At the end of October, Freddie Mac released a report finding that despite efforts to address the housing affordability crisis, there remains a widening gap of affordable rental units and an increasing demand. Freddie Mac has identified Very Low-Income (VLI) households as those experiencing the most adverse impact. VLI households are those with income no greater than 50% of the Area Median Income (AMI).
Freddie Mac approached this analysis with a new method – analyzing units where loans were financed by Freddie Mac Multifamily twice between 2010 and 2016. The results illustrated a large drop in the affordability of a unit between the first finance and the second finance. Nationally, when looking at the first finance, 11.2% of rental units were affordable to VLI, whereas when looking to the second finance, only 4.3% of those same units were affordable to VLI households, or a 60% drop in the number of affordable units. The report attributed this drop to increasing rents, stagnant wages, and supply not keeping pace with demand.
To address the worsening affordability of units, the report suggests the multifamily rental housing market needs a complete understanding of market needs, an increase in the supply of affordable units, and a targeting of subsidy to lower-income households.
Freddie Mac is a government-sponsored enterprise (GSE), along with Fannie Mae. Both GSEs are part of the housing finance market, and aim to expand the availability of mortgages to low- and moderate- income families, and are regulated by the Federal Housing Finance Authority (FHFA).