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The U.S. housing market is in the midst of an extremely successful and extended period of cycle growth and maturation. For more than 10 years since the housing bubble burst of 2008, the real estate market has been on a torrid pace that still does not seem to have an end in sight. But all types of housing aren’t sharing equally in this positive phase.

During the course of this time period, one key trend has surfaced – multifamily housing is taking up more investor and lender attention than ever before when compared to single family housing. The influx in multifamily activity can be attributed to a mix of demographic and economic factors – such as millennials delaying home ownership because of increased student loan debt.1 These factors have met with a push by federal agencies to focus their mission onto multifamily. That was a key takeaway from the “State of the Government-Sponsored Enterprises (GSEs)” panel at the 2019 Mortgage Bankers Association Conference.

Fannie Mae and Freddie Mac play an essential role in the U.S. housing market and have helped boost its fundamentals to the highs they are currently experiencing. These agencies provide liquidity, stability and affordability into the housing market by helping to preserve the long-term financing of multifamily mortgages and attract global capital and liquidity in times of economic distress through explicit government guarantees. Recently, their presence has been most felt in the multifamily space where Freddie Mac reported having its best year ever for multifamily security issuances in 2018, according to Housing Wire.2

But while the multifamily market continues to achieve amazing absorption levels, construction activity, pricing and affordability in the single-family housing sector have fallen well behind.

Affordability is an Issue for Single-family

Occupancy and rental rates are rosy for single-family housing, but affordability has substantially waned in their stead.3 Since the end of World War 2, single family homes appreciated in value an average of .75 percent per year.4 Over the past half-decade, this number has increased drastically to 5 percent per year. Additionally, the single-family market is being undersupplied by 200,000 homes annually, pushing the supply and availability of starter homes down 17 percent per year and actively forcing families to stay in homes longer than they would otherwise.5 In short people looking to enter and progress through the single-family market face real impediments, namely pricing and supply.

Lack of Supply Hurting Affordable and Workforce Housing

Affordable and workforce housing are essential property types that deliver housing to support the backbone of America’s working class. But while the dearth of affordable and workforce housing options is well publicized, the magnitude of the problem is only expanding.

Currently, 60 percent of lower-income families (units making less than 50 percent of the area’s average media income (AMI)) are severely burdened, meaning they are spending 50 percent or more of their income on rent and utilities. The culprit of this problem is an utter lack of supply coming onto the market.

To meet demand and preserve supply-demand fundamentals, developers must deliver 1.5 million units of affordable housing per year. The disparity in supply and demand lies in the fact that only 1.2 million units are being brought to market each year, leaving the country with a yearly deficit of 300,000 necessary housing units. This is driving prices up in a population that desperately needs and deserves financial relief.

The solution to this problem lies in being able to entice more capital to freely flow into the market. Freddie Mac offers a Low-Income Housing Tax Credit Execution which provides permanent financing to build or significantly rehabilitate garden or mid-rise apartment buildings with low-income housing tax credits. Along with Fannie Mae, they also offer programs for tax-exempt bond credit enhancements and programs to preserve and develop affordable housing.

What's Next?

While multifamily keeps thriving thanks to demographic and economic factors, investors and lenders see this as a temporary situation, not a trend. Millennials are starting to and will continue to enter the housing market and will eventually consume real estate similarly to their baby boomer counterparts. The crunch felt in the housing market because of lack of supply, especially in the affordable and workforce housing segment, is not going away. This puts the onus on government-sponsored agencies, investors and lenders to bridge the gap between supply and demand of single and multifamily homes to encourage sustainable pricing and affordability.

As a Delegated Underwriting and Servicing lender for Fannie Mae and Freddie Mac and one of the leading affordable housing lenders in the nation, KeyBank understands the role of government agencies in bringing more housing options to American communities. Our experienced advisors can support clients that are exploring federal financing programs to help address the housing crunch.

For more information, contact your mortgage banker.

Key Learning Points:

  • The U.S. housing market boasts very strong market fundamentals, such as absorption and supply, specifically in multifamily housing.
  • Demographic factors, economic conditions and government focus on multifamily is contributing greatly to the increased overall strength of the multifamily sector.
  • In the single-family sector, less new supply and pricing increases have made it more difficult for Americans to purchase a home.
  • Lack of supply is also critically affecting affordable and workforce housing.
  • Fannie Mae and Freddie Mac lending programs offer relief to the capital and supply problem.

Noguchi, Yuki. “Heavy Student Loan Debt Forces Many Millennials to Delay Buying Homes.” National Public Radio, February 2019.


Lane, Ben. “Freddie Mac set all-time record for multifamily security issuance in 2018.” Housing Wire, January 2019.


Lerner, Michele. “Home prices rose nearly 7% in the past year.” The Washington Post, December 2018.


Drum, Kevin. “Chart of the Day: Housing Prices Since WWII.” Mother Jones, August 2010.


Vivas, Javier. “The Housing Shortage Part II: Starter Homes Disappear.”, August 2017.