Lawmakers considering the future of the nation’s housing finance system must understand that a “one-size-fits-all” approach will not work. The meaningful differences between the single-family and multifamily sectors, both in how they operate and how they have performed, require different solutions to avoid putting the 35 million Americans who rely on the apartment industry for their housing and the $862 billion multifamily debt market at risk. That was the core message from National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) in today’s testimony before the Senate Committee on Banking, Housing and Urban Affairs.
Tom Bozzuto, Chairman and CEO of the Bozzuto Group
“The multifamily financing process, mortgage instruments, legal framework, loan terms and requirements, origination, secondary market investors, underlying assets, business expertise and systems are all separate and unique from single-family home mortgage activities,” said Tom Bozzuto, Chairman and CEO of the Bozzuto Group, representing NMHC and NAA.
“Not only are the sectors very different in how they operate, they also have much different performance records,” Bozzuto said. “The delinquency and default rates of Fannie Mae and Freddie Mac’s multifamily programs are less than one percent, a tenth of the size of the rates plaguing their single-family programs. It comes as a surprise to many that their multifamily programs have generated more than $13.6 billion in net profits for the federal government since they were put into conservatorship.”
“We strongly urge policymakers to retain the successful elements of the government-sponsored enterprises’ (GSEs’) multifamily programs in whatever replaces them,” Bozzuto added. “It is also critical that a reformed housing finance system retain a federal backstop for multifamily. When credit markets have been impaired for reasons that have nothing to do with multifamily property operating performance, the federally backed secondary market has ensured the continued flow of capital to apartments.”
“Private capital should bear the principal risk to protect taxpayers, but history has shown that private capital is unwilling or unable to meet the full financing needs of the multifamily sector, including the $100 billion in mortgages that need to be refinanced each year,” said Bozzuto.
“We now know that housing our diverse nation means having a vibrant rental market along with a functioning ownership market,” Bozzuto continued, “and a strong apartment market depends on sufficient access to capital. Five million new renter households were created between 2007 and 2012 and another seven million new renter households could be formed this decade. The stakes are too high to let the multifamily market become a collateral victim of the single-family housing crash.”