Typical apartment building complex near Dallas, Texas, USA in fall season with colorful autumn leaves.
Trong Nguyen

What’s taking so long?

The nation’s affordable housing owners, developers, lenders – and most of all, tenants – have waited far too long for an extension to the CARES Act. Help is needed before a growing wave of missed monthly rent payments upends an entire industry.

Sarah Garland says we arrive at this crossroads after a peaceful summer of relative market calm. The director of CBRE Affordable Housing – Debt and Structured Finance cites the activity of her own team. “If I didn’t know what was going on, I wouldn’t know what was going on based on the numbers,” she says. She points to nearly identical year-over-year financing numbers, backing-out the March-April pause.

Where do things stand right now? How much time do we have before an issue turns into a crisis? What is Garland advising today? Her perspective:

How long can the industry get by without a new round of stimulus checks?

It’s a huge blow that the CARES Act wasn’t extended. We’re already seeing the fallout in softening monthly rent payments and more pressure on property owners. Everybody is holding their breath. If something doesn’t happen soon, we could have a major issue on our hands. To date, forbearance hasn’t been a big issue, but if things continue, it will be something that will need to be addressed.

What encourages you right now?

That depends on what hat I’m wearing. If I’m wearing my lender hat, things are solid. People are buying properties and refinancing. We’re busier than we’ve ever been. The government says they’re not raising interest rates for the time being. I could easily see this surge carrying through 2021, even with an upfront 12-month reserve requirement. You can borrow at historically low rates and sleep well at night.

If I wear my socially conscious hat, it’s a tough time. There’s a growing disparity between the haves and have-nots, and fortunately cities and other municipalities are doing their best to step in and fill some of the gaps created where the stimulus package was not extended.

Sarah Garland, director, CBRE Affordable Housing – Debt and Structured Finance
Marissa Natkin Sarah Garland, director, CBRE Affordable Housing – Debt and Structured Finance

There’s talk of doing more for the missing middle, workforce housing. What are you hearing?

It’s tough when you work hard, pay your taxes, and still can’t afford to live anywhere near your place of employment. It’s a real problem for a lot of people. The key is to finally recognize workforce housing as an asset class and develop programs that address it without diminishing existing affordable housing programs. Right now, neither Fannie or Freddie have many dedicated products for those assets that fall between market-rate and affordable The industry is continuing to have these conversations and agrees that workforce housing assistance can’t come at the price of affordable.

In the last month, I’ve received multiple calls about hotel conversions to multifamily. With both the retail and hospitality industries not bouncing back as many had hoped, this is high on people’s radar. People ask: What would that look like? Is it even an option? Yes, it’s definitely an option and is actively being considered as a solution to increase housing. As for what it looks like, that’s still to be determined.

How are you advising clients right now?

It’s a great time to buy. We are in a very unique lending environment, with interest rates remaining low, and even though COVID is causing additional operating reserve requirements, borrowers are generally still able to get full proceeds. We’re really not getting much pushback on the additional requirements. All the borrowers understand. They know it’s the right thing to do and they know that the need remains greater than ever for availability of these affordable units.

For assistance with affordable multifamily finance, visit CBRE Affordable Housing.