Multifamily rental housing accounts for a sizable share of America's housing stock, with an estimated 15.2 .... These ty
FIRST QUARTER 2011
FANNIE MAE AND
WORKFORCE RENTAL HOUSING
EXECUTIVE SUMMARY Multifamily rental housing accounts for a sizable share of America’s housing stock,
TABLE OF CONTENTS 1
Executive Summary
5
What is Affordable Rental Housing?
future market conditions – including the ongoing economic and housing recovery,
9
Why is it Important to Preserve Subsidized Affordable Rentals?
demographic forces and a change in attitudes towards homeownership versus
12 How Much Rental Housing is There?
renting – point to a growing need for rental housing, especially affordable rentals.
13 How Affordable is Multifamily Rental Housing?
with an estimated 15.2 million occupied multifamily rental units. Current and
20 Is There Enough Rental Housing to Satisfy Demand?
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
21 What is the State of Lending in the Multifamily Sector Today?
mortgage-backed securities and providing a credit guarantee on the securities.
25 What is Fannie Mae’s Role in the Multifamily Market?
The vast majority – roughly 90 percent – of Fannie Mae’s multifamily housing
28 What is the Outlook for the Multifamily Sector?
finance currently supports rental housing that is affordable to households earning at their area’s median income level. Through this function, Fannie Mae has continued to provide a reliable, safe, and sustainable source of financing to meet the nation’s rental housing needs.
31 Bibliography 32 Contacts
MULTIFAMILY MORTGAGE BUSINESS There are six key points regarding the multifamily sector and
»
workforce rental housing:
Subsidized Affordable Housing consists of rental properties that are privately owned but receive some form of government-sponsored subsidy in return for
1. MOST MULTIFAMILY HOUSING IS “AFFORDABLE”
keeping rents affordable to those at the lowest-income
According to data from the 2009 American Housing Survey
levels. These properties rely on a mix of public subsidy
by the U.S. Department of Housing and Urban Development
and private financing, and typically support households
(HUD), about 14 million of the estimated 17 million rental
earning between 30% and 80% of AMI.
housing units across the nation are considered affordable to
»
Conventional Market Rate rental housing is also
people earning less than their area’s median income (AMI) –
privately owned but charges rents consistent with the
where rent payments comprise no more than 30% of income.
property amenities as well as local housing market prices and conditions. Typically, these property owners do
A subset of affordable rental housing is known as “workforce”
not receive direct subsidies. Conventional market-rate
rental housing, defined by the Urban Land Institute (ULI) as
properties may offer rental housing that is affordable to
affordable to households earning 60% to 100% of AMI.
workforce households.
In addition, there are different levels of rental affordability.
2. MOST MULTIFAMILY PROPERTIES OFFER A MIX OF
For instance, a rental unit may be affordable to a household
RENTAL UNITS AND RENT LEVELS
earning 100% of AMI, but not affordable to one earning 50%
A common misperception is that an entire apartment building
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
With these distinctions, multifamily housing is often classified
reality, apartment buildings frequently offer a variety of units
into three distinct categories: Public Housing, Subsidized
with different rent levels – some tenants may pay market-rate
Affordable Housing, and Conventional Market Rate Housing.
rents while their neighbors pay below-market or government-
»
Public Housing consists of rental housing properties
subsidized rents.
that are both publicly funded and publicly owned and managed by local housing authorities. It is financed by
The mix of rent levels is effective in leveraging public
the federal government and typically serves the lowest
subsidies while increasing economic integration and limiting
income households – those earning less than 30% of AMI.
the concentration of poverty. For example, 70% of all the multifamily properties financed by Fannie Mae offer rental units
2
affordable to various levels of AMI, with the remaining 30% of
during the housing run-up. Rental housing saw a rapid influx
the properties offering units affordable to just one AMI level.
of investment capital, decreased affordability for tenants, increased debt by owners, and a dramatic expansion of
3. A SHORTAGE OF AFFORDABLE AND WORKFORCE
financing structures created for securities that were sold to
RENTAL HOUSING PERSISTS
global investors.
Rental housing affordable to lower-income households increasingly is in short supply, especially in certain more high-
The housing market collapse reversed this dynamic and
density metropolitan areas, such as Washington, DC and New
caused a rapid withdrawal of private investment capital from
York City.
the multifamily market. Since the housing crisis began, new multifamily commercial mortgage-backed security (CMBS)
According to the HUD 2009 American Housing Survey report:
issuances have practically ceased and other institutional lenders,
»
The share of occupied rental units affordable to
such as life insurers and commercial banks, have severely
households earning 80% to 100% of AMI increased slightly
curtailed their investment in financing multifamily debt. Fannie
to 15.5% in 2009 from 14.9% in 2007.
Mae, Freddie Mac, and the Federal Housing Administration
The share of rental units affordable to households earning
have stepped in to fill the void and have become the primary
30% to 50% of AMI fell to 25.9% from 26.4%.
multifamily financing options available today.
»
»
The share of rental units affordable to households earning less than 30% of AMI fell to 15.5% from 17.2%.
The decline in the share of affordable rentals has been occurring for at least a decade. According to the Harvard Joint Center for Housing Studies 2010 State of the Nation’s Housing report, the number of units affordable to households earning a
Roughly 90 percent of Fannie Mae’s
full-time minimum wage declined by 15.6% from 1997 to 2007.
multifamily housing finance currently supports rental housing that is
4. THE FINANCIAL CRISIS PUSHED MOST MULTIFAMILY HOUSING INVESTORS OUT OF THE MARKET Parts of the multifamily mortgage sector experienced the
affordable to households earning at their area’s median income level.
same dynamic as the single-family home-purchase sector
FANNIE MAE AND WORKFORCE RENTAL HOUSING
3
MULTIFAMILY MORTGAGE BUSINESS 5. FANNIE MAE’S MULTIFAMILY BUSINESS – MARKET
in the wake of the currency crisis in 1998 and again after 9/11
SHARE AND CREDIT PROFILE
and the 2001 recession, Fannie Mae and Freddie Mac stepped
As Fannie Mae helped to fill the multifamily housing
up portfolio purchases and guarantees of multifamily debt.”
financing void, the company’s share of new multifamily securities issued was nearly 50%, or roughly $10 billion,
Before and during the financial crisis, Fannie Mae has
as of the third quarter of 2010. The company’s share of
provided financing for nearly all segments of the multifamily
overall multifamily mortgage debt outstanding stood at
rental housing market while containing credit losses. By
20%, or $168.9 billion, as of the second quarter of 2010,
guaranteeing multifamily loans in securities issuances and
according to Federal Reserve data. (In comparison, the
providing credit enhancement on multifamily housing bonds,
CMBS share was 12.5% and Freddie Mac’s was 11.2%.)
the company has consistently supported both the subsidized affordable and workforce rental housing markets to create and
The credit profile of Fannie Mae’s multifamily book of business
preserve affordable rental housing.
is significantly stronger than the rest of the commercial markets. For example, Fannie Mae’s multifamily serious
6. MULTIFAMILY FUNDAMENTALS APPEAR HEALTHY
delinquency rate (60 days behind on payments or more)
U.S. housing demand is expected to continue growing.
was just 0.80%, compared with the CMBS rate of 12%, as
Anticipated population growth due to immigration and
of the second quarter of 2010. The credit performance of
positive birth rates, coupled with demographic trends, is
Fannie Mae’s multifamily book of business is attributable to
expected to increase household formation. Compared to
the company’s multifamily business model, which requires
past trends, future household growth is expected to tip more
borrowers to maintain a certain amount of equity and lenders
toward renting, underscoring the need for reliable and stable
to share the risk of loss on each loan. The company also has
financing for the multifamily sector, for several reasons:
held to strong multifamily underwriting guidelines. »
The “Echo Boomers” – offspring of Baby Boomers – are
Fannie Mae’s multifamily business model and activities reflect
forming independent households. The prime renting age
the company’s role of remaining in the market through all
cohort, consisting of individuals aged 20 – 34 years, is
housing and economic cycles, even when private-market
expected to grow substantially between 2010 and 2030.
participants withdraw. The company expanded its multifamily
»
Consumer attitudes toward homeownership are changing as a
activity during the dislocation of the credit markets starting in
result of the housing crisis. According to Fannie Mae’s National
late 2007, and as the Harvard Joint Center report noted, “Both
Housing Surveys in 2010, while a majority of Americans
4
»
still want to own homes, a significant number recognize they
whether there is enough rental housing to satisfy demand,
may have to wait longer than previously expected.
what the state of lending in the multifamily market is today,
In response to the housing crisis, mortgage underwriting
and what role Fannie Mae plays in the multifamily rental
standards have been strengthened to ensure long-term
housing sector.
success and sustainability of the borrowers and the loans, reducing the number of households that may qualify
Multifamily rental housing accounts for a significant amount
to obtain a mortgage. Moreover, many borrowers with
of the affordable housing available today. There are three
unsustainable loans who lost, sold, or relinquished their
primary segments of the multifamily market: Public Housing,
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
types of multifamily housing can be considered affordable as
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
demonstrated in the chart below.
lending in the multifamily market is today, and what role Fannie Mae plays in the multifamily rental housing sector.
PURPOSE OF THIS PAPER
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.
of these issues and are based in large part on Fannie Mae’s Public Housing
This is the most well-known type of affordable multifamily
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.
Government-Issued Incentives and Subsidies
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
ESTIMATED 14.0 MILLION MULTIFAMILY AFFORDABLE MARKET SEGMENTED BY UNSUBSIDIZED UNITS VERSUS SUBSIDIZED UNITS
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
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
the multifamily rental housing Tenant Voucher 2.2M units (Estimated)
sector, this paper discusses how
Public Housing 1.2M units (Estimated)
affordable housing is defined, how much rental housing is available, Source: HUD report: "A Picture of Subsidized Households - 2008" and the 2009 American Housing Survey.
FANNIE MAE AND WORKFORCE HOUSING
FANNIE MAE AND WORKFORCE RENTAL HOUSING
55
MULTIFAMILY MORTGAGE BUSINESS Government-Issued Incentives and Subsidies
public subsidies in exchange for affordability restrictions.
One common, yet narrow, definition for affordable multifamily
Assisted Housing can sometimes be referred to as
is a unit in a multifamily property that receives some form
Subsidized Affordable Multifamily Housing. Public
of government subsidy, such as a rental subsidy from HUD.
subsidies include:
These types of subsidies can include federal programs such
• Capital Financing – Low-interest-rate mortgages, mortgage
as Housing Choice vouchers issued to tenants, low-income
insurance, tax-exempt bond financing, loan guarantees,
housing tax credits issued to developers, or state or local
and pre-development financing to reduce costs.
programs such as tax abatements and subordinate financing.
• Low-Income Housing Tax Credits (LIHTC) – This program provides developers with tax credits that can be sold to
The government-issued incentives and subsidies can be
reduce the amount of debt that must be borrowed to
separated into two primary categories of subsidy:
finance a multifamily building. • Rental Subsidies – HUD and U.S. Department of
1.
Housing Choice Vouchers: Affordable monthly rent
Agriculture (USDA) Rural Development provide rental
subsidies provided to individual tenants who rent
subsidies, such as project-based Section 8 rental
privately-owned housing. The voucher pays the difference
assistance, to property owners to ensure that some or
between market rent in a locality and the rent that is
all low income tenants pay no more than 30% of their
affordable to the individual, so that the individual pays no
income for rent.
more than 30% of monthly income towards rent. 2.
• Tax Abatement – Tax reduction or elimination of some
Assisted Housing/Subsidized Affordable Multifamily
or all of the state or local property taxes for rental
Housing: Privately owned rental housing that receives
housing with certain ownership structures, servicing low- and moderate-income renters.
Fannie Mae supports the affordable
• Federal Grant Programs – The Community Development
multifamily market by financing
Block Grant (CDBG) and the Home Investment
both conventional market rate
Partnership (HOME) programs are two leading
rental properties and government subsidized rental properties that are privately owned.
6
examples. The programs provide block grants to local governments for the construction and renovation of rental housing properties.
Note that subsidy programs can be grouped into “supply” subsidies, which subsidize the development of affordable housing, and “demand” subsidies, which subsidize the rent. For example, Public Housing and the
these unsubsidized units form the vast majority of the multifamily affordable sector.
LIHTC program are examples of supply-side subsidies while the Housing Choice Voucher program is an example of a demand-side subsidy.
Workforce Rental Housing and Gaps Workforce rental housing is a subset of all affordable rental
Workforce RentalRate Housing andHousing Gaps Conventional Market Rental
housing. As defined by ULI, workforce households are those
Workforce rental housing is a subset of all affordable rental housing. As defined by ULI, workforce households are those
In contrast to subsidized affordable rentals, conventional earning 60% to 100% of AMI.
earning 60% to 100% of AMI.
market-rate rental housing is usually owned by private
According to ULI’s J. Ronald Terwilliger Center for Workforce Housing, a workforce housing gap persists in high-cost areas
individuals entities charge rents consistent the According to ULI’s 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
Housing, a workforce housing gap persists in high-cost areas that
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
no public assistance. As the diagram on the page 5 shows, more than 30% of income on rent.
San Francisco, and Boston.
2010 TWO-BEDROOM HOUSING WAGE Represents the hourly wage that a household must earn (working 40 hours a week, 52 weeks a year) in order to afford the Fair Market Rent for a two-bedroom unit at 30% of income.
Housing Wage
Source: National Low Income Housing Coalition • Out of Reach 2010 – June Update
FANNIE MAE AND WORKFORCE RENTAL HOUSING
7
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.
Affordability Is Determined Relative to AMI The definition of “affordability” in the multifamily affordable sector is based on the AMI in a locality – the midpoint household income for a metropolitan areaRelative or a non-metropolitan county, as calculated each year by HUD. Affordability Is Determined to AMI The definition of “affordability” in the multifamily affordable sector is based on the AMI in a locality – the midpoint household income for a metropolitan area or a non-metropolitan county, as calculated each year by HUD. A unit of rental housing is considered affordable to an income group if the rent is no more than 30% of the maximum AMI for the Aincome unit of group. rental housing is considered affordable to angroup, income group rent isthen no more thancould 30%not of the maximum for For example, for the Very Low Income if the AMIifisthe $44,000, the rent exceed $550 a AMI month the For example, for the Very Low Income group,provides if the AMI is $44,000, forincome the unitgroup. to be considered affordable. The following illustration other examples:then the rent could not exceed $550 a month for the unit to be considered affordable. The following illustration provides other examples:
POTENTIAL INCOME GROUPS BASED ON AREA MEDIAN INCOME (AMI) Income ≤ 30% of AMI [Extremely Low Income (ELI)]
Rent Charged for Illustrative Purposes Apartment 1: $300 per month
30% AMI < Income ≤ 50% of AMI [Very Low Income (VLI)]
Apartment 2: $550 per month
50% AMI< Income ≤ 60% of AMI
Apartment 3: $750 per month
60% AMI< Income ≤ 100% of AMI Workforce Housing
Apartment 4: $1,400 per month Apartment 5: $5,000 / month
Affordable Rental Housing Sector
Not Low Income (Income greater than 100% of AMI)
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
8
income households.
WHY IS IT IMPORTANT TO PRESERVE SUBSIDIZED AFFORDABLE RENTALS? Subsidized Affordable Multifamily Definition
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
Subsidized Affordable Multifamily Participants
generally impose these restrictions, property owners loan in portfolio and taking both credit and interest-rate Entities providing financing for Subsidized Affordable multifamily properties assume credit risk either by providing credit sometimes voluntarily record these restrictions in an risk on the asset. The following diagram shows the range of enhancement to the financing asset or by holding the loan in portfolio and taking both credit and interest-rate risk on the asset. attempt to preserve multifamily affordable for for loan activities possibilities loan that by may be undertaken The following diagram shows the range ofhousing possibilities thatfor may beactivities undertaken these entities. by the future. In essence, subsidized affordable housing these entities. Among the participating entities are Fannie Mae, Freddie Mac, FHA, and state housing finance agencies. Many large regional is privately owned rental housing that receives public lenders also originate loans on properties with rent restrictions, but in the current lending environment, these loans are subsidies inprimarily exchangefor forCommunity affordabilityReinvestment restrictions. Act (CRA) credit. Among the participating entities are Fannie Mae, Freddie originated Mac, FHA, and state housing finance agencies. Many large Other direct lenders include nonprofit entities such as the Massachusetts Housing Partnership, mission-driven entities such Subsidized housing provides Preservation a significant amount lenders also originate loans propertiesCommunity with rent as the NewAffordable York-based Community Corporationregional and lender consortia such as theonCalifornia
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.
LOAN ACTIVITIES UNDERTAKEN BY SUBSIDIZED AFFORDABLE MARKET PARTICIPANTS Affordable Multifamily Loan (at origination) Secondary Mortgage Market • Can credit enhance - Loss sharing - Bond credit enhancement • Can purchase loan from lender - Immediate - Forward • Can retain mortgages or securitize
Investors: Purchase securities (generally take interest rate risk, but not credit risk)
Stays in Lender Portfolio • Some housing finance agencies • Some nonprofit lenders • Commercial lenders For Community Reinvestment Act (CRA) Credit
FANNIE MAE AND WORKFORCE HOUSING
FANNIE MAE AND WORKFORCE RENTAL HOUSING
9
9
MULTIFAMILY MORTGAGE BUSINESS loans are originated primarily for Community Reinvestment
Units affordable to the lowest-income levels, below 30%
Act (CRA) credit.
or even 50% of AMI, can be challenging to build or even rehabilitate using mortgage debt financing (e.g., loans) alone.
Other direct lenders include nonprofit entities such as the
Debt-only financing for construction of a new multifamily
Massachusetts Housing Partnership, mission-driven entities
property usually leads to above-average market-rate rents
such as the New York-based Community Preservation
to cover the cost of the financing. Extensive subsidies are
Corporation and lender consortia such as the California
required to minimize this resulting pass-along cost to tenants.
Community Reinvestment Corporation are tasked specifically with developing and preserving affordable housing. Larger
The primary subsidy program for stimulating the construction
entities tend to keep loans in portfolio, although they may sell
and rehabilitation of rental housing affordable to low-income
a pool at a later date.
households is the LIHTC program enacted in 1986. The program offers tax credits to developers that they can be sold
Subsidies Reduce the Amount of Debt on a
to investors before construction begins. The cash from the
Multifamily Property, Making Rents Affordable
sale of the tax credits reduces the amount of debt that must
Multifamily housing has the ability to deliver large amounts of
be borrowed for construction. As a result, the rents charged,
affordable housing since multifamily apartment buildings or
which must also be used to pay down debt, can be offered at a
other multi-unit dwellings can house more families on a parcel
discount to average market-rate rents.
of land than a single-family development. In its January 2009 policy brief, Meeting Multifamily Housing Finance Needs During and After the Credit Crisis, the Harvard
Multifamily housing has the ability to
Joint Center for Housing Studies provides a useful example:
deliver large amounts of affordable
For a multifamily development property to offer rental
housing since multifamily apartment
units affordable to a household earning at least 60% of AMI,
buildings or other multi-unit
then tax credits worth about 70% of the net present value of the property must be issued. In other words, it takes a
dwellings can house more families
large amount of subsidies to help finance and maintain the
on a parcel of land than a single-
availability of these types of affordable rental units.
family development.
10
Housing Vouchers Help Very Low Income
households which qualify for housing vouchers, according to
Households
its 2008 report, A Picture of Subsidized Households.
Another form of housing subsidy is the federal rental voucher or certificate. To enable tenants to pay no more than 30% of
Fannie Mae Participates in the Subsidized
their household income on rent, the federal government offers
Affordable Market and Preservation
the Housing Choice Voucher program. The voucher pays the
While focusing primarily on workforce rental housing, Fannie
difference between the 30% of the household income and the
Mae is also active in the Subsidized Affordable market and the
fair market rent amount for that local area. Tenants must apply
preservation of this housing. This can be a challenging market
for these vouchers and must meet strict income requirements.
to serve due to the layering of subsidies necessary to make
The average voucher amounts to around $6,600 annually.
rents affordable to the lowest income households. As a result, Fannie Mae has several programs designed specifically for this
According to the 2008 State Housing Finance Factbook
market. The company’s Affordable Delegated Underwriting
produced by the National Council of State Housing Finance
and Servicing (DUS®) program, Fixed-Rate Bond Credit
Agencies, as many as 20% of households living in rental units
Enhancement program, and Forward Commitments program
generated by the LIHTC program still require vouchers so that
are designed to aid in the development and preservation of
the household is paying no more than 30% of its income for
rental units affordable to households earning 60% of AMI or
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.
FANNIE MAE AND WORKFORCE RENTAL HOUSING
11
MULTIFAMILY MORTGAGE BUSINESS
HOW MUCH RENTAL HOUSING IS THERE?
Multifamily properties (defined as having five or more
»
units) with about 15.2 million occupied units.
As shown in the following table, according to the HUD 2009 American Housing Survey report, there are a total estimated
Fannie Mae has provided financing on nearly four million of
35.4 million occupied rental housing units in the U.S. This
the estimated total 15.2 million occupied multifamily units
HOW MUCH RENTAL HOUSING IS THERE?
total includes the three most prevalent occupied housingHOUSING in the That is about one-quarter of the nation’s total HOW MUCH RENTAL ISU.S. THERE? As shown in the following table, according to the HUD 2009 American Housing Survey report, there are a total estimated As shown in the following table, according to the HUD 2009 American Housing Survey report, there are a total estimated structures: estimated multifamily rental units. As seen in the following 35.4 million occupied rental units inrental the housing U.S. This the three most prevalent occupied housing structures: 35.4housing million occupied unitstotal in theincludes U.S. This total includes the three most prevalent occupied housing structures: »
Single-family properties (one to four units) with about table, the majority of these units are affordable to households Single-family (one to four units) aboutoccupied 18.8 millionunits; occupied units; • Single-family properties• (one to fourproperties units) with about 18.8with million 18.8 million occupied units; with incomes between 50% and 100% of AMI. • Manufactured housing with about 1.4 million occupied units; and
»
• Manufactured housing with about 1.4 million occupied units; and Manufactured housing with about 1.4 million occupied
• 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
Income ≤ 30% of AMI
Estimated Single Family Rental (1-4 units) (C)
1
Estimated 2.5M Estimated 3.1MEstimated Multifamily Multifamily Manufactured 3.1M 2.5M Rental Rental (5+ units) 4.0M Housing Units 5.2M (5+units) (C) (C) 8.3M 6.5M
50%< 3.1M Income ≤ 60% of AMI
3.2M 2.5M
60%< Income ≤ 80% of AMI
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 ( 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 market’s 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 nation’s 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 market’s 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
30%< Income ≤ 50% of AMI
5.2M
8.3M 80%< Income ≤ 100% of AMI
4.0M
1.6M
15.7M
6.5M
0.6M
9.5M 0.4M
Survey (AHS) Data for occupied units; Estimated Total Source: Data provided by HUD based on 1 Cumulative (C) Column represents Rental compilation of 2009 American Housing (C) cumulative affordable units. For Survey (AHS) Dataif aforunit occupied units; instance, is affordable at 0.4M Estimated 6.0M Extremely Low Income, i.e. affordable 0.4MTotal 6.0M to income
