Rising rents. Increasing demand. Limited supply. Together, they describe a housing situation that is putting millions of Americans in financial difficulty. Freddie Mac Multifamily’s David Leopold recently shared his views on the dimensions of the challenge, innovative solutions, and reasons for optimism.
1. There has been much discussion about the scarcity of affordable housing. In your view, how difficult is it for the average working American to find safe, decent affordable housing?
For many families, it’s very difficult—and getting worse. The Joint Center for Housing Studies estimated that a quarter of all renters are “severely rent burdened,” meaning they spend more than half of their income on rent. And a new Freddie Mac analysis makes clear that it’s getting worse—finding that over the past six years, the number of apartments affordable for very low-income families fell by more than 60%.
2. Is Freddie Mac’s role in expanding affordable housing finance properly understood? If not, what are the misconceptions?
I think the extent to which we are investing in innovations that improve liquidity and lower financing costs is sometimes overlooked. We’re dedicated to making our Targeted Affordable Housing platform—which finances multifamily properties that are affordable to families with low and very-low incomes—more efficient. The success is evident: we have released several new offerings this year, and are on track to finance over 90,000 units of affordable housing in 2017 alone.
3. Freddie Mac recently rolled out a range of affordable housing finance initiatives—including TAH Express, NOAH preservation, and tax-exempt loan securitizations. How will these initiatives expand access to affordable housing?
These initiatives help borrowers finance affordable properties quickly, more efficiently and less expensively. And they’re advancing the industry.
TAH Express facilitates efficient preservation by simplifying processing, underwriting, and reducing costs for transactions $10 million or under. Our Naturally Occurring Affordable Housing preservation execution works with all our products, and is designed to increase speed and certainty of execution. Our ML Deal— the first-ever securitization of a tax-exempt loan portfolio—was so successful we immediately reduced rates on our tax-exempt loans, continuing to drive down costs.
4. Where do you see the affordable housing sector three years from now? On balance, are you optimistic?
Overall, I’m optimistic. There continues to be a large, unmet need for affordable housing. We will continue to invest in major innovations with several new offerings to bring increased liquidity to the affordable market faster. 2016 and 2017 were very good years, and we will continue that momentum in the years ahead.
5. What would you tell an owner or developer weighing affordable housing investment options? Why is this a good time for affordable housing development and investment?
First, demand – the need for affordable housing is significant. Second, choice—we offer a diverse array of new and traditional products to make financing cheaper, faster and easier. And we do it while transferring risk away from taxpayers.
Finally and most importantly, commitment. We are dedicated to overcoming new challenges through continued investment in innovations that improve liquidity. Owner-operators can rest assured that we will be in the market providing financing liquidity for affordable housing—regardless of tax changes or other market shifts.
