Enhancing Access to Capital for Smaller Unsubsidized Multifamily Rental Properties

William Apgar, Shekar Narasimhan

RR07-8: Nearly one-fifth of the rental housing stock is in smaller, multifamily apartment buildings with between 5 and 49 units. Even though relatively large shares of these units are occupied by lower-income families, the overwhelming majority is unsubsidized, and many are at risk of loss due to disinvestment, and/or conversion to higher-income occupancy. Unfortunately, little is known about the property ownership, management, and financial condition of this housing. What is known suggests that the scale and value of these properties makes it difficult for the current owners to achieve economies in property management and to absorb the high fixed cost of gaining access to debt or equity capital needed to operate, maintain and preserve these units. Indeed, in a paper prepared for the Millennial Housing Commission, the Housing Finance Task Force noted that “financing for small multifamily properties (defined here as 5 to 49 unit properties) is one of the most significant gaps in the mortgage industry…”