How is the multifamily housing sector doing? Is it showing signs of cooling down or heating up? Freddie Mac’s executive vice president and head of multifamily, David Brickman, recently sat down with us to share his perspective on rental supply and demand and the growing affordability challenge.
Freddie Mac Multifamily recently published the Multifamily 2017 Mid-year Outlook. What takeaway should industry members glean from the report?
The main takeaway is that, despite recent concerns about the health of the multifamily market, we expect 2017 to be another record year. There will be moderation in some high-cost areas, but strong fundamentals will continue to propel growth throughout the remainder of 2017 and beyond. A combination of demographic trends, population growth, and changing consumer preferences continues to fuel demand and outpace even the recent increases in supply.
We’re also seeing optimism from industry participants. A new survey Freddie Mac Multifamily commissioned with Hanley Wood found that 60% of multifamily industry participants anticipate the multifamily housing market will grow over the next three to five years, while only about 15% see it slowing down. This on-the-ground perspective corresponds with what we’re seeing from an economic point of view: This will continue to be a strong market for years to come.
Are you comfortable with the current pace of multifamily starts, completions, and deliveries?
In most markets, the overall supply is simply not expanding fast enough. Despite more units entering the market every year, property values continue to appreciate nationally. Rents continue to rise, averaging about a 3% annual increase so far this year. Vacancy rates remain relatively flat.
Meanwhile, the number of renters continues to grow. It’s estimated that we’ll likely add 4.7 million renters between 2015 and 2025, well above the nation’s average of 3.8 million over the previous several decades. Demographic trends indicate that this demand is unlikely to wane anytime soon. Our research indicates the United States is facing an annual shortfall of about 400,000 housing units, even when taking single-family starts into account. The evidence shows we’re not meeting demand.
How is Freddie Mac Multifamily helping meet the growing need for safe, clean, affordable rental housing nationwide?
We’re overwhelmingly focused on financing and preserving rental properties that are affordable for working and low-income Americans. Historically, nearly 90% of the apartments we finance are affordable to working families earning at or below their area median income. Today, we’re one of the nation’s largest sources of financing for the preservation of subsidized housing for low- and very low-income families.
We believe the key to the affordable rental housing crisis is to increase available supply. Over the course of the year, we plan to come out with a number of new offerings that will help serve in the development and rehabilitation of affordable rental properties. We’re doing everything we can to help reduce the heavy rent burdens shouldered by millions of American households.