GSEs aim to expand nation’s stock of affordable multifamily housing


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Ask a Lender
February 17, 2016 | Updated September 7, 2017


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Key Points

Financing affordable multifamily housing

  • As part of their mission, the GSEs purchase loans on properties offering affordable rents.
  • Loan purchases involve a range of affordable rentals, not just Section 8 subsidized housing.
  • GSE affordability definitions are based on local income levels.
  • GSEs and USDA also offer incentives and programs to expand the availability of affordable multifamily housing.

If you're trying to finance the purchase or development of what the government defines as affordable apartment rentals, Fannie Mae and Freddie Mac will provide some help — through ongoing loan purchases as well as other financing programs and incentives intended specifically for low-income multifamily housing.

Congress requires these government-sponsored enterprises (GSEs) to set loan-purchase goals for affordable multifamily development and exempts that spending from caps established for overall multifamily loan purchases There are other housing types exempted from the caps on GSE activity also, including manufactured housing and small apartment complexes.

Income-based standard

As a mortgage holder, it's relatively easy to participate in GSE-supported affordable housing efforts. The apartments you're financing do not have to be in a rent-controlled or Section 8 subsidized-housing development to qualify as affordable. Instead, GSE affordability standards require that rents be affordable to families making less than an area's median income, and they put a premium on 5- to 50-unit apartments in which some portion of the units offer affordable rents.

Under the GSEs definition, an apartment's rent is judged affordable if tenants are able to live there spending 30 percent or less of their income on rent. In most areas, apartments that rent at rates affordable to those making 60 percent of an area's median income (AMI) meet the GSEs affordability standards. In some markets with expensive housing, the level rises to rents that are affordable to those making 80 percent of an area's median income.

The AMI calculations are maintained by the U.S. Department of Housing and Urban Development (HUD), and are listed on the agency's website.

The GSEs support loans made by private lending institutions by buying the loans and using them to back securities sold to investors.

Low-income housing loans

The GSEs do offer financing incentives and programs designed specifically for low-income multifamily transactions. Fannie and Freddie back specific types of multifamily loans, including those for properties that are eligible for low-income housing tax credits, properties supported by U.S. Department of Housing and Urban Development Section 8 renters' subsidies, and multifamily developments in need of rehabilitation. On its website, Freddie Mac includes a list of affordable housing loan programs targeted for multifamily properties. Those loans, like all loans securitized by the GSEs, are originated by private lenders. A list of lenders specializing in low-income multifamily financing is included on Fannie Mae's website.

The U.S. Department of Agriculture offers a loan program of its own for support of low-income multifamily housing. The program, outlined on the department's website, is intended to provide apartment rentals for low-income, elderly or disabled individuals and families in eligible rural areas.


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