Recently, financing giant Fannie Mae announced a new policy designed to help address the national affordable housing crisis. We look at what they’re changing and what they say it will do, in today’s edition of the BAM Blog…
Although Freddie Mac may have had more loans last year, Fannie Mae is also a heavy hitter in multifamily financing. That’s why the announcement early this month may make a big difference for the millions seeking affordable housing options. Per a press release on the Fannie Mae news page, the finance company announced they would be increasing the small loan limit from $3 million (or less) nationwide and $5 million (or less) in high-cost markets to $6 million. The press release notes that the change would be effective immediately and the higher loan amount would be available nationwide.
The press release also quotes Fannie Mae VP, Multifamily Customer Engagement, Michael Winters, as saying that Fannie Mae believes increasing the small loan limit will help address the affordable/workforce housing shortage that the industry is dealing with. He also said it would provide more capital and liquidity to the small loan marketplace.
The Fannie Mae press piece further states that they have added new pricing and underwriting benefits to specific markets, like: Denver, Miami, Minneapolis, and Salt Lake. These cities have seen economic and credit performance making them eligible for these changes.
As we’ve written before, although there is new inventory in development and being delivered in markets across the country, the majority of new inventory is Class A, or luxury properties. There remains a shortage of workforce housing; this asset class is in high demand. According to some stats, multifamily assets make up the brunt of where this demographic call home, which helps ensure consistent demand. With factors like rising costs for first-time homes, the workforce multifamily assets remain a popular alternative to home buying.
Fannie Mae isn’t the only one making efforts to address the housing situation. As we wrote about in this article, Freddie Mac has also rolled out new non-LIHTC forwards. Freddie designed the product to help with workforce housing supply by creating available funds for both construction or major renovation. It’s offered to both profits and non-profits, offers up to 80% leverage for eligible properties, and can hedge interest rate risk, among other features. Freddie had publicly announced a major project underway using the new financing: a mixed-use workforce housing project in Massachusetts. The project was a massive renovation of an old chocolate factory and used a $26.7 million dollar loan, 36-month forward that converts to a fixed-rate 10-year loan. The planned units will meet Freddie’s rental rate and income requirements, ensuring workforce housing availability.
Now, with Fannie Mae increasing the small loan limit and providing more available funding to the multifamily market, affordable housing will have another option that will hopefully lead to increased inventory. Different markets are taking steps to increase workforce housing, and lenders like Fannie and Freddie are playing an important role in trying to improve the affordable housing shortage.