The new caps will see each of the government-sponsored enterprises drop from $100 billion to $70 billion for loan purchases. The previous combined cap of $200 billion (spread between Q4 2019 and Q4 2020) is now sitting at $140 billion for 2021, reflecting a decrease of 12.5% on a per-quarter basis. As per usual, these loan cap structure changes apply to all multifamily business, with no exceptions.
These new caps will only apply to the four financial quarters of 2021, much like the cap structures that were in place between 2014 and 2019, replacing the five-quarter structure announced last fall. Interestingly, to put a stronger focus on affordable housing and some of the more niche markets, the caps also require no less than 50% of multifamily business to be “mission-driven, affordable housing.” During these uncertain times brought on by Covid-19, this is a pretty logical move to accommodate better the rise in unemployment and general instability of the economy and housing market. The 50% rule should act to address the shortage of affordable housing without starving-out private capital finance.
It is also worth noting that this will be the first time that the criteria for “mission-driven, affordable housing” is presented clearly in the case of affordable housing manufactured housing communities (MHC). MHCs must now either be under the ownership of residents, the government, or a nonprofit organization. Conversely, it must at least have tenant pad lease protections in place to be designated as mission-driven affordable housing. This is no doubt a move to make sure the campaign doesn’t get caught up on technicalities that could detract from the entire purpose of the affordable housing focus.
The definition of mission-driven, affordable housing was also simplified to reflect housing that is affordable to residents at or below 80% of the area median income (AMI). With this change, the FHFA also stated that at least 20% of multifamily business should be affordable to residents at or below the 60% AMI line. The question here is how well government-sponsored enterprises (GSEs) will adapt to these new measures and whether or not the focus on affordable housing will extend beyond the 2021 financial year.
With everything going on in the world, it is refreshing to see provisions put in place that may take some pressure off of residents while still allowing the housing market the opportunity for private capital investors to get in on the action. I’m excited to see what else 2021 has in store for the multifamily industry and, as always, I am more than happy to be able to share my thoughts with you.