Understanding the MultiFamily Mortgage Market
Single-family mortgages dominate discussions of the mortgage market and, especially, the housing government-sponsored enterprises (GSEs). But the GSEs have a significant history with the multifamily sector as well. As a paper commissioned for the National Housing Council put it:
The debate on the future Fannie Mae and Freddie Mac (the “Government-Sponsored Enterprises” or “GSEs”) has focused principally on the role of these entities in financing single-family homeownership. However, the GSEs have also played a major role in financing multifamily housing, including especially multifamily rental housing….The GSEs’ proper role deserves evaluation in its own right, apart from any evaluation of the GSEs’ activities in single-family housing.
As it stands, multifamily rental housing accounts for 15 million (13 percent of) households and 43 percent of renters. However, as cities increasingly become the focal points of the country’s economic growth potential, multifamily housing will naturally become a centerpiece of the economic landscape of the 21st century. From a policy perspective, growing concerns over the costs of traffic congestion, the beneficial productivity effects of human capital agglomeration when people live in dense urban environments, and the gradual graying of the country’s population will necessarily dampen the traditional focus on placing every person into a single-family detached home with a yard. In the immediate future, the fallout of the painful collapse in the single-family mortgage-backed security market will drive a need to consider other housing options.
The U.S. will experience a net growth in population of over 122 million persons from now until 2050. Although the actual population growth rate is projected to decline, it will still remain in the 0.8-1.0 percent change per annum range. This growing population will require significantly more housing, regardless of housing type (single or multifamily), even if we allow for changing patterns in average household size.
Read the full paper here.