Mortgage financing giant Freddie Mac has announced it will offer low-cost loans to multifamily property owners who keep their buildings affordable to middle-class families. Landlords will receive lower interest rates if they agree to make the majority of their units affordable for tenants who earn 80 percent or less of the area’s median income. The units also must remain affordable for the term of the loan, which typically spans about a decade.
“The supply of workforce housing is rapidly declining,” says David Brickman, an executive vice president at Freddie Mac and head of its multifamily division. “There is an urgent need to preserve what’s there and find ways that you can effectively create more.”
To launch the program, Freddie will back $500 million in loans to the Bridge Investment Group, which is a landlord with a portfolio of about 30,000 apartments around the country. Bridge has pinpointed 38 metro areas across the country for investment. “Players have raised rents to justify returns, and many residents have been priced out” of central areas, Inna Khidekel, managing director of the capital markets group at the Bridge Investment Group, told
The Wall Street Journal. A growing number of suburban areas are at risk of no longer being affordable, too. More than 60 percent of renters in the U.S. earn less than 80 percent of their area’s median income, according to Bridge.
Freddie Mac’s initiative will help the GSE meet a mandate from the Federal Housing Finance Agency to grow its lending arm to more underserved communities. Freddie backs loans for purchases of existing buildings; it does not make development loans.
About two-thirds of the $73 billion of multifamily loans that Freddie purchased in 2017 went to apartments affordable to households earning less than 80 percent of their area’s median income, the
Journal reports. However, that is down from three-quarters of its loans that were allocated to such units in 2013.
Source: “Freddie Mac Offers Cheap Loans to Affordable-Housing Landlords,” The Wall Street Journal (May 3, 2018) [Log-in required.]
