Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) issued a final rule last week establishing multifamily housing goals for Fannie Mae and Freddie Mac over the next two years.
Multifamily housing goals for 2023 and 2024 will be based on a new percentage-based methodology rather than an absolute number. The change to a percentage was part of a proposed rule change issued in August.
The new goals are:
61 percent of all goal-eligible units in multifamily properties financed by mortgages purchased by the enterprises must be affordable to low-income families, defined as families with incomes less than or equal to 80 percent of area median income (AMI).
12 percent of all goal-eligible units in multifamily properties must be affordable to very low income families, defined as those with incomes less than or equal to 50 percent AMI.
2.5 percent of all goal-eligible units in all multifamily properties financed by mortgages purchased by the enterprises must be units in small multifamily properties affordable to low-income families. Small multifamily properties are defined as those with between five and 50 units.
To meet these goals, an enterprise must purchase mortgages on multifamily properties with rental units affordable to families in each category. FHFA said it will continue to monitor the enterprises’ annual performance against these benchmark levels, as well as trends in the multifamily market.
FHFA said the housing goals ensure the enterprises responsibly promote equitable access to affordable housing that reaches low- and very low-income families in multifamily rental properties across the country.
“The multifamily housing goals are one method FHFA employs to ensure the enterprises remain focused on affordable segments of the market, consistent with FHFA’s statutory duty to promote affordability nationwide,” said FHFA Director Sandra L. Thompson. “The new methodology will make the multifamily housing goals more responsive to market conditions and better position the Enterprises to fulfill their affordable housing mission requirements each year.”
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 requires FHFA to establish annual housing goals for mortgages purchased by the enterprises.
FHFA said it would adjust the goals if changes in market conditions make it difficult to meet them in a safe manner.
In the final rule document, FHFA said the change to a percentage approach and the benchmarks selected were generally supported by parties that commented on the proposed rule. However, a few commenters urged the agency to raise the benchmark percentages. One argument was that the benchmarks should be in line with or higher than the enterprises’ recent performance. Another commenter said the goals should be higher given the current demand for affordable housing to “ensure that the Enterprises fulfill their countercyclical role during economic downturns.”
The housing goals were published about a month after FHFA established multifamily loan purchase caps for 2023 for Fannie and Freddie.
The caps for next year will be $75 billion for each enterprise. FHFA said the caps reflect an anticipated contraction of the multifamily originations market in 2023.
FHFA will require that at least 50 percent of the enterprises’ multifamily business be mission-driven affordable housing.
“The 2023 multifamily loan caps, coupled with a new mission-driven category for workforce housing properties, will continue to ensure that the enterprises have a strong commitment to addressing the need for affordable housing,” said Thompson. “The new workforce housing category will provide incentives for conventional borrowers to maintain rents at affordable levels for extended periods of time.”
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
