Low and moderate income households face a growing challenge in their search for affordable rental housing, including workers in such high-cost, high-employment areas as Washington, D.C., San Francisco, and Boston.
As the U.S. works through economic and housing recovery, the need for rental housing – especially rentals affordable to America’s working families – is growing while the supply of housing to meet that demand is shrinking.
Fannie Mae is working to address this need. Our mission is to provide liquidity to both the multifamily and single-family markets. This is especially important during difficult economic conditions when other sources of liquidity leave the market.
Many factors are driving the demand for affordable rentals. In a seven-year period from 2004 to 2011, the rate of homeownership dropped from 69 percent to 66 percent according to Census figures. As homeownership declines, more households are renting, including the growing population of seniors between 65 and 75 years old and the significant growth in households of those older than 75 years. Many first-time buyers are delaying a home purchase, and thus are likely to rent for a longer period.
Rental demand is not likely to diminish soon. Census projections indicate that we can expect between 12.5 million and 14.8 million new households to form by 2020. Those between 20 to 34 years old, who are most likely to rent, represent a significant portion of this increase.
As rental demand escalates, the number of housing units that minimum wage households can afford has fallen, declining by nearly 16 percent from 1997 to 2007, according to the 2010 State of the Nation’s Housing report, published by the Harvard Joint Center for Housing Studies.
Where do these apartments go? In many cases, older, lower-rent buildings are being demolished or abandoned, or they are converted into higher-end rentals or condos.
The production of new affordable rentals is not keeping pace with the loss of older units. The housing crisis has contributed to tighter credit and undercut investor demand for commercial mortgage-backed securities, the primary financing vehicle for rental housing. Without a strong market for these securities, financing to build and preserve affordable rental housing is scarce.
Fannie Mae is a leader in the multifamily mortgage market. As of June 30, 2011, we owned or guaranteed approximately 20 percent of the outstanding debt on multifamily properties. Over 85 percent of the multifamily units we financed during 2009 and 2010 were affordable to families earning at or below their area’s median income level.
Fannie Mae also has programs designed specifically to support the market for subsidized affordable rentals, which are generally targeted to households earning below 60 percent of an area’s median income.
More about how we support the affordable workforce rental housing market is in our white paper FannieMae and Workforce Rental Housing.
Vice President for Affordable Multifamily Lending
December 8, 2011