WASHINGTON, DC - National Multi Housing Council (NMHC) President Doug Bibby issued the following statement concerning today's release of the Obama Administration's proposal for reforming Fannie Mae and Freddie Mac. His statement is on behalf of NMHC and its joint legislative partner, the National Apartment Association.
"We commend the Administration for taking the first step in what will be a long process to overhaul the nation's housing finance system, and we are encouraged that the Administration explicitly notes the need to support rental housing and to return to a housing framework that understands that not every American wants to or should own a house.
"We would encourage lawmakers to focus their attention-at least in terms of serving the rental housing industry-on the third option identified in the Obama plan, which would provide a federal guarantee at all times. We have serious doubts about the ability of an "emergency-only" federal guarantee to ramp up quickly enough to adequately respond to a capital crisis.
"Reform is absolutely necessary to address the serious flaws in the single-family sector. But as the Administration recognizes, policymakers need to understand that the GSEs' multifamily programs were not part of the meltdown, and they are a vital capital source for the rental housing sector.
"We would urge policymakers to be very cautious in their reform efforts and not cause unintended consequences by trying to solve a problem that doesn't exist in the GSEs' multifamily business.
"Quite simply, the GSEs' multifamily programs are not broken. They have default rates of less than one percent and they actually produce net revenue (profits) for the U.S. government. They pose no risk to the taxpayer. But they-and the nation's supply of workforce rental housing-stand at risk of becoming a collateral victim of the single-family meltdown.
"We support a return to a marketplace dominated by private capital, but history has shown that even in healthy economic times, the private market simply cannot meet a majority of the rental housing industry's capital needs."
"Over the past 40 years, there have been numerous occasions when the private sector has been unable or unwilling to finance multifamily loans. A federally backed secondary market with an explicit federal government guarantee is absolutely critical to our industry's continued health.
"Without the GSEs, from 2008 through 2010, there would have been widespread foreclosures of otherwise performing apartment properties because owners would have had no capital source to refinance maturing mortgages. This could have resulted in upheaval and dislocations of thousands of renters. Having a fully operational federal source of liquidity prevented that.
"That liquidity need extends beyond the targeted affordable housing the Obama Administration plan identifies. It is the lifeline of the "middle market," which the Obama plan agrees reform should continue to fund.
"Without a federally backed secondary market for multifamily mortgages, the apartment industry will not be able to meet the growing demand for rental housing. Between 2008 and 2015, nearly two-thirds of new households formed will be renters. That's six million new renter households.
"The apartment industry is prepared to pay a risk-based price for such a guarantee to insulate taxpayers from any losses. We also believe the guarantee should be priced so it does not unfairly compete with private debt capital. But a federal guarantee not only protects the nation from shocks during financial crises, it also ensures sufficient liquidity to the apartment industry during normal times.
"We look forward to working with the Administration and Congress to build a world-class housing finance system that can provide safe, decent housing to all Americans."
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The National Multi Housing Council (NMHC) and National Apartment Association (NAA) operate a Joint Legislative Program and represent the nation's leading firms participating in the multifamily rental housing industry. NMHC/NAA's combined memberships are engaged in all aspects of the development and operation of apartment communities, including ownership, construction, finance and management. One-third of Americans rent their housing, and over 14 percent of all U.S. households live in an apartment home. For more information, contact NMHC at 202/974-2300, e-mail the Council at email@example.com or visit NMHC's web site at www.nmhc.org.
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