulative Based on
Estimated
Affordable to income > 100% of AMI
1.35+ units
15.2 Units0.4
3.8 30.8% 25.0%
Estimated Cumulative
Units
5+ units
Total Market
15.2 Available
3.8 to 5+3.8
Units 25.0%
units 25.0%
Available15.2
to (Millions)
(Millions)
Market
Affordable to 50% of AMI< income 60% of AMI
Category
Category
FANNIE
MAE
Affordable to income 50%
of AMI
6.5
3.0
3.5
6.5
9.5
13.0
0.7
0.9
1.2
0.7
1.6
2.8
(Millions)
10.8%
30.0%
34.3%
Available to
AMI
Category
10.8%
16.8%
21.5%
11
For households earning less than 30% of AMI, only 2.5 million
of the 15.2 million occupied rental units available for rent in the
100% of AMI.
Most of the affordable rental housing supply falls into the 50%
LY RENTAL
HOUSING?
to 100% AMI segment alone, accounting for almost half or
100% of AMI.
he
alf
ds
in
80% 100%
of AMI
0.9
9%
6%
16%
60% 80%
of AMI
3.5
23%
26%
ny
to
ult,
to
Below market rate rent is any asking rent that is less than the
nly
its
20%
ther asking rents in the same general location for comparable units
13
MULTIFAMILY
MORTGAGE
BUSINESS
annually estimates Fair Market Rents for 530 metropolitan areas
Market Rents for use in any fiscal year must be published and
available for use at the start of that fiscal year, on October 1st.
They include the shelter rent plus the cost of all tenant-paid
and internet service. HUD sets Fair Market Rents to assure that
families as possible.
Since the Fair Market Rent determines the income stream for
14
The national level fair market rent, as determined by HUD, along with the corresponding annual income levels necessary to afford
The national level fair market rent, as determined by HUD, along with the corresponding annual income levels necessary to
each particular unit types rent, is illustrated in the following tables:
afford each particular unit types rent, is illustrated in the following tables:
Zero Bedroom
$713
Zero Bedroom
$28,520
Zero Bedroom
43%
One Bedroom
$805
One Bedroom
$32,200
One Bedroom
49%
Two Bedroom
$959
Two Bedroom
$38,360
Two Bedroom
58%
Three Bedroom
$1,254
Three Bedroom
$50,160
Three Bedroom
76%
Four Bedroom
$1,435
Four Bedroom
$57,400
Four Bedroom
87%
Source: Out of Reach 2010 June Update, National Low Income Housing Coalition.
Fiscal Year 2010 Fair Market Rent (HUD, 2010; revised as of March 11, 2010).
Annual 2010 Area Median Income of $65,801 as estimated by National Low Income Housing Coalition.
1
2
To afford HUDs fair market rent level for a studio apartment of $713 per month, spending just 30% of annual income on
household would need to earn at least $38,360 or 58% of the
rent, the annual household income would have to be $28,520. This is far above the federal minimum wage of $7.25 per hour,
To
afford
HUDsonly
fair yield
market
levelincome
for a studio
apartment
Income
Coalitions
estimated
national
which
would
anrent
annual
of $15,080
based on aNational
40-hourLow
work
weekHousing
and a 52-week
year.
A minimum
wage
Wage Income
of
$713 would
per month,
30%
annualto
income
annual
AMI ofin
$65,801.
Moving to
a three-bedroom
earner
havespending
to spendjust
50%
ofofincome
affordonthe studio
apartment
this example,
thereby
illustrating apartment
the role of
government
subsidies
in these
high-cost
rent,
the annual
household
income
wouldareas.
have to be $28,520.
This
is far above
wage of $7.25
per hour, a household
average annual
$50,160,
or 76%
of theor
estimated
To afford
$959 the
perfederal
monthminimum
for a two-bedroom
apartment,
would income
need to of
earn
at least
$38,360
58% of the
National
Low
Income
estimated
national
AMIannual
of $65,801.
to afford
a three-bedroom
apartment
which
would
only
yield Housing
an annualCoalitions
income of $15,080
based
on annual
national
AMI, toMoving
be able to
a three-bedroom
unit becomes significantly more expensive. It would take an average annual income of $50,160, or 76% of the estimated
a 40-hour work week and a 52-week year. A minimum wage
apartment at a fair market rent of $1,254 per month.
national annual AMI, to be able to afford a three-bedroom apartment at a fair market rent of $1,254 per month.
earner would have to spend 50% of income to afford the
The map on the following page presents rents in select high-cost areas of New York City, Washington, DC, Chicago, Los
studio apartment in this example, thereby illustrating the role
Angeles, and San Francisco.
of government subsidies in these high-cost areas.
15
MULTIFAMILY
MORTGAGE
BUSINESS
The map presents rents in select high-cost areas of New York City, Washington, DC, Chicago, Los Angeles, and San Francisco.
HUDs fair market rent level can differ from the actual market
HUDsRate
fairrate
market
level
can
fromtothe
askingrent
rent,
as
indiffer
theHigher
tables
theactual
right. market
Market
Rents
Can
beseen
Much
ratefair
asking
rent,
astable
seen
in can
the tables
to thefair
right.
HUDs
market
level
differ
from
the
actual market
The
toprent
compares
the HUD
market
rents at a
national
level in
bythe
number
of to
bedrooms
to second quarter,
rate asking rent,
as seen
tables
the right.
2010 market rate asking rents as estimated by REIS, Inc., a
table
compares
the
market
rents
at aThe
national
TheThe
toptop
table
the HUD
HUD
fair
market
rents
at
a
Newcompares
York City-based
real fair
estate
research
firm.
market
rateby
rentnumber
estimates
are bedrooms
significantly
higher
than
the
HUD fair
national
level
of
to second
quarter,
level by
number
of
bedrooms
to second quarter,
2010
market
market rent levels.
16
Zero Bedroom
One Bedroom
$805
$1,023
Fair Market
$959 Rent
Two Bedroom
ThreeBedroom
Bedroom
Zero
$1,254
Market
$1,222Rate Rent
$713
$1,019
$1,419
One Bedroom
$805
ANNUAL INCOME NEEDED
$1,023
$1,222
$28,520
$40,760
Three Bedroom
Zero Bedroom
$1,254
$1,419
$32,200
$40,920
ANNUAL INCOME
NEEDED
$38,360
TO AFFORD RENT $48,880
One Bedroom
Two Bedroom
Three Bedroom
$50,160
$56,760
$40,760
One Bedroom
$32,200
$40,920
Two Bedroom
$38,360
$48,880
Three Bedroom
$50,160
$56,760
15
A
Tale
of Three
Cities
more diverse
selection
of asking rents.
The
difference
in fair
market rents and market rate rents is evena more
dramatic
in metropolitan
areas San
withFrancisco
a highershows
cost of
living.
The following
table rents
showsand
themarket
price differential
metros: San
Francisco,
anda market
New York
The
difference
in fair market
rate rents isin three such
a difference
of slightly
moreLos
thanAngeles,
$500, with
rate City.
of
even
more dramatic in metropolitan areas with a higher cost of
nearly $2,300, well above HUDs fair market rent of $1,760.
Of the three, New York City reflects the largest difference in fair market rents and market rate rents as calculated using REIS
national property data $2,251. The difference is primarily due to the concentration of the REIS data in Manhattan, which
living.
The following table shows the price differential in three
carries
a much
asking
level and
thanNew
the York
otherCity.
New York The
Citytable
boroughs.
such
metros:
Sanhigher
Francisco,
Losrent
Angeles,
shows scenarios where households must routinely
spend
well overofone-third
of gross
to be this
ableistobecause
live
At the other end of the spectrum, the Los Angeles metro area has
a difference
just about
$200.income
Most likely
Losthe
Angeles
metro
is aCity
much
larger
anddifference
therefore in
includes ainmore
diverse selection
of asking
rents. San
shows
Of
three, New
York
reflects
thearea
largest
a two-bedroom
apartment.
For instance,
in Francisco
Los Angeles,
a difference of slightly more than $500, with a market rate of nearly $2,300, well above HUDs fair market rent of $1,760.
fair market rents and market rate rents as calculated using REIS
a household earning 50% of AMI, $34,100, must spend over
The table
shows data
scenarios
where
routinely spend
over one-third
to be
able to
in
national
property
$2,251.
Thehouseholds
difference ismust
primarily
57%well
of income
to be ableoftogross
affordincome
the typical
market
ratelive
rent
a two-bedroom apartment. For instance, in Los Angeles, a household earning 50% of AMI, $34,100, must spend over 57%
for a two-bedroom of $1,627. A household earning $34,100
due to the concentration of the REIS data in Manhattan, which
of income to be able to afford the typical market rate rent for a two-bedroom of $1,627. A household earning $34,100
could afford to spend no more than $853 per month on rent
carries a much higher asking rent level than the other New
could afford to spend no more than $853 per month on rent to stay within spending one-third of gross income on rent. Only
stay withinlive
spending
of gross
income
on rent.
York
City boroughs.
households
earning 80% to 100% of area median income could to
comfortably
in the one-third
typical market
rate
apartment.
Only households earning 80% to 100% of area median income
What is most striking in the comparison below is not necessarily the difference in asking rents, but the difference in the
could
live in that
the typical
rate apartment.
At
the other
end of theincome
spectrum,
the Los
Angeles
metro
area
estimated
household
needed
to afford
the
corresponding
rentalcomfortably
rates. It is likely
many market
households
in these highhas
difference
aboutthe
$200.
Most needed
likely this
because
costametros
are of
notjust
earning
income
toisafford
the two-bedroom market rate rent apartment, but rather are spending
more
than one-third
grosslarger
income
paytherefore
the rent.includes
Los
Angeles
metro is aofmuch
areatoand
HUD FAIR MARKET RENTS VS. ESTIMATED MARKET RATE RENTS SELECT METROS
San Francisco
New York
Housing Costs
Two bedroom at HUD determined Fair Market Rent (FMR)1
2
Income needed to afford 2 BR FMR
$1,760
$70,400
$1,420
$56,800
$1,359
$54,360
$2,281
$91,240
$1,627
$65,080
$3,610
$144,400
$93,400 / $2,335
$74,720 / $1,868
$46,700 / $1,168
$28,020 / $701
$68,200 / $1,705
$54,560 / $1,364
$34,100 / $853
$20,460 / $512
$78,300 / $1,958
$62,640 / $1,566
$39,150 / 979
$23,490 / $587
Fiscal Year 2010 Fair Market Rent provided in Out of Reach 2010 June Update, National Low Income Housing Coalition
Affordable rents represent the generally accepted standard within housing policy circles of spending not more than 30% of gross income on housing.
Market Rate Rents based on REIS 2nd quarter 2010 data for geography based on Metropolitan Statistical Area (MSA)
AMI = Fiscal Year 2010 Area Median Income (HUD, 2010) as provided by Federal Housing Finance Agency (FHFA) to Fannie Mae.
17
16
MULTIFAMILY
MORTGAGE
BUSINESS
What is most striking in the comparison is not necessarily the
Fannie
and Workforce
Rental
or below
AMI.
The threeMae
metropolitan
areas cited
on theHousing
previous page may haveathigher
costs
of living on average, but they still include some
rental
units
affordable across
the spectrum
of AMI.
The
three
metropolitan
areas cited
on the previous
page may
have
higher
costs
of livingchart,
on average,
butasthey
still include
Properties
Can has
Offer
a Mixnearly
of Rental
Units
As seen
in the
following
in a city
high-cost
as San Francisco,
Fannie Mae
financed
30,000
units renting at
between
80%
andaffordable
100% of across
AMI. Fannie
Mae also
has financed over
67,000
units
with rents
affordable
to households
earning
some
rental
units
the spectrum
of AMI.
As noted
in the
Executive
Summary,
a common
misperception
between 60% and 100% of AMI.
Onseen
a cumulative
basis, chart,
Fannie
financed as
approximately
89,000
to residents
of San Francisco
As
in the following
in Mae
a cityhas
as high-cost
San
rent
levelunits
for itsaffordable
units. In other
words, a landlord
will cater at or
below AMI. On a cumulative basis in New York, Fannie Mae has financed approximately 312,000 units affordable to residents
Francisco, Fannie Mae has financed nearly 30,000 units renting
exclusively to tenants earning 30% of AMI. That may be true
at or below AMI.
15,453
112,244
80%
70%
29,423
60%
105,076
50%
40%
38,113
30%
20%
10%
0%
141,755
96,042
110,527
83,308
15,088
61,510
6,363
31,385
10,987
San Francisco-Oakland-Fremont, CA
43,979
New York-Northern New Jersey-Long Island,
NY-NJ-PA
Income Housing
some tenants paying market rate rents, while others are paying
Once again using San Francisco, Los Angeles, and New York
earning
no morethe
than
50% of AMI
40% of
must of
be such
units of
which
61 units
rents that
100%
the York City
Once
again
using
San have
Francisco,
Los exceed
Angeles,
and of
New
as examples,
following
tableorlooks
atunits
examples
properties
located
in each
of these
metros
that haveofreceived multifamily
Fannie
Mae.than
Based
onofinformation
affordablefinancing
to familiesfrom
earning
no more
60%
AMI. The
metros AMI.
There are
26 units
each in
the categories
received
Fannie
Mae,and
none
of these60%
three
properties
receive any
rental subsidies.
remainder
of the units may be offered at the market rate,
between by
80%
and 100%
between
and
80% of AMI;
unless
state61
allocating
the tax
credit
imposed
greater
threeproperty
units are located
rented atinbetween
50% and
60% AMI; 12Itunits
The
Los Angeles
is illustrative.
has 135 units
ofthe
which
units have
rents
thathas
exceed
100%
of the
metros
AMI.
There are
26and
units
each
in and
the categories
of betweenrestrictions,
80% and 100%
and
between
60% and 80% of AMI; three
which is
often
the case.
are rented
at between
30%
50%
AMI;
lastly, seven
units are rented at between 50% and 60% AMI; 12 units are rented at between 30% and 50% AMI; and lastly, seven units
units are rented at below 30% AMI.
are rented at below 30% AMI.
1
4
27
15
20
5
61
26
26
3
12
7
12
1
5
4
3
4
MULTIFAMILY
MORTGAGE
BUSINESS
IS THERE
ENOUGH
RENTAL
HOUSING
TO SATISFY
DEMAND?
affordable
at more
than 80% of AMI
climbed slightly
in 2009
demolished,
lost to a natural
disaster, abandoned, converted
Supply and demand for multifamily rental units generally appear to be in balance. However, the supply of housing to lowerto 15.5% of all multifamily rental units, up from 14.9% in 2007.
to non-housing purposes, or otherwise removed from the
income households has fallen short of demand. As noted in the Executive Summary, according to the HUD 2009 American
At the same time, the units affordable to households earning
housing stock.
Housing Survey report, the multifamily rental units affordable at more than 80% of AMI climbed slightly in 2009 to 15.5%
30%
50% of AMIrental
fell to 25.9%
from
26.4%.
Unitsinaffordable
of alltomultifamily
units, up
from
14.9%
2007. At the same time, the units affordable to households earning 30% to
50%
AMI
felloftoAMI
25.9%
from 26.4%.
Unitsloss,
affordable
at less than 30% of AMI recognized the largest loss, dropping to just
at
lessof
than
30%
recognized
the largest
dropping
15.5% of all multifamily rentals in 2009, compared to 17.2% in 2007, as seen in the chart below.
Percentage of Total
80%
70%
60%
50%
15.2 Million
15.2 Million
9%
5%
9%
6%
23%
23%
19%
20%
27%
26%
20%
10%
0%
80%-100% AMI
60%-80% AMI
50% - 60% AMI
40%
30%
17%
16%
2007
2009
According to Harvard Joint Centers State of the Nations Housing 2010 report, from 1997 to 2007 the number of rental units
affordable to households earning at a full-time minimum wage declined by 15.6%. Most of these units were demolished, lost
to a natural disaster, abandoned, converted to non-housing purposes, or otherwise removed from the housing stock.
20
the
CMBS
conduit
market,
may withdraw
the market
2010 data, commercial
banks market
and savings
Fannie
Maes
housing
mission
compels from
the company
to remain quarter
in the multifamily
housing finance
in allinstitutions
geographic
areas under
all economic
and For
market
conditions.
Other market saw
participants,
including banks,
life insurance
companies
during
unfavorable
conditions.
example,
the life insurance
a quarter-over-quarter
decrease
of $3.9 billion
in their and
the CMBS
conduit market,
mayon
withdraw
from the market during
unfavorable
conditions.
For example,
the life insurance
industry
significantly
scaled back
issuing multifamily
contribution
to multifamily
mortgage
debt outstanding,
as
industry significantly scaled back on issuing multifamily loan commitments in 2008. As seen in the chart below, only recently
loan commitments in 2008. As seen in the chart below, only
seen in the chart on the following page. The decline in the
have the life insurers started to return to multifamily lending. Based on the latest data from the American Council of Life
recently have the life insurers started to return to multifamily
fourth quarter of 2009 was nearly $10 billion.
Insurers, the largest 25 life insurers were responsible for nearly $735 million in multifamily loan commitments in the second
quarter of 2010.
35%
$3,500
30%
$3,000
$2,500
$2,000
25%
20%
15%
$1,500
10%
$1,000
$500
5%
$0
0%
% Committed to Apartments
$4,000
20
05
Q
20 4
06
Q
20 1
06
Q
20 2
06
Q
20 3
06
Q
20 4
07
Q
20 1
07
Q
20 2
07
Q
20 3
07
Q
20 4
08
Q
20 1
08
Q
20 2
08
Q
20 3
08
Q
20 4
09
Q
20 1
09
Q
20 2
09
Q
20 3
09
Q
20 4
10
Q
20 1
10
Q
2
Banks and thrifts have also seen a decrease in multifamily lending activity. According to the Federal Reserves second-quarter
2010 data, commercial banks and savings institutions saw a quarter-over-quarter decrease of $3.9 billion in their contribution
to multifamily mortgage debt outstanding, as seen in the chart on the following page. The decline in the fourth quarter of 2009
was nearly $10 billion.
21
MULTIFAMILY
MORTGAGE
BUSINESS
Q Q1
1: :2
20 0
0 0
Q Q2 5 5
2: :2
20 0
0
Q Q305 5
3: :2
20 0
0
Q Q405 5
4: :2
20 0
0 0
Q Q1 5 5
1: :2
20 0
0
Q Q206 6
2: :2
20 0
0 0
Q Q3 6 6
3: :2
20 0
0
Q Q406 6
4: :2
20 0
0
Q Q106 6
1: :2
20 0
0 0
Q Q2 7 7
2: :2
20 0
0
Q Q307 7
3: :2
20 0
0 0
Q Q4 7 7
4: :2
20 0
0
Q Q107 7
1: :2
20 0
0 0
Q Q2 8 8
2: :2
20 0
0
Q Q308 8
3: :2
20 0
0
Q Q408 8
4: :2
20 0
0 0
Q Q1 8 8
1: :2
20 0
0
Q Q209 9
2: :2
20 0
0 0
Q Q3 9 9
3: :2
20 0
0
Q Q409 9
4: :2
20 0
0
Q Q109 9
1: :2
20 0
1 1
Q Q2 0 0
2: :2
20 0
10 10
(Billions)
(Billions)
$15
$15
$10
$10
$5
$5
$0
$0
($5)
($5)
($10)
($10)
($15)
($15)
FDIC-INSURED INSTITUTIONS:
INSTITUTIONS:
QUARTERLY CHANGE FDIC-INSURED
IN MULTIFAMILY
DEBT OUTSTANDING HOLDINGS
QUARTERLY CHANGE IN MULTIFAMILY DEBT OUTSTANDING HOLDINGS
Although
there have
have been
been aa few
few CMBS
CMBSconduit
conduittransactions
transactions
issued
this
year,
of the
second
quarter
2010
none
contained
Although there
issued
this
year,
as as
of the
second
quarter
2010
none
hadhad
contained
Although there have been a few CMBS conduit transactions issued this year, as of the second quarter 2010 none had contained
newly originated multifamily loans. In June 2010, there was one all-multifamily CMBS issued: the Impact Funding 2010-1
newly
loans.
In June
2010,
therethere
was one
CMBS issued:
Impact
deal.
newly originated
originatedmultifamily
multifamily
loans.
In June
2010,
wasall-multifamily
one all-multifamily
CMBSthe
issued:
theFunding
Impact 2010-1
Funding
2010-1
deal. However, it only consisted of seasoned multifamily loans, the most recent of which was originated in 2007. As a result,
deal. However,
only consisted
of seasoned
multifamily
most
of which
was originated
2007.new
As a result,
However,
it only it
consisted
of seasoned
multifamily
loans, theloans,
most the
recent
of recent
which was
originated
in 2007. As in
a result,
new multifamily CMBS issuance remains at zero for the first half of 2010.
new multifamily CMBS issuance remains at zero for the first half of 2010.
multifamily CMBS issuance remains at zero for the first half of 2010.
$14
$12.0
$14 $10.7
$12
$10.3$11.0 $12.0
$12 $10.7
$8.9
$10.3$11.0
$10
$8.9
$10
$8
$6.3 $5.9 $5.9
$8
$6
$6.3 $5.9 $5.9
$4.1
$6
$4
$4.1
$4
$2
$0.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
$2
$0.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
$0
$0
20 20
05 05
Q Q4
4
20 20
06 06
Q Q1
1
20 20
06 06
Q Q2
2
20 20
06 06
Q Q3
3
20 20
06 06
Q Q4
4
20 20
07 07
Q Q1
1
20 20
07 07
Q Q2
2
20 20
07 07
Q Q3
3
20 20
07 07
Q Q4
4
20 20
08 08
Q Q1
1
20 20
08 08
Q Q2
2
20 20
08 08
Q Q3
3
20 20
08 08
Q Q4
4
20 20
09 09
Q Q1
1
20 20
09 09
Q Q2
2
20 20
09 09
Q Q3
3
20 20
09 09
Q Q4
4
20 20
10 10
Q Q1
1
20 20
10 10
Q Q2
2
(Billions)
(Billions)
Leading multifamily housing stakeholders have cited the need for a reliable flow of capital for rental housing and the benefits
Need
for
Consistent
Capital
joint report
U.S. Treasury
and
Leading
multifamily
housing
stakeholders have cited the need forInaareliable
flowto
ofthe
capital
for rentalDepartment
housing and
theHUD,
benefits
of maintaining that supply.
of maintaining
that housing
supply. stakeholders have cited the need
Leading
multifamily
the National Multi-Housing Council, the National Apartment
In a joint report to the U.S. Treasury Department and HUD, the National Multi-Housing Council, the National Apartment
for
flow of
forTreasury
rental housing
and theand
benefits
and the American
Seniorsthe
Housing
Association,
In a reliable
joint report
to capital
the U.S.
Department
HUD, theAssociation,
National Multi-Housing
Council,
National
Apartment
Association, and the American Seniors Housing Association, stated that the sufficient, reasonable and reliable source of
Association,
American Seniors Housing Association, stated
reasonableand
andreliable
reliable
source
of
maintainingand
thatthe
supply.
statedthat
that the
the sufficient,
sufficient, reasonable
source
of of
liquidity the GSEs have provided to the apartment sector has attracted private sector investors to apartments, which has
liquidity the GSEs have provided to the apartment sector has attracted private sector investors to apartments, which has
liquidity
the GSEsAmericans
have provided
to the apartment
sector
enabled our industry to produce millions of units of housing for the
hard-working
our communities
rely on
and for
enabled our industry to produce millions of units of housing for the hard-working Americans our communities rely on and for
our senior citizens. The report further added that a government-supported
secondary
is absolutely
critical
to the
has attracted private
sectormarket
investors
to apartments,
which
our senior citizens. The report further added that a government-supported secondary market is absolutely critical to the
multifamily sector and our industrys ability to continue to meet the nations demand for affordable and workforce housing.
multifamily sector and our industrys ability to continue to meet the nations demand for affordable and workforce housing.
22
FANNIE
MAE AND WORKFORCE HOUSING
FANNIE MAE AND WORKFORCE HOUSING
21
21
The Joint Centers January 2009 policy brief also stated that,
Mae) play a small but critical role in the overall market. FHA
The Harvard Joint Center for Housing Studies also confirmed the importance of support for multifamily housing finance. In
through higher loan-to-value loans for multifamily
and workforce housing.
a January 2009 policy brief, the Center concluded, An efficient, smoothly functioning finance system is needed to insure the
developments than the private lending market.
viability of the apartment building market and the multifamily industry. In normal times, multiple sources provide fresh credit
The
Joint Center
for and
Housing
Studies
also confirmed
to Harvard
the multifamily
market
industry.
During
this period of extreme distress, however, only federal sources are active in the
multifamily
finance
market.
the
importance
of support
for multifamily housing finance.
InFHA
a January
2009 policy
brief, the Plays
Centeraconcluded,
An
Multifamily
Financing
Small Role
The Joint
Centers
January 2009
brief
also stated
that,permanent
FHA-insured
multifamily
sales of these
financing.
This is inmortgages
contrast to(and
the private
efficient,
smoothly
functioning
financepolicy
system
is needed
to
mortgages into mortgage-backed pools guaranteed by Ginnie Mae) play a small but critical role in the overall market. FHA
sector where construction loans are usually separated from
insure the viability of the apartment building market and the
insurance facilitates new construction and rehabilitation through higher loan-to-value loans for multifamily developments
permanent financing loans with construction loans generally
multifamily industry. In normal times, multiple sources provide
than the private lending market.
insured loans:
The following table shows the recent volumes of FHA-insured loans:
100%
80%
$2.6B
$2.3B
$3.0B
$9.5B
1.4
1.2
1.6
6.0
1.2
1.1
1.4
2007
2008
2009
60%
40%
20%
0%
3.5
2010
Purchase/Refinance
Source: FHA; Excludes loans endorsed under FHA section 232 Health Care Program and FHA Risk Share Program
From 2007 to the present, FHA has been increasing the amount insured annually to aid construction financing. As the previous
1
as of August 2010
chart shows, in the past, under normal circumstances, FHA endorsements and insurance of multifamily mortgages were fairly
evenly divided between new construction or rehabilitation loans and purchase
refinance
loans.
FANNIEor
MAE
AND WORKFORCE
RENTAL HOUSING
23
MULTIFAMILY
MORTGAGE
BUSINESS
From 2007 to the present, FHA has been increasing the
insured also increased from about $1.6 billion in the fiscal year
ending in 2010.
75.0
($ Billions)
Freddie Mac
$41.1
Fannie Mae
50.0
$59.9
25.0
$23.0
$26.9
$16.3
$32.0
$36.6
2006
2007
2008
Calendar Year
$19.4
2009
Source: 2007-2010 Annual Housing Activities Report provided to the Federal Housing Finance Agency (FHFA)
Ginnie
Ginnie Mae
Mae Multifamily
MultifamilyVolume
VolumeFollows
FollowsSuit
Suit
Since the dislocation of the credit markets in 2008 and thanks to increased FHA endorsements, Ginnie Mae has experienced
Since the dislocation of the credit markets in 2008 and thanks to increased FHA endorsements, Ginnie Mae has experienced
a significant increase in issuance, as seen in the following table. Ginnie Mae does not buy or sell multifamily loans but instead
a significantthat
increase
in issuance,
seen in
the following
table.and
Ginnie
Mae does
not buy
or sell multifamily
loans but instead
guarantees
investors
receiveastimely
payment
of interest
principal
for MBS
consisting
of FHA multifamily
loans.
guarantees that investors receive timely payment of interest and principal for MBS consisting of FHA multifamily loans.
More than $9 billion in Ginnie Mae multifamily securities were issued during the first nine months of 2010, compared to $6.7
billion issued in all of last year, for an annualized pace of over $12 billion for this year. However, even with the recent increase
in activity, Ginnie Mae still holds less than 6% of the total mortgage debt outstanding as of the second quarter of 2010.
24
Source: 2007-2010 Annual Housing Activities Report provided to the Federal Housing Finance Agency (FHFA)
66.3%
7.8%
25.5%
0.4%
43.2%
18.1%
37.1%
1.6%
Q309
6.7
5.3
1.4
78.9%
0.0%
21.1%
0.0%
Q409
8.2
4.5
1.0
2.6
55.6%
12.2%
32.2%
0.0%
Q110
7.8
3.2
2.1
2.3
0.1
41.5%
27.2%
30.3%
1.1%
Q210
7.1
2.7
1.2
2.9
0.3
Q310
9.6
4.6
1.2
3.8
-
38.2% 48.4%
16.4% 12.1%
41.2% 39.5%
4.2% 0.0%
FANNIE MAE
WORKFORCE
HOUSING
WHAT
ISAND
FANNIE
MAES
ROLE IN THE
MULTIFAMILY MARKET?
23
The share of multifamily financing from private sources moved
to beReserve,
fairly stable,
in the 16% range. That market share has
tended to be fairly stable, in the 16% range. That
Fannie Mae
20.0%
market
share
has
increased
since
the housing
crisis began.
The
increased
since
the
housing
crisis
began.
The companys
share
Freddie Mac
11.2%
enhancements)
was 20%
as share
of thewas
second
quarter of 2010.
of 2010. Freddie
Macs
11.2%
Freddie Macs share was 11.2%
BanksThrifts
31.6%
CMBS
12.5%
Ginnie Mae
5.6%
25
MULTIFAMILY
WHAT IS FANNIE MAES ROLE
IN THE MULTIFAMILY MARKET?
MORTGAGE
Fannie Maes Multifamily Market Share BUSINESS
Fannie Mae currently provides the largest share of the U.S.
multifamily mortgage financing, and traditionally has been a
the fall of 2007, the CMBS originators retreated, as seen in the
leader in this market.
chart to the right. The CMBS share fell to 12.5% in the second
Prior to 2007, Fannie Maes share of total multifamily
quarter of 2010.
mortgage debt outstanding, as reported by the Federal
Reserve, tended to be fairly stable, in the 16% range. That
market share has increased since the housing crisis began. The
In an effort
to of
promote,
enhance,
and maintain(not
product
companys
share
mortgage
debt outstanding
including
bondstandardization
credit enhancements)
was 20%marketplace,
as of the second
in the multifamily
Fanniequarter
Mae
Freddie Mac
of 2010.
Freddie
Macs share
was 11.2%
created
the Delegated
Underwriting
and Servicing (DUS)
BanksGinnie Mae
5.6%scale up
Americans,Thrifts
from those at the lower end of the income
31.6%
in 1988 for
purchasing
individual
multifamily
The product
share ofline
multifamily
financing
from
private sources
moved
in the
opposite
ThetoCMBS
share
ofMaes
multifamily
loans.
DUS hasdirection.
since evolved
become
Fannie
CMBS
12.5%
mortgage
debt
outstanding
fromis slightly
less
principal
network
wherebyincreased
underwriting
delegated
to than
the
As seen on the chart on page 27, Fannie Mae has financed a
12% in the early 2000s to a high of 16.5% in the third quarter of 2007. With the dislocation of the credit markets starting in
DUS lenders, who retain credit risk over the life of the loan,
wide array of affordable rental units over the past few years.
the fall of 2007, the CMBS originators retreated, as seen in the chart to the right. The CMBS share fell to 12.5% in the second
enabling them to move quickly to arrange financing for
Approximately 87% of multifamily units financed by Fannie
quarter of 2010.
borrowers.
Mae in 2009 were affordable to households at or below
credit
risk overthrough
the lifeFannie
of the Maes
loan, 25-member
enabling them
move quickly and
to arrange
financing
for borrowers.
48% of the
multifamily
units financed were located in
purchased
DUStolender
underserved markets.
are secured by properties with units that are largely
The network
DUS program
has been effective in providing liquidity for affordable
multifamily properties. The majority of loans
affordable
to households
at or below 100%
AMI. network are secured by properties with units that are largely
purchased
through
Fannie earning
Maes 25-member
DUSoflender
MULTIFAMILY DELINQUENCY
COMPARISONS
Fannie
Credit
Quality
Fannie
MaeMae
andand
Credit
Quality
10%
8%
CMBS
(60+)
CMBS (60+)
Fannie (60+)
Banks & Thrifts (90+)
6%
4%
2%
Fannie (60+)
J10
M
-1
-0
9
D
S09
J09
M
-0
M
-0
-0
8
0%
12%
S08
loans
following
thethe
DUS
riskon
on
loans
following
DUSguidelines
guidelinesand
andretains
retains credit
credit risk
14%
J08
Central
to the
DUS
program
thatthe
thelender
lenderunderwrites
underwritesthe
the
Central
to the
DUS
program
is isthat
26
24
As seen in the following charts, Fannie Mae has financed a wide array of affordable rental units over the past few years.
Approximately 87% of multifamily units financed by Fannie Mae in 2009 were affordable to households at or below
the median income of their communities. About 49% of all multifamily units financed by Fannie Mae were affordable to
low- and very-low income households in low-income areas, and 48% of the multifamily units financed were located in
underserved markets.
Units
500,000
400,000
300,000
200,000
2003
2004
2005
11%
9%
8%
2006
2007
2008
2009
100%
90%
9%
31%
80%
70%
60%
46%
49%
44%
10%
42%
31%
50%
45%
9%
11%
44%
40%
30%
20%
40%
10%
33%
41%
43%
2004
2005
34%
33%
37%
37%
2006
2007
2008
2009
0%
2002
2003
25
27
Fannie Mae has several programs designed specifically for this market, including Affordable Delegated Underwriting and
MULTIFAMILY
Servicing (DUS), Fixed-Rate Bond Credit Enhancement
and Forward Commitments which are all designed to aid in the
MORTGAGE
1,602,557
42.5%
1,715,951
45.5%
3,318,508
88.1%
449,884
11.9%
3,768,392 100.0%
Note: Fannie Mae AMI category for loan level affordability determined based on category at year of acquisition.
Source: Fannie Mae, December 31, 2009
Fannie Mae has several programs designed specifically for this market, including Affordable Delegated Underwriting and
Servicing (DUS), Fixed-Rate Bond Credit Enhancement and Forward Commitments which are all designed to aid in the
development and preservation of rental units affordable to households earning 60% of AMI or less.
WHAT
IS THE OUTLOOK FOR THE MULTIFAMILY SECTOR?
The multifamily sector improved in 2010 despite stubbornly
Multifamily Fundamentals Improving
Effective
rents
have now
risen
three
quarters
a row.
In
In
addition,
effective
rents
have
now
risen in
three
quarters
in
aaddition,
row. In concessions,
addition, concessions,
which expressed
are usuallyinexpressed
which are usually
the form
in the form of a month or more of free rent, have been
of a month or more of free rent, have been contracting all year.
contracting all year.
8.0
7.5
7.0
6.5
6.0
1.0
0.5
0.0
quarter
frombasis
8.0%points
in theto
first
quarter.
fell
againand
by -60
7.2%
from 7.8% in the second
8.5
2.0
-0.5
5.5
-1.0
5.0
-1.5
2:
2
Q 005
4:
2
Q 005
2:
2
Q 006
4:
2
Q 006
2:
2
Q 007
4:
2
Q 007
2:
2
Q 008
4:
2
Q 008
2:
2
Q 009
4:
2
Q 009
2:
20
10
fell again by -60 basis points to 7.2% from 7.8% in the second
REIS, Inc. reported that the third quarter, 2010 vacancy rate
9.0
REIS, Inc.and
reported
that thetothird
rate
recovery
is expected
end quarter,
the year2010
on avacancy
strong note.
Source: REIS
According to REIS, the second and third quarters typically are stronger periods, as most households make decisions to move
and lease new apartments during this time.
It appears that rental rates have fallen far enough to warrant an increase in occupancy levels. Other likely reasons for
28 overall improvement in multifamily include landlords experiencing a higher rate of tenant retention and declines in new
the
26
2.0
8.5
8.0
1.0
Healthy
7.5 Long-Term Fundamentals
an increase
occupancy
levels.
Other from
likely 7.8%
reasons
fell
again byin-60
basis points
to 7.2%
in for
the second
quarter
andimprovement
from 8.0% in
first quarter.
the overall
in the
multifamily
include landlords
experiencing
a higher rate
tenant
retention
and declines
In
addition, effective
rentsofhave
now
risen three
quartersin in
-1.0
5.5
reliable
and stable financing for the multifamily sector. Some
anew
row.
In addition,
concessions,
which
are usually
expressed
apartment
completions,
thereby
limiting
the amount
of
in
the form
of a month or more of free rent, have been
competing
supply.
contracting all year.
0.5
0.0
6.5
6.0
-1.5
Q
2:
2
Q 005
4:
2
Q 005
2:
2
Q 006
4:
2
Q 006
2:
2
Q 007
4:
2
Q 007
2:
2
Q 008
4:
2
Q 008
2:
2
Q 009
4:
2
Q 009
2:
20
10
5.0
Source: REIS
According to REIS, the second and third quarters typically are stronger periods, as most households make decisions to move
The lack of new supply is clearly demonstrated in the following
and lease new apartments during this time.
More importantly, demographics are in the multifamily
chart. McGraw-Hill Constructions Dodge Pipeline data shows
It
appears
that rental
rates have projects
fallen far
to warrant
an increase
in occupancy
levels.
likely reasons
for
sectors
favor over
the long-term.
TheOther
Echo Boomers
are
that
new multifamily
construction
thatenough
are currently
the overall improvement in multifamily include landlords experiencing a higher rate of tenant retention and declines in new
starting to form independent households. The prime renting
underway and expected to complete and become available
apartment completions, thereby limiting the amount of competing supply.
age cohort, which consists of individuals aged 20-34 years old,
for new tenants will keep declining over the next 12 months.
The lack of new supply is clearly demonstrated in the following chart. McGraw-Hill Constructions Dodge Pipeline data shows
is expected to grow substantially between 2010 and 2030.
that new multifamily construction projects that are currently underway and expected to complete and become available for
new tenants will keep declining over the next 12 months.
70
Apartments
Thousands
60
Condos
50
40
30
20
10
Q
2*
1*
11
20
20
11
4*
3*
20
10
2*
Q
10
20
20
10
4
Q
20
10
20
09
Q
2
20
09
09
20
20
09
3
20
08
20
08
1
20
08
08
20
20
07
2
20
07
1
Q
20
07
4
20
07
20
06
2
Q
06
20
06
20
20
06
27
29
slowly stabilizing and household formations are up from recently historic low levels.
and stable financing for the multifamily sector. Some former homeowners will turn to renting. In addition, the labor market is
More importantly, demographics are in the multifamily sectors favor over the long-term. The Echo Boomers are starting to
slowly
stabilizing and household formations
are up from recently historic low levels.
MULTIFAMILY
form independent households. The prime MORTGAGE
renting age cohort, which consists of individuals aged 20-34 years old, is expected
More importantly, demographics are in the multifamily sectors favor over the long-term. The Echo Boomers are starting to
BUSINESS
to grow substantially between 2010 and 2030,
as seen below.
form independent households. The prime renting age cohort, which consists of individuals aged 20-34 years old, is expected
to grow substantially between 2010
andRENTER
2030, as seen
below.
U.S.
POPULATION:
70
Millions
Millions
68
70
66
68
64
66
62
64
60
62
58
60
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
56
58
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
56 U.S. Census
Source:
an
theCenter
demand
for rental
housing
the next
Theincrease
Harvard in
Joint
for Housing
Studies
alsoover
projects
The Harvard Joint Center for Housing Studies also projects
decade. In The State of the Nations Housing 2010,
an increase
increase in
housing
over
the the
nextnext
an
in the
thedemand
demandfor
forrental
rental
housing
over
the Center projects that changes in the age distribution of
decade.
In The
The
State
ofNations
the Nations
decade. In
State
of the
HousingHousing
2010, the2010,
Center
households will likely lift demand for rental housing over the
the Center projects that changes in the age distribution of
projects
that changes in the age distribution of households
next
decade.
households will likely lift demand for rental housing over the
will likely lift demand for rental housing over the next decade.
In addition
next
decade. to growth in the prime renting cohort, the Center
projects that the number of older renter households will
In addition to growth in the prime renting cohort, the Center
increase.
Although
figures
vary
depending
onthe
immigration
In addition
to growth
in themay
prime
renting
cohort,
Center
projects that the number of older renter households will
levels, as the adjacent chart shows, not only will the 20-34
projects that the number of older renter households will
increase. Although figures may vary depending on immigration
year old group increase substantially, but the number of
increase.
figures
mayshows,
vary depending
levels,
as Although
the adjacent
chart
not only on
willimmigration
the 20-34
renter households over age 55 will likely rise by more than
year
old
group
increase
substantially,
but
the
levels,
as the
adjacent
chart
shows,
will
the number
20-34
yearof
3
million
in the
coming
decade
asnot
theonly
Baby
Boom
generation
renter households over age 55 will likely rise by more than
old group
substantially,
but the
numberfor
of renter
ages.
Withincrease
the lack
of new supply,
demand
multifamily
3 million in the coming decade as the Baby Boom generation
housing
should
strong
over
coming
decade.
households
overremain
age 55 will
likely
risethe
by more
than
3 million
ages. With the lack of new supply, demand for multifamily
in the coming
the Baby
Boom
generation
ages. With
housing
shoulddecade
remainasstrong
over
the coming
decade.
the lack of
new
supply,
demand for
multifamily housing should
FANNIE
MAE
AND
WORKFORCE
HOUSING
Thousands
Thousands
1,250
750
1,000
500
750
250
5000
250
-250
15-24
25-34
28
30
28
BIBLIOGRAPHY
Belsky and Drew, Taking Stock of the Nations Rental Housing
Challenges and a Half Century of Public Policy Responses, March
2007, Joint Center for Housing Studies of Harvard University.
Meeting Multifamily Housing Finance Needs During and After
the Credit Crisis, January 2009 policy brief, Joint Center for
Housing Studies of Harvard University.
Cohen, Wardrip and Williams, Rental Housing Affordability,
A Review of Current Research, October 2010, The Center for
Housing Policy.
DeCrappeo and Pelletiere, Out of Reach 2010: Renters in the
Great Recession The Crisis Continues, June 2010, The National
Low Income Housing Coalition.
Fowler, Policies and Programs to Preserve Affordable Housing: A
Review of Incentives and Recommendations for Northern Virginia
Prepared for The Alliance for Housing Solutions in July 2006,
George Mason University School of Public Policy Center for
Regional Analysis.
Government-Sponsored Enterprises and Multifamily
Housing Finance: Refocusing Core Functions, October 2010,
Commissioned by the National Housing Conference and
prepared by Recap Real Estate Investment Advisors.
Priced Out: Persistence of the Workforce Housing Gap in the
Washington, D.C., Metro Area, 2009, Urban Land Institute (ULI) J.
Ronald Terwilliger Center for Workforce Housing
Beltway Burden: The Combined Cost of Housing and
Transportation in the Greater Washington DC Metropolitan Area,
2009, Urban Land Institute (ULI) J. Ronald Terwilliger Center for
Workforce Housing.
31
MULTIFAMILY
MORTGAGE
BUSINESS
CONTACTS
Multifamily Economics and Market Research Team
Kim Betancourt
202-752-4656
Kim_Betancourt@fanniemae.com
How this information affects Fannie Mae will depend on many factors.
Although the MRG bases its opinions, analyses, estimates, forecasts and
other views on information it considers reliable, it does not guarantee
Tanya Zahalak
202-752-4944
Tatyana_M_Zahalak@fanniemae.com
32