Meeting Multifamily Housing Finance Needs During and After the Credit Crisis

Harvard Joint Center for Housing Studies

Although multifamily housing finance is not the source of the current credit crisis, it has been disrupted by it. Even though multifamily rental loan performance has held up well, many private sources of multifamily finance have exited the market. Fannie Mae and Freddie Mac, and to a lesser degree the Federal Housing Administration (FHA), have stepped in to make up much of the gap. Thus, the apartment and multifamily development markets are now being heavily supported by federal sources..

With uncertainty about what the reform of Fannie Mae and Freddie Mac will bring, mandatory reductions in their portfolios scheduled for 2010, and questions about the capability of FHA to handle greatly expanded loan volumes, these essential federal supports are at risk. There is a narrow window of opportunity to take steps to ensure the federal government continues to be a liquidity backstop for multifamily property markets before institutional reforms or scheduled portfolio reductions occur. Beyond these immediate liquidity needs, the likely broader reform of the housing finance system provides an additional opportunity to improve government supports for the multifamily finance system of the future..

Multifamily rental housing is important because it meets the housing needs of a range of different types of households. From those who simply find renting more convenient, to those who cannot qualify for a mortgage loan to own a home, to those unprepared to take on the risks of owning a home, to those who have just moved to an area or plan to move again soon, to those who seek the services that are more economically provided in higher density settings (such as seniors and others with disabilities), rental housing is a crucial option.