Fannie Mae and Workforce Rental Housing

FIRST QUARTER 2011
FANNIE MAE AND
WORKFORCE RENTAL HOUSING
EXECUTIVE SUMMARY
Multifamily rental housing accounts for a sizable share of Americas housing stock,
TABLE OF CONTENTS
1
Executive Summary
What is Affordable Rental Housing?
future market conditions including the ongoing economic and housing recovery,
Why is it Important to Preserve

Subsidized Affordable Rentals?
demographic forces and a change in attitudes towards homeownership versus
12 How Much Rental Housing is There?
renting point to a growing need for rental housing, especially affordable rentals.
13 How Affordable is Multifamily Rental

Housing?
with an estimated 15.2 million occupied multifamily rental units. Current and
20 Is There Enough Rental Housing to

Satisfy Demand?
Fannie Mae has long played a significant role in the multifamily rental housing
sector, and continues to do so, largely by packaging multifamily loans into
21 What is the State of Lending in the

Multifamily Sector Today?
mortgage-backed securities and providing a credit guarantee on the securities.
25 What is Fannie Maes Role in the

Multifamily Market?
The vast majority roughly 90 percent of Fannie Maes multifamily housing
28 What is the Outlook for the Multifamily

Sector?
finance currently supports rental housing that is affordable to households earning

at their areas median income level. Through this function, Fannie Mae has
continued to provide a reliable, safe, and sustainable source of financing to meet
the nations rental housing needs.
31 Bibliography
32 Contacts
MULTIFAMILY
MORTGAGE
BUSINESS
There are six key points regarding the multifamily sector and
workforce rental housing:
Subsidized Affordable Housing consists of rental

properties that are privately owned but receive some
form of government-sponsored subsidy in return for
1. MOST MULTIFAMILY HOUSING IS AFFORDABLE
keeping rents affordable to those at the lowest-income
According to data from the 2009 American Housing Survey
levels. These properties rely on a mix of public subsidy
by the U.S. Department of Housing and Urban Development
and private financing, and typically support households
(HUD), about 14 million of the estimated 17 million rental
earning between 30% and 80% of AMI.
housing units across the nation are considered affordable to
Conventional Market Rate rental housing is also
people earning less than their areas median income (AMI)
privately owned but charges rents consistent with the
where rent payments comprise no more than 30% of income.
property amenities as well as local housing market prices

and conditions. Typically, these property owners do
A subset of affordable rental housing is known as workforce
not receive direct subsidies. Conventional market-rate
rental housing, defined by the Urban Land Institute (ULI) as
properties may offer rental housing that is affordable to
affordable to households earning 60% to 100% of AMI.
workforce households.
In addition, there are different levels of rental affordability.
2. MOST MULTIFAMILY PROPERTIES OFFER A MIX OF
For instance, a rental unit may be affordable to a household
RENTAL UNITS AND RENT LEVELS
earning 100% of AMI, but not affordable to one earning 50%
A common misperception is that an entire apartment building
of AMI.
will only offer one rent level for its units; in other words, a
landlord will price all units for tenants earning 60% of AMI. In
With these distinctions, multifamily housing is often classified
reality, apartment buildings frequently offer a variety of units
into three distinct categories: Public Housing, Subsidized
with different rent levels some tenants may pay market-rate
Affordable Housing, and Conventional Market Rate Housing.
rents while their neighbors pay below-market or government-
Public Housing consists of rental housing properties
subsidized rents.
that are both publicly funded and publicly owned and

managed by local housing authorities. It is financed by
The mix of rent levels is effective in leveraging public
the federal government and typically serves the lowest
subsidies while increasing economic integration and limiting
income households those earning less than 30% of AMI.
the concentration of poverty. For example, 70% of all the

multifamily properties financed by Fannie Mae offer rental units
affordable to various levels of AMI, with the remaining 30% of
during the housing run-up. Rental housing saw a rapid influx
the properties offering units affordable to just one AMI level.
of investment capital, decreased affordability for tenants,

increased debt by owners, and a dramatic expansion of
3. A SHORTAGE OF AFFORDABLE AND WORKFORCE
financing structures created for securities that were sold to
RENTAL HOUSING PERSISTS
global investors.
Rental housing affordable to lower-income households

increasingly is in short supply, especially in certain more high-
The housing market collapse reversed this dynamic and
density metropolitan areas, such as Washington, DC and New
caused a rapid withdrawal of private investment capital from
York City.
the multifamily market. Since the housing crisis began, new

multifamily commercial mortgage-backed security (CMBS)
According to the HUD 2009 American Housing Survey report:
issuances have practically ceased and other institutional lenders,
The share of occupied rental units affordable to
such as life insurers and commercial banks, have severely
households earning 80% to 100% of AMI increased slightly
curtailed their investment in financing multifamily debt. Fannie
to 15.5% in 2009 from 14.9% in 2007.
Mae, Freddie Mac, and the Federal Housing Administration
The share of rental units affordable to households earning
have stepped in to fill the void and have become the primary
30% to 50% of AMI fell to 25.9% from 26.4%.
multifamily financing options available today.
The share of rental units affordable to households earning

less than 30% of AMI fell to 15.5% from 17.2%.
The decline in the share of affordable rentals has been

occurring for at least a decade. According to the Harvard Joint
Center for Housing Studies 2010 State of the Nations Housing
report, the number of units affordable to households earning a
Roughly 90 percent of Fannie Maes
full-time minimum wage declined by 15.6% from 1997 to 2007.
multifamily housing finance currently

supports rental housing that is
4. THE FINANCIAL CRISIS PUSHED MOST MULTIFAMILY

HOUSING INVESTORS OUT OF THE MARKET
Parts of the multifamily mortgage sector experienced the
affordable to households earning at

their areas median income level.
same dynamic as the single-family home-purchase sector
FANNIE MAE AND WORKFORCE RENTAL HOUSING
MULTIFAMILY
MORTGAGE
BUSINESS
5. FANNIE MAES MULTIFAMILY BUSINESS MARKET
in the wake of the currency crisis in 1998 and again after 9/11
SHARE AND CREDIT PROFILE
and the 2001 recession, Fannie Mae and Freddie Mac stepped
As Fannie Mae helped to fill the multifamily housing
up portfolio purchases and guarantees of multifamily debt.
financing void, the companys share of new multifamily

securities issued was nearly 50%, or roughly $10 billion,
Before and during the financial crisis, Fannie Mae has
as of the third quarter of 2010. The companys share of
provided financing for nearly all segments of the multifamily
overall multifamily mortgage debt outstanding stood at
rental housing market while containing credit losses. By
20%, or $168.9 billion, as of the second quarter of 2010,
guaranteeing multifamily loans in securities issuances and
according to Federal Reserve data. (In comparison, the
providing credit enhancement on multifamily housing bonds,
CMBS share was 12.5% and Freddie Macs was 11.2%.)
the company has consistently supported both the subsidized

affordable and workforce rental housing markets to create and
The credit profile of Fannie Maes multifamily book of business
preserve affordable rental housing.
is significantly stronger than the rest of the commercial

markets. For example, Fannie Maes multifamily serious
6. MULTIFAMILY FUNDAMENTALS APPEAR HEALTHY
delinquency rate (60 days behind on payments or more)
U.S. housing demand is expected to continue growing.
was just 0.80%, compared with the CMBS rate of 12%, as
Anticipated population growth due to immigration and
of the second quarter of 2010. The credit performance of
positive birth rates, coupled with demographic trends, is
Fannie Maes multifamily book of business is attributable to
expected to increase household formation. Compared to
the companys multifamily business model, which requires
past trends, future household growth is expected to tip more
borrowers to maintain a certain amount of equity and lenders
toward renting, underscoring the need for reliable and stable
to share the risk of loss on each loan. The company also has
financing for the multifamily sector, for several reasons:
held to strong multifamily underwriting guidelines.
The Echo Boomers offspring of Baby Boomers are
Fannie Maes multifamily business model and activities reflect
forming independent households. The prime renting age
the companys role of remaining in the market through all
cohort, consisting of individuals aged 20 34 years, is
housing and economic cycles, even when private-market
expected to grow substantially between 2010 and 2030.
participants withdraw. The company expanded its multifamily
Consumer attitudes toward homeownership are changing as a
activity during the dislocation of the credit markets starting in
result of the housing crisis. According to Fannie Maes National
late 2007, and as the Harvard Joint Center report noted, Both
Housing Surveys in 2010, while a majority of Americans
still want to own homes, a significant number recognize they
whether there is enough rental housing to satisfy demand,
may have to wait longer than previously expected.
what the state of lending in the multifamily market is today,
In response to the housing crisis, mortgage underwriting
and what role Fannie Mae plays in the multifamily rental
standards have been strengthened to ensure long-term
housing sector.
success and sustainability of the borrowers and the loans,

reducing the number of households that may qualify
Multifamily rental housing accounts for a significant amount
to obtain a mortgage. Moreover, many borrowers with
of the affordable housing available today. There are three
unsustainable loans who lost, sold, or relinquished their
primary segments of the multifamily market: Public Housing,
Subsidized,
and Conventional Market Rate Housing. All three
homes in this cycle will need to relyWHAT
on rentalIShousing
in the
AFFORDABLE
RENTAL HOUSING?
near term and possibly longer.
Multifamily rental housing is a large and diverse sector and is generally defined as properties consisting of five or more individual
types of multifamily housing can be considered affordable as
housing units. To present the current state of the multifamily rental housing sector, this paper discusses how affordable housing
is defined, how much rental housing is available, whether there is enough rental housing to satisfy demand, what the state of
demonstrated in the chart below.
lending in the multifamily market is today, and what role Fannie Mae plays in the multifamily rental housing sector.
PURPOSE OF THIS PAPER
Multifamily rental housing accounts for a significant amount of the affordable housing available today. There are three primary
segmentsaoffuller
the multifamily
market: Public
Housing,
Subsidized, and Conventional Market Rate Housing. All three types of
Public
Housing
The following sections of this paper provide
discussion
multifamily housing can be considered affordable as demonstrated in the chart below.
of these issues and are based in large part on Fannie Maes

Public Housing
This is the most well-known type of affordable multifamily
is the most
well-known type of affordable
multifamily
housing.
It is rental
thatpublically-funded
is both publically-funded
and
housing.
It is rental
housing
thathousing
is both
and
experience in the market as a leading This
provider
of multifamily
housing finance.
publically-owned.
publically-owned.
Government-Issued Incentives and Subsidies
One common, yet narrow, definition for affordable multifamily is a unit in a multifamily property that receives some form
of government subsidy, such as a rental subsidy from HUD. These types of subsidies can include federal programs such as
WHAT IS AFFORDABLEHousing
RENTAL
Choice vouchers issued to tenants, low-income housing tax credits issued to developers, or state or local programs
such as tax abatements and subordinate financing.
HOUSING?
Multifamily rental housing
ESTIMATED 14.0 MILLION MULTIFAMILY AFFORDABLE MARKET

SEGMENTED BY UNSUBSIDIZED UNITS VERSUS SUBSIDIZED UNITS
is a large and diverse sector

and is generally defined as
properties consisting of five or
more individual housing units.
To present the current state of
Conventional
Market Rate
Multifamily Housing
6.7M units (Estimated)
Privately owned rental housing
that does not receive any subsidy
(renters pay no more than 30%
of income; limited here to income
groups at 100% of AMI or below)
Subsidized
Multifamily Housing
3.9M units (Estimated)
Privately owned rental
housing that receives public
subsidies in exchange for
affordability restrictions
the multifamily rental housing

Tenant
Voucher
2.2M units
(Estimated)
sector, this paper discusses how
Public
Housing
1.2M units
(Estimated)
affordable housing is defined, how

much rental housing is available,
Source: HUD report: "A Picture of Subsidized Households - 2008" and the 2009 American Housing Survey.
FANNIE MAE AND WORKFORCE HOUSING
55
MULTIFAMILY
MORTGAGE
BUSINESS
Government-Issued Incentives and Subsidies
public subsidies in exchange for affordability restrictions.
One common, yet narrow, definition for affordable multifamily
Assisted Housing can sometimes be referred to as
is a unit in a multifamily property that receives some form
Subsidized Affordable Multifamily Housing. Public
of government subsidy, such as a rental subsidy from HUD.
subsidies include:
These types of subsidies can include federal programs such
Capital Financing Low-interest-rate mortgages, mortgage
as Housing Choice vouchers issued to tenants, low-income
insurance, tax-exempt bond financing, loan guarantees,
housing tax credits issued to developers, or state or local
and pre-development financing to reduce costs.
programs such as tax abatements and subordinate financing.
Low-Income Housing Tax Credits (LIHTC) This program

provides developers with tax credits that can be sold to
The government-issued incentives and subsidies can be
reduce the amount of debt that must be borrowed to
separated into two primary categories of subsidy:
finance a multifamily building.

Rental Subsidies HUD and U.S. Department of
1.
Housing Choice Vouchers: Affordable monthly rent
Agriculture (USDA) Rural Development provide rental
subsidies provided to individual tenants who rent
subsidies, such as project-based Section 8 rental
privately-owned housing. The voucher pays the difference
assistance, to property owners to ensure that some or
between market rent in a locality and the rent that is
all low income tenants pay no more than 30% of their
affordable to the individual, so that the individual pays no
income for rent.
more than 30% of monthly income towards rent.

2.
Tax Abatement Tax reduction or elimination of some
Assisted Housing/Subsidized Affordable Multifamily
or all of the state or local property taxes for rental
Housing: Privately owned rental housing that receives
housing with certain ownership structures, servicing

low- and moderate-income renters.
Fannie Mae supports the affordable
Federal Grant Programs The Community Development
multifamily market by financing
Block Grant (CDBG) and the Home Investment
both conventional market rate
Partnership (HOME) programs are two leading
rental properties and government

subsidized rental properties that are
privately owned.
examples. The programs provide block grants to local

governments for the construction and renovation of
rental housing properties.
Note that subsidy programs can be grouped into supply subsidies,

which subsidize the development of affordable housing, and demand
subsidies, which subsidize the rent. For example, Public Housing and the
these unsubsidized units form the vast majority of the

multifamily affordable sector.
LIHTC program are examples of supply-side subsidies while the Housing

Choice Voucher program is an example of a demand-side subsidy.
Workforce Rental Housing and Gaps

Workforce rental housing is a subset of all affordable rental
Workforce
RentalRate
Housing
andHousing
Gaps
Conventional
Market
Rental
housing. As defined by ULI, workforce households are those
Workforce rental housing is a subset of all affordable rental housing. As defined by ULI, workforce households are those
In contrast to subsidized affordable rentals, conventional

earning 60% to 100% of AMI.
earning 60% to 100% of AMI.
market-rate rental housing is usually owned by private
According to ULIs J. Ronald Terwilliger Center for Workforce Housing, a workforce housing gap persists in high-cost areas
individuals
entities
charge
rents consistent
the
According
to ULIs
J. Ronald Terwilliger Center for Workforce
thatorare
major that
centers
of employment,
such aswith
Washington
DC, San
Francisco,
and Boston.
amenities offered by the property and local housing market
Housing, a workforce housing gap persists in high-cost areas that
As the following map illustrates, the Fair Market Rent on a two-bedroom apartment in most high-cost states requires significant
income.
Currently,
theproperty
federal minimum
wage isreceive
$7.25 an hour;
state laws
mandate a higher
minimum
wageDC,
in
conditions.
In general,
these
owners usually
arelocal
majororcenters
of employment,
such as
Washington
Washington, DC and in 14 states including California. It is likely that many households in these high-cost areas are spending
no public assistance. As the diagram on the page 5 shows,

more than 30% of income on rent.
San Francisco, and Boston.
2010 TWO-BEDROOM HOUSING WAGE

Represents the hourly wage that a household must earn (working 40 hours a week, 52 weeks a year) in order to
afford the Fair Market Rent for a two-bedroom unit at 30% of income.
Housing Wage
Source: National Low Income Housing Coalition Out of Reach 2010 June Update
MULTIFAMILY
MORTGAGE
BUSINESS
As the map illustrates, the Fair Market Rent on a two-bedroom apartment in most high-cost states requires significant income. Currently,
the federal minimum wage is $7.25 an hour; local or state laws mandate a higher minimum wage in Washington, DC and in 14 states
including California. It is likely that many households in these high-cost areas are spending more than 30% of income on rent.
Affordability Is Determined Relative to AMI

The definition of affordability in the multifamily affordable sector is based on the AMI in a locality the midpoint household
income for a metropolitan
areaRelative
or a non-metropolitan
county, as calculated each year by HUD.
Affordability
Is Determined
to AMI
The definition of affordability in the multifamily affordable sector is based on the AMI in a locality the midpoint household
income for a metropolitan area or a non-metropolitan county, as calculated each year by HUD.
A unit of rental housing is considered affordable to an income group if the rent is no more than 30% of the maximum AMI for the
Aincome
unit of group.
rental housing
is considered
affordable
to angroup,
income
group
rent isthen
no more
thancould
30%not
of the
maximum
for
For example,
for the Very
Low Income
if the
AMIifisthe
$44,000,
the rent
exceed
$550 a AMI
month
the
For example,
for the Very
Low Income
group,provides
if the AMI
is $44,000,
forincome
the unitgroup.
to be considered
affordable.
The following
illustration
other
examples:then the rent could not exceed $550
a month for the unit to be considered affordable. The following illustration provides other examples:
POTENTIAL INCOME GROUPS BASED ON AREA MEDIAN INCOME (AMI)

Income 30% of AMI
[Extremely Low Income (ELI)]
Rent Charged for Illustrative Purposes

Apartment 1: $300 per month
30% AMI < Income 50% of AMI

[Very Low Income (VLI)]
50% AMI< Income 60% of AMI
60% AMI< Income 100% of AMI

Workforce Housing
Apartment 4: $1,400 per month

Apartment 5: $5,000 / month
Affordable
Rental
Housing
Sector
Not Low Income

(Income greater than 100% of AMI)
Substantial Subsidies Are Necessary to Keep Rental Units Affordable for the Lowest Income Tenants
Substantial
Subsidies are
Aresharing
Necessary
to Keep
Affordable
for
Lowest
Income
Tenants
Since
multiple households
the same
parcelRental
of land,Units
multifamily
housing
is the
generally
more
affordable
than singlefamily
Nevertheless,
affordable
the lowest-income
levelsincome
thosetobelow
of AMI
can be
for
Since housing.
multiple households
areunits
sharing
the sametoparcel
of
rental
cover 60%
operating
expenses.
Aschallenging
a result, these
developers to build or preserve. At 30% of AMI, most multifamily housing owners find it nearly impossible for rental income
land, multifamily housing is generally more affordable than
types of affordable units usually require multiple propertyto cover operating expenses. As a result, these types of affordable units usually require multiple property-specific subsidies
single-family housing. Nevertheless, units affordable to the
specific subsidies from several sources. In many cases, despite
from several sources. In many cases, despite these subsidies, rents may still not be affordable to the lowest income households.
lowest-income levels those below 60% of AMI can be
these subsidies, rents may still not be affordable to the lowest
challenging for developers to build or preserve. At 30% of AMI,
most multifamily housing owners find it nearly impossible for
income households.
WHY IS IT IMPORTANT TO PRESERVE SUBSIDIZED AFFORDABLE RENTALS?

Subsidized Affordable Multifamily Definition
WHY IS IT IMPORTANT TO PRESERVE earning under 50% of AMI. As a result, there is ongoing effort
A Subsidized Affordable multifamily property incorporates a regulatory agreement or recorded restriction that limits rents, sets
SUBSIDIZED AFFORDABLE RENTALS? by Subsidized Affordable multifamily participants to develop
forth income qualifications for tenants, or places other restrictions on the use or occupancy of the multifamily property all
Subsidized
Affordable
Multifamily
Definition
and preserve
properties
with
subsidies
maintain theproperty
stock
of
which are designed
to make
the property
affordable. While government
entities
generally
impose
thesetorestrictions,
owners
sometimes
voluntarily
record
these restrictions
in an attempt
to preserve
multifamily
affordable
housing
for the
future.
A Subsidized
Affordable
multifamily
property
incorporates
of safe
and affordable
housing
for the lowest
income
tenants.
In
essence, subsidized
is privately
owned rental housing that receives public subsidies in exchange for
a regulatory
agreementaffordable
or recordedhousing
restriction
that
affordability restrictions.
limits rents, sets forth income qualifications for tenants,
Subsidized Affordable Multifamily Participants
Subsidized
Affordable
housing
a significant
housing
for those
with lower
incomes,Affordable
particularly those
or places other
restrictions
on theprovides
use or occupancy
of amount ofEntities
providing
financing
for Subsidized
earning under 50% of AMI. As a result, there is ongoing effort by Subsidized Affordable multifamily participants to develop
the multifamily property all of which are designed to
multifamily properties assume credit risk either by providing
and preserve properties with subsidies to maintain the stock of safe and affordable housing for the lowest income tenants.
make the property affordable. While government entities
credit enhancement to the financing asset or by holding the
Subsidized Affordable Multifamily Participants
generally impose these restrictions, property owners

loan in portfolio and taking both credit and interest-rate
Entities providing financing for Subsidized Affordable multifamily properties assume credit risk either by providing credit
sometimes voluntarily record these restrictions in an
risk on the asset. The following diagram shows the range of
enhancement to the financing asset or by holding the loan in portfolio and taking both credit and interest-rate risk on the asset.
attempt
to preserve
multifamily
affordable
for for loan activities
possibilities
loan
that by
may
be undertaken
The
following
diagram
shows the
range ofhousing
possibilities
thatfor
may
beactivities
undertaken
these
entities. by
the future. In essence, subsidized affordable housing
these entities.
Among the participating entities are Fannie Mae, Freddie Mac, FHA, and state housing finance agencies. Many large regional
is privately owned rental housing that receives public
lenders also originate loans on properties with rent restrictions, but in the current lending environment, these loans are
subsidies inprimarily
exchangefor
forCommunity
affordabilityReinvestment
restrictions. Act (CRA) credit.
Among the participating entities are Fannie Mae, Freddie
originated
Mac, FHA, and state housing finance agencies. Many large
Other direct lenders include nonprofit entities such as the Massachusetts Housing Partnership, mission-driven entities such
Subsidized
housing
provides Preservation
a significant amount
lenders
also originate
loans
propertiesCommunity
with rent
as
the NewAffordable
York-based
Community
Corporationregional
and lender
consortia
such as
theonCalifornia
Reinvestment
are incomes,
tasked specifically
developing
and preserving
Larger entities
tend to
of housing for Corporation
those with lower
particularlywith
those
restrictions,
but in affordable
the currenthousing.
lending environment,
these
keep loans in portfolio, although they may sell a pool at a later date.
LOAN ACTIVITIES UNDERTAKEN BY SUBSIDIZED AFFORDABLE MARKET PARTICIPANTS

Affordable Multifamily Loan
(at origination)
Secondary Mortgage Market
Can credit enhance
- Loss sharing
- Bond credit enhancement
Can purchase loan from lender
- Immediate
- Forward
Can retain mortgages or securitize
Investors:
Purchase securities
(generally take interest
rate risk, but not credit risk)
Stays in Lender Portfolio

Some housing finance agencies
Some nonprofit lenders
Commercial lenders
For Community Reinvestment Act (CRA) Credit
MULTIFAMILY
MORTGAGE
BUSINESS
loans are originated primarily for Community Reinvestment
Units affordable to the lowest-income levels, below 30%
Act (CRA) credit.
or even 50% of AMI, can be challenging to build or even

rehabilitate using mortgage debt financing (e.g., loans) alone.
Other direct lenders include nonprofit entities such as the
Debt-only financing for construction of a new multifamily
Massachusetts Housing Partnership, mission-driven entities
property usually leads to above-average market-rate rents
such as the New York-based Community Preservation
to cover the cost of the financing. Extensive subsidies are
Corporation and lender consortia such as the California
required to minimize this resulting pass-along cost to tenants.
Community Reinvestment Corporation are tasked specifically

with developing and preserving affordable housing. Larger
The primary subsidy program for stimulating the construction
entities tend to keep loans in portfolio, although they may sell
and rehabilitation of rental housing affordable to low-income
a pool at a later date.
households is the LIHTC program enacted in 1986. The

program offers tax credits to developers that they can be sold
Subsidies Reduce the Amount of Debt on a
to investors before construction begins. The cash from the
Multifamily Property, Making Rents Affordable
sale of the tax credits reduces the amount of debt that must
Multifamily housing has the ability to deliver large amounts of
be borrowed for construction. As a result, the rents charged,
affordable housing since multifamily apartment buildings or
which must also be used to pay down debt, can be offered at a
other multi-unit dwellings can house more families on a parcel
discount to average market-rate rents.
of land than a single-family development.

In its January 2009 policy brief, Meeting Multifamily Housing
Finance Needs During and After the Credit Crisis, the Harvard
Multifamily housing has the ability to
Joint Center for Housing Studies provides a useful example:
deliver large amounts of affordable
For a multifamily development property to offer rental
housing since multifamily apartment
units affordable to a household earning at least 60% of AMI,
buildings or other multi-unit
then tax credits worth about 70% of the net present value
of the property must be issued. In other words, it takes a
dwellings can house more families
large amount of subsidies to help finance and maintain the
on a parcel of land than a single-
availability of these types of affordable rental units.
family development.
10
Housing Vouchers Help Very Low Income
households which qualify for housing vouchers, according to
Households
its 2008 report, A Picture of Subsidized Households.
Another form of housing subsidy is the federal rental voucher

or certificate. To enable tenants to pay no more than 30% of
Fannie Mae Participates in the Subsidized
their household income on rent, the federal government offers
Affordable Market and Preservation
the Housing Choice Voucher program. The voucher pays the
While focusing primarily on workforce rental housing, Fannie
difference between the 30% of the household income and the
Mae is also active in the Subsidized Affordable market and the
fair market rent amount for that local area. Tenants must apply
preservation of this housing. This can be a challenging market
for these vouchers and must meet strict income requirements.
to serve due to the layering of subsidies necessary to make
The average voucher amounts to around $6,600 annually.
rents affordable to the lowest income households. As a result,

Fannie Mae has several programs designed specifically for this
According to the 2008 State Housing Finance Factbook
market. The companys Affordable Delegated Underwriting
produced by the National Council of State Housing Finance
and Servicing (DUS) program, Fixed-Rate Bond Credit
Agencies, as many as 20% of households living in rental units
Enhancement program, and Forward Commitments program
generated by the LIHTC program still require vouchers so that
are designed to aid in the development and preservation of
the household is paying no more than 30% of its income for
rental units affordable to households earning 60% of AMI or
rent. Overall, HUD has estimated that there are 2.2 million
less. Fannie Mae has financed about half a million rental units
that have these types of layered subsidies.
11
MULTIFAMILY
MORTGAGE
BUSINESS
HOW MUCH RENTAL HOUSING IS

THERE?
Multifamily properties (defined as having five or more
units) with about 15.2 million occupied units.
As shown in the following table, according to the HUD 2009

American Housing Survey report, there are a total estimated
Fannie Mae has provided financing on nearly four million of
35.4 million occupied rental housing units in the U.S. This
the estimated total 15.2 million occupied multifamily units
HOW MUCH RENTAL HOUSING IS THERE?
total includes the three most

prevalent
occupied
housingHOUSING
in the
That is about one-quarter of the nations total
HOW
MUCH
RENTAL
ISU.S.
THERE?
As shown in the following table, according to the HUD 2009 American Housing Survey report, there are a total estimated
As shown in the following table, according to the HUD 2009 American Housing Survey report, there are a total estimated
structures:
estimated multifamily rental units. As seen in the following
35.4 million occupied rental
units inrental
the housing
U.S. This
the three
most
prevalent
occupied
housing
structures:
35.4housing
million occupied
unitstotal
in theincludes
U.S. This total
includes
the three
most prevalent
occupied
housing
structures:
Single-family properties (one to four units) with about

table, the majority of these units are affordable to households
Single-family
(one to
four units)
aboutoccupied
18.8 millionunits;
occupied units;
Single-family properties (one
to fourproperties
units) with
about
18.8with
million
18.8 million occupied units;
with incomes between 50% and 100% of AMI.
Manufactured housing with about 1.4 million occupied units; and
Manufactured housing with about 1.4 million occupied units; and

Manufactured housing with about 1.4 million occupied
Multifamily properties (defined as having five or more units) with about 15.2 million occupied units.
Multifamily
properties (defined as having five or more units) with about 15.2 million occupied units.
units; and
RENTAL UNITS SEGMENTED BY AMI FOR AFFORDABLE ESTIMATE
Source: Data provided by HUD based on
RENTAL UNITS SEGMENTED BY AMI FOR AFFORDABLE ESTIMATE
compilation of 2009 American Housing
Affordable to:
Affordable to:
(C) = Cumulative
Estimated Single
Family Rental
30%< Income (1-4
50%units)
of AMI
(C) = Cumulative 1
(C)
Income 30% of AMI
Income 30% of AMI
Estimated Single
Family Rental
(1-4 units)
(C)
Estimated 2.5M Estimated

3.1MEstimated
Multifamily
Multifamily
Manufactured
3.1M
2.5M
Rental
Rental
(5+
units) 4.0M
Housing Units
5.2M (5+units)
(C)
(C)
8.3M
6.5M
50%< 3.1M
Income 60% of AMI
3.2M
2.5M
60%< Income 80% of AMI
4.2M
3.1M
Estimated
Estimated
Multifamily
Multifamily
Rental
Rental(5+
(5+units)
units)
(C)
11.5M
2.5M
3.0M
0.4M
3.5M
30.0M
9.8M 1.3M
affordable
atsegmented
the Veryinto
Low
Income
Units
Single
and
15.8M
2.6M
(<=50%Multifamily
of AMI);rentals
therefore
units
basedtotal
on standard
17.3M
13.9M
1.4M
32.6M
Fannie
Mae definitions
of Single
and
3.2M
3.0M
0.2M
6.4M
affordable
to Very
Low Income
under
1.5M
1.3M
0.0M
2.8M
Multifamily. Units affordable to Income
Income > 100% of 11.5M
AMI
9.5M
1.2M
22.2M
Category is 2.5M +
the Multifamily
18.8M
15.2M
1.4M
35.4M
> 100% of AMI or higher represent
4.0M = upscale
6.5M. rental beyond a markets
4.2M
3.5M 18.8M
0.1M
7.8M
60%< Income 80% of AMI Total Market
15.2M
1.4M
35.4M
affordability.
15.7M
13.0M
1.3M
30.0M
Units segmented into Single and
1.6M
0.9M
0.1M
2.6M
Multifamily rentals based on standard
17.3M financing on 13.9M
1.4M
32.6M
Fannie Mae has provided
nearly four million
of the estimated
total 15.2
million
Fannie
Mae occupied
definitionsmultifamily
of Single andunits in
0.0M
2.8M
1.5M
1.3M
Multifamily. Units affordable to Income
Income > 100% of AMI the U.S. That
is about
one-quarter of the
nations total estimated
rental units. As seen in the following table, the
1.4M multifamily
35.4M
18.8M
15.2M
> 100% of AMI or higher represent
rental
beyond a markets
majority
of
these
units
are
affordable
to
households
with
incomes
between
50%
andupscale
100% of
AMI.
1.4M
35.4M
18.8M
15.2M
Total Market
5.2M
8.3M
80%< Income 100%
of AMI
4.0M
1.6M
15.7M
6.5M
0.6M
9.5M
0.4M
Survey (AHS) Data for occupied units;

Estimated
Total
Source:
Data
provided by HUD based on
1 Cumulative (C) Column represents
Rental
compilation
of 2009 American Housing
(C)
cumulative affordable units. For
Survey (AHS)
Dataif aforunit
occupied
units;
instance,
is affordable
at
0.4M Estimated
6.0M
Extremely Low Income, i.e. affordable
0.4MTotal
6.0M
to income
<=
30%
of
AMI,
it
is
also
1 Cumulative
Rental
(C) Column represents
0.6M
9.8M
affordable at the Very Low Income
1.0M (C)
15.8M
cumulative
affordable
For
(<=50%
of AMI); units.
therefore
total units
instance,affordable
if a unittoisVery
affordable
at under
0.2M
Low Income
6.0M 1.2M 6.4M 22.2M
theLow
Multifamily
Category
is 2.5M +
Extremely
Income,
i.e. affordable
6.0M
4.0M
=
6.5M.
0.1M
7.8M
to income <= 30% of AMI, it is also
Estimated
Manufactured
Housing Units
(C)
0.9M
13.0M
1.0M
0.1M
affordability.
FANNIE MAE SHARE OF MULTIFAMILY MARKET BY AMI

Fannie Mae has provided financing on nearly four million of the estimated total 15.2 million occupied multifamily units in
Market
Fannie Mae
(5+ Units)
(5+ Units)
Multifamily
Multifamily Rental
Units units.
Mae share
of
the U.S. That is about one-quarter of the nations total estimated multifamily
rental
As Rental
seen Units
in the Fannie
following
table,
the
Multifamily Market
Based on
Based on
Estimated Cumulative
Units
Units
Available to 5+ units
Available to
(Millions)
AMI
AMI
Category
Category
Estimated
Cumulative
majority of these units are affordable to households with incomesEstimated
between 50%
and 100%
of Cumulative
AMI.
5+ units
(Millions)
5+ units
Units
Available to (Millions)
AMI
Category
FANNIE MAE SHARE OF MULTIFAMILY MARKET BY AMI
6.5
6.5
0.7
0.7 10.8% 10.8%
Fannie
3.0
9.5 Mae0.9
1.6 30.0% 16.8%
Units 2.8
Multifamily
Fannie34.3%
Mae share21.5%
of
Affordable to 60% of AMI< income
80% of AMI Rental Units3.5Multifamily
13.0 Rental
1.2
(5+ Units)0.6
Multifamily
Affordable to 80% of AMI< income 100% of(5+
AMIUnits)
0.9
13.9
3.4
66.7%Market
24.5%
Based on
Cumulative Estimated Cumulative Based on
Estimated
Affordable to income > 100% of AMI
1.35+ units
15.2 Units0.4
3.8 30.8% 25.0%
Estimated Cumulative
Units
5+ units
Total Market
15.2 Available
3.8 to 5+3.8
Units 25.0%
units 25.0%
Available15.2
to (Millions)
(Millions)
Affordable to income 50% of AMI
Market
Affordable to 50% of AMI< income 60% of AMI
Notes: Market data based on HUD compilation of 2009 AmericanAMI

Housing Survey Data as of October, AMI
2010
Fannie Mae AMI category for loan level affordability determined based on category at year of acquisition.
Category
Category
FANNIE
MAE
Affordable to income 50%
of AMI
AND WORKFORCE HOUSING
12 Affordable to 50% of AMI< income 60% of AMI
Affordable to 60% of AMI< income 80% of AMI
6.5
3.0
3.5
6.5
9.5
13.0
0.7
0.9
1.2
0.7
1.6
2.8
(Millions)
10.8%
30.0%
34.3%
Available to
AMI
Category
10.8%
16.8%
21.5%
11
HOW AFFORDABLE IS MULTIFAMILY

RENTAL HOUSING?
There are significantly fewer units affordable to households

earning less than 50% of AMI about 6.5 million units in total.
The vast majority of the 15.2 million occupied multifamily
For households earning less than 30% of AMI, only 2.5 million
units in the U.S. 92% representing an estimated 14.0 million
occupied rental units are affordable. As a result, only about 16%
occupied units are affordable to households earning 100%
of the 15.2 million occupied rental units available for rent in the
of AMI or below. Additionally, 29% of the nations multifamily
multifamily market are affordable to households earning less
rental housing is affordable to households earning 60% to
than 30% of AMI. Moreover, many households are spending
100% of AMI.
more than 30% of their income to rent an apartment.
Most Multifamily Rental Can
Fair Market Rents and Market Rate Rents
Be Considered Affordable Housing
There are many different levels of rental affordability in a
Most of the affordable rental housing supply falls into the 50%
metropolitan area and three primary definitions of asking rents:
LY RENTAL
HOUSING?
to 100% AMI segment alone, accounting for almost half or
y units in the U.S. 92% representing an estimated 14.0 million

7.4 million units of all multifamily rental units.
% of AMI or below. Additionally, 29% of the nations multifamily
asking rents in the same general location for comparable

units and amenities.
100% of AMI.
he
MULTIFAMILY RENTAL UNITS

BY AFFORDABILITY
(As of 2009 in Millions)
alf
Total Occupied Units = 15.2 million

Over 100% AMI
1.3
ds
in
80% 100%
of AMI
0.9
9%
6%
16%
Income < 30%

of AMI
2.5
60% 80%
of AMI
3.5
Fair market rent is determined by HUD, which publishes a

list of what it considers to be fair market rents both at the
According to HUDs Fair Market Rent Program documentation:
standard amounts for the Housing Choice Voucher program,
23%
26%
ny
to
average market rate asking rent.
Fair Market Rents are primarily used to determine payment
ult,
to
Below market rate rent is any asking rent that is less than the
metropolitan area level and at the national level.
nly
its
Market rate rent is an asking rent that is in line with other
20%
to determine initial renewal rents for some expiring project30% 50%

of AMI
4.0
50% 60% of AMI

3.0
Source: HUD compilation of 2009 American Housing Survey, October 2010
based Section 8 contracts, to determine initial rents for

housing assistance payment contracts in the Moderate
Rehabilitation Single Room Occupancy program and to serve
as a rent ceiling in the HOME rental assistance program. HUD
metropolitan area and three primary definitions of asking rents:
ther asking rents in the same general location for comparable units
13
MULTIFAMILY
MORTGAGE
BUSINESS
annually estimates Fair Market Rents for 530 metropolitan areas
in HUDs program databases as likely to be either assisted
and 2,045 nonmetropolitan county areas. By law the final Fair
housing or otherwise at a below-market rent, and units less
Market Rents for use in any fiscal year must be published and
than two years old.
available for use at the start of that fiscal year, on October 1st.
Fair Market Rent Exceptions by HUD

HUDs Fair Market Rent Methodology
HUD Section 8 program rules allow for Fair Market Rent
According to HUD, Fair Market Rents are gross rent estimates.
exceptions to compensate for variations in rent levels and
They include the shelter rent plus the cost of all tenant-paid
rental housing characteristics that exist within individual
utilities, except telephones, cable or satellite television service,
housing markets. According to HUD, a Public Housing
and internet service. HUD sets Fair Market Rents to assure that
Authority may exceed the published Fair Market Rents by up
a sufficient supply of rental housing is available to program
to 20 percent for specified geographic submarkets of a larger
participants. To accomplish this objective, Fair Market Rents
Fair Market Rent area. Requests for [these] exceptions may
must be both high enough to permit a selection of units and
not be granted for more than 50 percent of an Fair Market
neighborhoods and low enough to serve as many low-income
Rent area (as measured by population). Such requests must
families as possible.
document the program-related need for the higher rents.

Geographic area exceptions are usually a small part of the
The level at which Fair Market Rents are set is expressed as
entire Fair Market Rent area and must be contiguous areas.
a percentile point within the rent distribution of standard-
As a result, high-cost areas frequently require exceptions.
quality rental housing units. The current definition used is

the 40th percentile rent, the dollar amount below which
Fair Market Rent Impact
40 percent of the standard-quality rental housing units
Fair Market Rents set by HUD may have an impact on low-
are rented. The 40th percentile rent is drawn from the
income housing apartment operators and on housing markets.
distribution of rents of all units occupied by recent movers
Since the Fair Market Rent determines the income stream for
(renter households who moved to their present residence
project-based Section 8 properties, it has a significant impact
within the past 15 months). HUD is required to ensure that
on the operating income for these properties. In addition,
Fair Market Rents exclude non-market rental housing in their
Fair Market Rents may exert downward pressure on prices in
computation. Therefore, HUD excludes all units falling below
markets with less competition.
a specified rent level determined from public housing rents
14
The national level fair market rent, as determined by HUD, along with the corresponding annual income levels necessary to afford
The national level fair market rent, as determined by HUD, along with the corresponding annual income levels necessary to
each particular unit types rent, is illustrated in the following tables:
afford each particular unit types rent, is illustrated in the following tables:
2010 FAIR MARKET RENT1
ANNUAL INCOME NEEDED

TO AFFORD
2010 FAIR MARKET RENT
PERCENT OF FAMILY AREA

MEDIAN INCOME NEEDED TO
AFFORD FAIR MARKET RENT2
Zero Bedroom
$713
Zero Bedroom
$28,520
Zero Bedroom
43%
One Bedroom
$805
One Bedroom
$32,200
One Bedroom
49%
Two Bedroom
$959
Two Bedroom
$38,360
Two Bedroom
58%
Three Bedroom
$1,254
Three Bedroom
$50,160
Three Bedroom
76%
Four Bedroom
$1,435
Four Bedroom
$57,400
Four Bedroom
87%
Source: Out of Reach 2010 June Update, National Low Income Housing Coalition.
Fiscal Year 2010 Fair Market Rent (HUD, 2010; revised as of March 11, 2010).
Annual 2010 Area Median Income of $65,801 as estimated by National Low Income Housing Coalition.
1
2
Fair Market Rents Require More Than Minimum Wage Income

Fair
Market Rents Require More Than Minimum
To afford $959 per month for a two-bedroom apartment, a
To afford HUDs fair market rent level for a studio apartment of $713 per month, spending just 30% of annual income on
household would need to earn at least $38,360 or 58% of the
rent, the annual household income would have to be $28,520. This is far above the federal minimum wage of $7.25 per hour,
To
afford
HUDsonly
fair yield
market
levelincome
for a studio
apartment
Income
Coalitions
estimated
national
which
would
anrent
annual
of $15,080
based on aNational
40-hourLow
work
weekHousing
and a 52-week
year.
A minimum
wage
Wage Income
of
$713 would
per month,
30%
annualto
income
annual
AMI ofin
$65,801.
Moving to
a three-bedroom
earner
havespending
to spendjust
50%
ofofincome
affordonthe studio
apartment
this example,
thereby
illustrating apartment
the role of
government
subsidies
in these
high-cost
rent,
the annual
household
income
wouldareas.
have to be $28,520.
unit becomes significantly more expensive. It would take an
This
is far above
wage of $7.25
per hour, a household
average annual
$50,160,
or 76%
of theor
estimated
To afford
$959 the
perfederal
monthminimum
for a two-bedroom
apartment,
would income
need to of
earn
at least
$38,360
58% of the
National
Low
Income
estimated
national
AMIannual
of $65,801.
to afford
a three-bedroom
apartment
which
would
only
yield Housing
an annualCoalitions
income of $15,080
based
on annual
national
AMI, toMoving
be able to
a three-bedroom
unit becomes significantly more expensive. It would take an average annual income of $50,160, or 76% of the estimated
a 40-hour work week and a 52-week year. A minimum wage
apartment at a fair market rent of $1,254 per month.
national annual AMI, to be able to afford a three-bedroom apartment at a fair market rent of $1,254 per month.
earner would have to spend 50% of income to afford the
The map on the following page presents rents in select high-cost areas of New York City, Washington, DC, Chicago, Los
studio apartment in this example, thereby illustrating the role
Angeles, and San Francisco.
of government subsidies in these high-cost areas.
15
MULTIFAMILY
MORTGAGE
BUSINESS
The map presents rents in select high-cost areas of New York City, Washington, DC, Chicago, Los Angeles, and San Francisco.
HIGH COST AREAS

HIGH COST AREAS
Sources: HUD, REIS
Sources: HUD, REIS
Market Rate Rents Can be Much Higher
Market Rate Rents Can be Much Higher
HUDs fair market rent level can differ from the actual market
HUDsRate
fairrate
market
level
can
fromtothe
askingrent
rent,
as
indiffer
theHigher
tables
theactual
right. market
Market
Rents
Can
beseen
Much
ratefair
asking
rent,
astable
seen
in can
the tables
to thefair
right.
HUDs
market
level
differ
from
the
actual market
The
toprent
compares
the HUD
market
rents at a
national
level in
bythe
number
of to
bedrooms
to second quarter,
rate asking rent,
as seen
tables
the right.
2010 market rate asking rents as estimated by REIS, Inc., a
table
compares
the
market
rents
at aThe
national
TheThe
toptop
table
the HUD
HUD
fair
market
rents
at
a
Newcompares
York City-based
real fair
estate
research
firm.
market
rateby
rentnumber
estimates
are bedrooms
significantly
higher
than
the
HUD fair
national
level
of
to second
quarter,
level by
number
of
bedrooms
to second quarter,
2010
market
market rent levels.
2010 market rate asking rents as estimated by REIS, Inc., a

rate asking rents as estimated by REIS, Inc., a New York CityThe bottom real
table estate
shows the
disparity
in household
income
New York City-based
research
firm.
The market
based real estate research firm. The market rate rent estimates
levels necessary to afford market rate rents compared to fair
rate rent estimates
are significantly higher than the HUD fair
market higher
rents while
more
than rent
30%levels.
of annual
are significantly
thanspending
the HUDnofair
market
market rent levels.
income on rent.
The bottom table shows the disparity in household income

The bottom table shows the disparity in household income
market rents while spending no more than 30% of annual
market
income
on rents
rent. while spending no more than 30% of annual
income on rent.
16
2010 FAIR MARKET RENT (FMR)

AND MARKET RATE RENT
Fair Market Rent
Market Rate Rent
2010 FAIR MARKET RENT (FMR)

$713
$1,019
AND MARKET RATE RENT
Zero Bedroom
One Bedroom
$805
$1,023
Fair Market
$959 Rent
Two Bedroom
ThreeBedroom
Bedroom
Zero
$1,254
Market
$1,222Rate Rent
$713
$1,019
$1,419
One Bedroom
$805
ANNUAL INCOME NEEDED
$1,023
Two BedroomTO AFFORD RENT

$959
$1,222
Fair Market Rent
Market Rate Rent
$28,520
$40,760
Three Bedroom
Zero Bedroom
$1,254
$1,419
$32,200
$40,920
ANNUAL INCOME
NEEDED
$38,360
TO AFFORD RENT $48,880
One Bedroom
Two Bedroom
Three Bedroom
$50,160
Fair Market Rent
$56,760
Market Rate Rent
Sources: National Low Income Housing Coalition, REIS national apartment

data
as of
Q2 2010
Zero
Bedroom
$28,520
$40,760
One Bedroom
$32,200
$40,920
Two Bedroom
$38,360
$48,880
Three Bedroom
$50,160
$56,760
Sources: National Low Income Housing Coalition, REIS national apartment

data as of Q2 2010
15
A Tale of Three Cities
A
Tale
of Three
Cities
more diverse
selection
of asking rents.
The
difference
in fair
market rents and market rate rents is evena more
dramatic
in metropolitan
areas San
withFrancisco
a highershows
cost of
living.
The following
table rents
showsand
themarket
price differential
metros: San
Francisco,
anda market
New York
The
difference
in fair market
rate rents isin three such
a difference
of slightly
moreLos
thanAngeles,
$500, with
rate City.
of
even
more dramatic in metropolitan areas with a higher cost of
nearly $2,300, well above HUDs fair market rent of $1,760.
Of the three, New York City reflects the largest difference in fair market rents and market rate rents as calculated using REIS
national property data $2,251. The difference is primarily due to the concentration of the REIS data in Manhattan, which
living.
The following table shows the price differential in three
carries
a much
asking
level and
thanNew
the York
otherCity.
New York The
Citytable
boroughs.
such
metros:
Sanhigher
Francisco,
Losrent
Angeles,
shows scenarios where households must routinely
spend
well overofone-third
of gross
to be this
ableistobecause
live
At the other end of the spectrum, the Los Angeles metro area has
a difference
just about
$200.income
Most likely
Losthe
Angeles
metro
is aCity
much
larger
anddifference
therefore in
includes ainmore
diverse selection
of asking
rents. San
shows
Of
three, New
York
reflects
thearea
largest
a two-bedroom
apartment.
For instance,
in Francisco
Los Angeles,
a difference of slightly more than $500, with a market rate of nearly $2,300, well above HUDs fair market rent of $1,760.
fair market rents and market rate rents as calculated using REIS
a household earning 50% of AMI, $34,100, must spend over
The table
shows data
scenarios
where
routinely spend
over one-third
to be
able to
in
national
property
$2,251.
Thehouseholds
difference ismust
primarily
57%well
of income
to be ableoftogross
affordincome
the typical
market
ratelive
rent
a two-bedroom apartment. For instance, in Los Angeles, a household earning 50% of AMI, $34,100, must spend over 57%
for a two-bedroom of $1,627. A household earning $34,100
due to the concentration of the REIS data in Manhattan, which
of income to be able to afford the typical market rate rent for a two-bedroom of $1,627. A household earning $34,100
could afford to spend no more than $853 per month on rent
carries a much higher asking rent level than the other New
could afford to spend no more than $853 per month on rent to stay within spending one-third of gross income on rent. Only
stay withinlive
spending
of gross
income
on rent.
York
City boroughs.
households
earning 80% to 100% of area median income could to
comfortably
in the one-third
typical market
rate
apartment.
Only households earning 80% to 100% of area median income
What is most striking in the comparison below is not necessarily the difference in asking rents, but the difference in the
could
live in that
the typical
rate apartment.
At
the other
end of theincome
spectrum,
the Los
Angeles
metro
area
estimated
household
needed
to afford
the
corresponding
rentalcomfortably
rates. It is likely
many market
households
in these highhas
difference
aboutthe
$200.
Most needed
likely this
because
costametros
are of
notjust
earning
income
toisafford
the two-bedroom market rate rent apartment, but rather are spending
more
than one-third
grosslarger
income
paytherefore
the rent.includes
Los
Angeles
metro is aofmuch
areatoand
HUD FAIR MARKET RENTS VS. ESTIMATED MARKET RATE RENTS SELECT METROS
San Francisco
Los Angeles Long Beach
New York
Housing Costs
Two bedroom at HUD determined Fair Market Rent (FMR)1
2
Income needed to afford 2 BR FMR
$1,760
$70,400
$1,420
$56,800
$1,359
$54,360
Two bedroom Market Rate Rent 3

Income needed to afford 2 BR Market Rate Rent
$2,281
$91,240
$1,627
$65,080
$3,610
$144,400
$93,400 / $2,335
$74,720 / $1,868
$46,700 / $1,168
$28,020 / $701
$68,200 / $1,705
$54,560 / $1,364
$34,100 / $853
$20,460 / $512
$78,300 / $1,958
$62,640 / $1,566
$39,150 / 979
$23,490 / $587
Area Median Income (AMI)

/ Monthly Rent Affordable4,2
Annual AMI / Monthly Rent Affordable
80% of annual AMI / Monthly Rent Affordable
1
2
3
4
Fiscal Year 2010 Fair Market Rent provided in Out of Reach 2010 June Update, National Low Income Housing Coalition
Affordable rents represent the generally accepted standard within housing policy circles of spending not more than 30% of gross income on housing.
Market Rate Rents based on REIS 2nd quarter 2010 data for geography based on Metropolitan Statistical Area (MSA)
AMI = Fiscal Year 2010 Area Median Income (HUD, 2010) as provided by Federal Housing Finance Agency (FHFA) to Fannie Mae.
17
16
MULTIFAMILY
MORTGAGE
BUSINESS
What is most striking in the comparison is not necessarily the
at between 80% and 100% of AMI. Fannie Mae also has
difference in asking rents, but the difference in the estimated
financed over 67,000 units with rents affordable to households
household income needed to afford the corresponding rental
earning between 60% and 100% of AMI.
rates. It is likely that many households in these high-cost

metros are not earning the income needed to afford the two-
On a cumulative basis, Fannie Mae has financed approximately
bedroom market rate rent apartment, but rather are spending
89,000 units affordable to residents of San Francisco at or
more than one-third of gross income to pay the rent.
below AMI. On a cumulative basis in New York, Fannie Mae has
Fannie Mae and Workforce Rental Housing
financed approximately 312,000 units affordable to residents
Fannie
and Workforce
Rental
or below
AMI.
The threeMae
metropolitan
areas cited
on theHousing
previous page may haveathigher
costs
of living on average, but they still include some
rental
units
affordable across
the spectrum
of AMI.
The
three
metropolitan
areas cited
on the previous
page may
have
higher
costs
of livingchart,
on average,
butasthey
still include
Properties
Can has
Offer
a Mixnearly
of Rental
Units
As seen
in the
following
in a city
high-cost
as San Francisco,
Fannie Mae
financed
30,000
units renting at
between
80%
andaffordable
100% of across
AMI. Fannie
Mae also
has financed over
67,000
units
with rents
affordable
to households
earning
some
rental
units
the spectrum
of AMI.
As noted
in the
Executive
Summary,
a common
misperception
between 60% and 100% of AMI.
is that an entire apartment building will only offer one
Onseen
a cumulative
basis, chart,
Fannie
financed as
approximately
89,000
to residents
of San Francisco
As
in the following
in Mae
a cityhas
as high-cost
San
rent
levelunits
for itsaffordable
units. In other
words, a landlord
will cater at or
below AMI. On a cumulative basis in New York, Fannie Mae has financed approximately 312,000 units affordable to residents
Francisco, Fannie Mae has financed nearly 30,000 units renting
exclusively to tenants earning 30% of AMI. That may be true
at or below AMI.
FANNIE MAES BOOK OF BUSINESS UNITS IN SPECIFIED MARKETS

SEGMENTED BY AFFORDABILITY TO AMI
100%
90%
15,453
112,244
80%
70%
29,423
60%
105,076
50%
40%
38,113
30%
20%
10%
0%
141,755
96,042
110,527
83,308
15,088
61,510
6,363
31,385
10,987
San Francisco-Oakland-Fremont, CA
Los Angeles-Long Beach-Santa Ana, CA
Units below 50% of AMI
50% of AMI to 60% of AMI
80% of AMI to 100% AMI
Units above 100
43,979
New York-Northern New Jersey-Long Island,
NY-NJ-PA
60% of AMI to 80% of AMI
Source: Fannie Mae, December 2009 Book of Business
Properties Can Offer a Mix of Rental Units

18
As noted in the Executive Summary, a common misperception is that an entire apartment building will only offer one rent level
with certain properties. However, a great number of apartment
Housing Policy Encourages Development of Mixed
buildings offer a variety of units with different rent levels, with
Income Housing
some tenants paying market rate rents, while others are paying
Over the last two decades, affordable housing policies have
below market or government subsidized rents.
shifted from supporting large-scale, urban renewal projects

during the 1950s, 1960s, and 1970s, to supporting smaller,
Once again using San Francisco, Los Angeles, and New York
mixed-income projects, supported by federal programs such
City as examples, the following table looks at examples of such
as LIHTC initiated in 1986 and HOPE VI initiated in 1990.
properties located in each of these metros that have received

multifamily financing from Fannie Mae. Based on information
These types of housing programs have restrictions on what
received by Fannie Mae, none of these three properties receive
percentage of a subsidized projects units must be affordable
any rental subsidies.
at various percentages of AMI and what percentage of units

can be offered at market rates. For instance, under the LIHTC
The property located in Los Angeles is illustrative. It has 135
program, 20% of the units must be affordable to households
earning
no morethe
than
50% of AMI
40% of
must of
be such
units of
which
61 units
rents that
100%
the York City
Once
again
using
San have
Francisco,
Los exceed
Angeles,
and of
New
as examples,
following
tableorlooks
atunits
examples
properties
located
in each
of these
metros
that haveofreceived multifamily
Fannie
Mae.than
Based
onofinformation
affordablefinancing
to familiesfrom
earning
no more
60%
AMI. The
metros AMI.
There are
26 units
each in
the categories
received
Fannie
Mae,and
none
of these60%
three
properties
receive any
rental subsidies.
remainder
of the units may be offered at the market rate,
between by
80%
and 100%
between
and
80% of AMI;
unless
state61
allocating
the tax
credit
imposed
greater
threeproperty
units are located
rented atinbetween
50% and
60% AMI; 12Itunits
The
Los Angeles
is illustrative.
has 135 units
ofthe
which
units have
rents
thathas
exceed
100%
of the
metros
AMI.
There are
26and
units
each
in and
the categories
of betweenrestrictions,
80% and 100%
and
between
60% and 80% of AMI; three
which is
often
the case.
are rented
at between
30%
50%
AMI;
lastly, seven
units are rented at between 50% and 60% AMI; 12 units are rented at between 30% and 50% AMI; and lastly, seven units
units are rented at below 30% AMI.
are rented at below 30% AMI.
UNIT MIXTURE BY AMI FOR THREE SAMPLE FANNIE MAE LOANS

MSA Name
Total Number of Units:
Number of Units:
San Francisco Los Angeles New York

72
135
29
Above 100% AMI

Between 80% of AMI and 100% AMI
Between 60% of AMI and 80% of AMI
Below 30% of AMI
1
4
27
15
20
5
61
26
26
3
12
7
12
1
5
4
3
4
Source: Fannie Mae
Housing Policy Encourages Development of Mixed Income Housing

Over the last two decades, affordable housing policies have shifted from supporting large-scale, urban renewal projects during
FANNIE MAE AND WORKFORCE RENTAL HOUSING 19
the 1950s, 1960s, and 1970s, to supporting smaller, mixed-income projects, supported by federal programs such as LIHTC
MULTIFAMILY
MORTGAGE
BUSINESS
IS THERE ENOUGH RENTAL HOUSING

TO SATISFY DEMAND?
to just 15.5% of all multifamily rentals in 2009, compared to

17.2% in 2007, as seen in the chart below.
Supply and demand for multifamily rental units generally

appear to be in balance. However, the supply of housing to
According to Harvard Joint Centers State of the Nations
lower-income households has fallen short of demand. As
Housing 2010 report, from 1997 to 2007 the number of
noted in the Executive Summary, according to the HUD 2009
rental units affordable to households earning at a full-time
American Housing Survey report, the multifamily rental units
minimum wage declined by 15.6%. Most of these units were
IS THERE
ENOUGH
RENTAL
HOUSING
TO SATISFY
DEMAND?
affordable
at more
than 80% of AMI
climbed slightly
in 2009
demolished,
lost to a natural
disaster, abandoned, converted
Supply and demand for multifamily rental units generally appear to be in balance. However, the supply of housing to lowerto 15.5% of all multifamily rental units, up from 14.9% in 2007.
to non-housing purposes, or otherwise removed from the
income households has fallen short of demand. As noted in the Executive Summary, according to the HUD 2009 American
At the same time, the units affordable to households earning
housing stock.
Housing Survey report, the multifamily rental units affordable at more than 80% of AMI climbed slightly in 2009 to 15.5%
30%
50% of AMIrental
fell to 25.9%
from
26.4%.
Unitsinaffordable
of alltomultifamily
units, up
from
14.9%
2007. At the same time, the units affordable to households earning 30% to
50%
AMI
felloftoAMI
25.9%
from 26.4%.
Unitsloss,
affordable
at less than 30% of AMI recognized the largest loss, dropping to just
at
lessof
than
30%
recognized
the largest
dropping
15.5% of all multifamily rentals in 2009, compared to 17.2% in 2007, as seen in the chart below.
MULTIFAMILY RENTAL UNITS BY AFFORDABILITY 2007 AND 2009

Totals:
100%
90%
Percentage of Total
80%
70%
60%
50%
15.2 Million
15.2 Million
9%
5%
9%
6%
23%
23%
19%
20%
27%
26%
20%
10%
0%
80%-100% AMI
60%-80% AMI
50% - 60% AMI
40%
30%
Over 100% AMI
30% - 50% of AMI

Income < 30% of AMI
17%
16%
2007
2009
Source: Fannie Mae compilation of 2007/2009 American Housing Survey
According to Harvard Joint Centers State of the Nations Housing 2010 report, from 1997 to 2007 the number of rental units
affordable to households earning at a full-time minimum wage declined by 15.6%. Most of these units were demolished, lost
to a natural disaster, abandoned, converted to non-housing purposes, or otherwise removed from the housing stock.
20
WHAT IS THE STATE OF LENDING IN

THE MULTIFAMILY SECTOR TODAY?
lending. Based on the latest data from the American Council

of Life Insurers, the largest 25 life insurers were responsible for
Provide Liquidity and Reliability
nearly $735 million in multifamily loan commitments in the
Fannie Maes housing mission compels the company to remain
second quarter of 2010.
in the multifamily housing finance market in all geographic

areas under all economic and market conditions. Other market
Banks and thrifts have also seen a decrease in multifamily
participants, including banks, life insurance companies and
lending activity. According to the Federal Reserves second-
WHAT IS THE STATE OF LENDING IN THE MULTIFAMILY SECTOR TODAY?

Provide Liquidity and Reliability
the
CMBS
conduit
market,
may withdraw
the market
2010 data, commercial
banks market
and savings
Fannie
Maes
housing
mission
compels from
the company
to remain quarter
in the multifamily
housing finance
in allinstitutions
geographic
areas under
all economic
and For
market
conditions.
Other market saw
participants,
including banks,
life insurance
companies
during
unfavorable
conditions.
example,
the life insurance
a quarter-over-quarter
decrease
of $3.9 billion
in their and
the CMBS
conduit market,
mayon
withdraw
from the market during
unfavorable
conditions.
For example,
the life insurance
industry
significantly
scaled back
issuing multifamily
contribution
to multifamily
mortgage
debt outstanding,
as
industry significantly scaled back on issuing multifamily loan commitments in 2008. As seen in the chart below, only recently
loan commitments in 2008. As seen in the chart below, only
seen in the chart on the following page. The decline in the
have the life insurers started to return to multifamily lending. Based on the latest data from the American Council of Life
recently have the life insurers started to return to multifamily
fourth quarter of 2009 was nearly $10 billion.
Insurers, the largest 25 life insurers were responsible for nearly $735 million in multifamily loan commitments in the second
quarter of 2010.
35%
$3,500
30%
$3,000
$2,500
Commitments for Apartments

% of All CRE Commitments
$2,000
25%
20%
15%
$1,500
10%
$1,000
$500
5%
$0
0%
% Committed to Apartments
$4,000
20
05
Q
20 4
06
Q
20 1
06
Q
20 2
06
Q
20 3
06
Q
20 4
07
Q
20 1
07
Q
20 2
07
Q
20 3
07
Q
20 4
08
Q
20 1
08
Q
20 2
08
Q
20 3
08
Q
20 4
09
Q
20 1
09
Q
20 2
09
Q
20 3
09
Q
20 4
10
Q
20 1
10
Q
2
Apartment Commitments (Millions)
LIFE INSURERS: LOANS COMMITTED FOR APARTMENTS
Source: American Council of Life Insurers
Banks and thrifts have also seen a decrease in multifamily lending activity. According to the Federal Reserves second-quarter
2010 data, commercial banks and savings institutions saw a quarter-over-quarter decrease of $3.9 billion in their contribution
to multifamily mortgage debt outstanding, as seen in the chart on the following page. The decline in the fourth quarter of 2009
was nearly $10 billion.
21
MULTIFAMILY
MORTGAGE
BUSINESS
Q Q1
1: :2
20 0
0 0
Q Q2 5 5
2: :2
20 0
0
Q Q305 5
3: :2
20 0
0
Q Q405 5
4: :2
20 0
0 0
Q Q1 5 5
1: :2
20 0
0
Q Q206 6
2: :2
20 0
0 0
Q Q3 6 6
3: :2
20 0
0
Q Q406 6
4: :2
20 0
0
Q Q106 6
1: :2
20 0
0 0
Q Q2 7 7
2: :2
20 0
0
Q Q307 7
3: :2
20 0
0 0
Q Q4 7 7
4: :2
20 0
0
Q Q107 7
1: :2
20 0
0 0
Q Q2 8 8
2: :2
20 0
0
Q Q308 8
3: :2
20 0
0
Q Q408 8
4: :2
20 0
0 0
Q Q1 8 8
1: :2
20 0
0
Q Q209 9
2: :2
20 0
0 0
Q Q3 9 9
3: :2
20 0
0
Q Q409 9
4: :2
20 0
0
Q Q109 9
1: :2
20 0
1 1
Q Q2 0 0
2: :2
20 0
10 10
(Billions)
(Billions)
$15
$15
$10
$10
$5
$5
$0
$0
($5)
($5)
($10)
($10)
($15)
($15)
FDIC-INSURED INSTITUTIONS:
INSTITUTIONS:
QUARTERLY CHANGE FDIC-INSURED
IN MULTIFAMILY
DEBT OUTSTANDING HOLDINGS
QUARTERLY CHANGE IN MULTIFAMILY DEBT OUTSTANDING HOLDINGS
Source: Federal Reserve Flow of Funds

Source: Federal Reserve Flow of Funds
Although
there have
have been
been aa few
few CMBS
CMBSconduit
conduittransactions
transactions
issued
this
year,
of the
second
quarter
2010
none
contained
Although there
issued
this
year,
as as
of the
second
quarter
2010
none
hadhad
contained
Although there have been a few CMBS conduit transactions issued this year, as of the second quarter 2010 none had contained
newly originated multifamily loans. In June 2010, there was one all-multifamily CMBS issued: the Impact Funding 2010-1
newly
loans.
In June
2010,
therethere
was one
CMBS issued:
Impact
deal.
newly originated
originatedmultifamily
multifamily
loans.
In June
2010,
wasall-multifamily
one all-multifamily
CMBSthe
issued:
theFunding
Impact 2010-1
Funding
2010-1
deal. However, it only consisted of seasoned multifamily loans, the most recent of which was originated in 2007. As a result,
deal. However,
only consisted
of seasoned
multifamily
most
of which
was originated
2007.new
As a result,
However,
it only it
consisted
of seasoned
multifamily
loans, theloans,
most the
recent
of recent
which was
originated
in 2007. As in
a result,
new multifamily CMBS issuance remains at zero for the first half of 2010.
new multifamily CMBS issuance remains at zero for the first half of 2010.
multifamily CMBS issuance remains at zero for the first half of 2010.
$14
$12.0
$14 $10.7
$12
$10.3$11.0 $12.0
$12 $10.7
$8.9
$10.3$11.0
$10
$8.9
$10
$8
$6.3 $5.9 $5.9
$8
$6
$6.3 $5.9 $5.9
$4.1
$6
$4
$4.1
$4
$2
$0.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
$2
$0.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
$0
$0
20 20
05 05
Q Q4
4
20 20
06 06
Q Q1
1
20 20
06 06
Q Q2
2
20 20
06 06
Q Q3
3
20 20
06 06
Q Q4
4
20 20
07 07
Q Q1
1
20 20
07 07
Q Q2
2
20 20
07 07
Q Q3
3
20 20
07 07
Q Q4
4
20 20
08 08
Q Q1
1
20 20
08 08
Q Q2
2
20 20
08 08
Q Q3
3
20 20
08 08
Q Q4
4
20 20
09 09
Q Q1
1
20 20
09 09
Q Q2
2
20 20
09 09
Q Q3
3
20 20
09 09
Q Q4
4
20 20
10 10
Q Q1
1
20 20
10 10
Q Q2
2
(Billions)
(Billions)
U.S. MULTIFAMILY CMBS ISSUANCE

U.S. MULTIFAMILY CMBS ISSUANCE
Source: Commercial Mortgage Alert

Source: Commercial Mortgage Alert
Need for Consistent Capital

Need for Consistent Capital
Leading multifamily housing stakeholders have cited the need for a reliable flow of capital for rental housing and the benefits
Need
for
Consistent
Capital
joint report
U.S. Treasury
and
Leading
multifamily
housing
stakeholders have cited the need forInaareliable
flowto
ofthe
capital
for rentalDepartment
housing and
theHUD,
benefits
of maintaining that supply.
of maintaining
that housing
supply. stakeholders have cited the need
Leading
multifamily
the National Multi-Housing Council, the National Apartment
In a joint report to the U.S. Treasury Department and HUD, the National Multi-Housing Council, the National Apartment
for
flow of
forTreasury
rental housing
and theand
benefits
and the American
Seniorsthe
Housing
Association,
In a reliable
joint report
to capital
the U.S.
Department
HUD, theAssociation,
National Multi-Housing
Council,
National
Apartment
Association, and the American Seniors Housing Association, stated that the sufficient, reasonable and reliable source of
Association,
American Seniors Housing Association, stated
reasonableand
andreliable
reliable
source
of
maintainingand
thatthe
supply.
statedthat
that the
the sufficient,
sufficient, reasonable
source
of of
liquidity the GSEs have provided to the apartment sector has attracted private sector investors to apartments, which has
liquidity the GSEs have provided to the apartment sector has attracted private sector investors to apartments, which has
liquidity
the GSEsAmericans
have provided
to the apartment
sector
enabled our industry to produce millions of units of housing for the
hard-working
our communities
rely on
and for
enabled our industry to produce millions of units of housing for the hard-working Americans our communities rely on and for
our senior citizens. The report further added that a government-supported
secondary
is absolutely
critical
to the
has attracted private
sectormarket
investors
to apartments,
which
our senior citizens. The report further added that a government-supported secondary market is absolutely critical to the
multifamily sector and our industrys ability to continue to meet the nations demand for affordable and workforce housing.
multifamily sector and our industrys ability to continue to meet the nations demand for affordable and workforce housing.
22
FANNIE
MAE AND WORKFORCE HOUSING
21
21
has enabled our industry to produce millions of units of
FHA Multifamily Financing Plays a Small Role
housing for the hard-working Americans our communities
The Joint Centers January 2009 policy brief also stated that,
rely on and for our senior citizens. The report further
FHA-insured multifamily mortgages (and sales of these
added that a government-supported secondary market is
mortgages into mortgage-backed pools guaranteed by Ginnie
absolutely critical to the multifamily sector and our industrys
Mae) play a small but critical role in the overall market. FHA
ability to continue to meet the nations demand for affordable
insurance facilitates new construction and rehabilitation
The Harvard Joint Center for Housing Studies also confirmed the importance of support for multifamily housing finance. In
through higher loan-to-value loans for multifamily
and workforce housing.
a January 2009 policy brief, the Center concluded, An efficient, smoothly functioning finance system is needed to insure the
developments than the private lending market.
viability of the apartment building market and the multifamily industry. In normal times, multiple sources provide fresh credit
The
Joint Center
for and
Housing
Studies
also confirmed
to Harvard
the multifamily
market
industry.
During
this period of extreme distress, however, only federal sources are active in the
multifamily
finance
market.
the
importance
of support
for multifamily housing finance.
In addition, through its Section 221 and 542(c) programs,
InFHA
a January
2009 policy
brief, the Plays
Centeraconcluded,
An
Multifamily
Financing
Small Role
FHA provides one-stop financing from construction through
The Joint
Centers
January 2009
brief
also stated
that,permanent
FHA-insured
multifamily
sales of these
financing.
This is inmortgages
contrast to(and
the private
efficient,
smoothly
functioning
financepolicy
system
is needed
to
mortgages into mortgage-backed pools guaranteed by Ginnie Mae) play a small but critical role in the overall market. FHA
sector where construction loans are usually separated from
insure the viability of the apartment building market and the
insurance facilitates new construction and rehabilitation through higher loan-to-value loans for multifamily developments
permanent financing loans with construction loans generally
multifamily industry. In normal times, multiple sources provide
than the private lending market.
provided by one lender and permanent financing provided by

fresh credit to the multifamily market and industry. During this
In addition, through its Section 221 and 542(c) programs, FHA provides one-stop financing from construction through
another lender to minimize financing risk.
period of extreme distress, however, only federal sources are
permanent financing. This is in contrast to the private sector where construction loans are usually separated from permanent
active
in theloans
multifamily
finance market.
financing
with construction
loans generally provided by one lender and permanent financing provided by another lender
to minimize financing risk.
The following table shows the recent volumes1 of FHA-
insured loans:
The following table shows the recent volumes of FHA-insured loans:
FHA CREDIT INSURED LOAN VOLUME

Totals:
100%
80%
$2.6B
$2.3B
$3.0B
$9.5B
1.4
1.2
1.6
6.0
1.2
1.1
1.4
2007
2008
2009
60%
40%
20%
0%
New Construction/Substantial Rehab
3.5
2010
Purchase/Refinance
Source: FHA; Excludes loans endorsed under FHA section 232 Health Care Program and FHA Risk Share Program
From 2007 to the present, FHA has been increasing the amount insured annually to aid construction financing. As the previous
1
as of August 2010
chart shows, in the past, under normal circumstances, FHA endorsements and insurance of multifamily mortgages were fairly
evenly divided between new construction or rehabilitation loans and purchase
refinance
loans.
FANNIEor
MAE
AND WORKFORCE
RENTAL HOUSING
23
MULTIFAMILY
MORTGAGE
BUSINESS
From 2007 to the present, FHA has been increasing the
over-year, from $1.4 billion insured in the fiscal year ending
amount insured annually to aid construction financing. As the
in September 2009 to approximately $3.5 billion in the fiscal
previous chart shows, in the past, under normal circumstances,
year ending in September 2010. Purchase and refinance loans
FHA endorsements and insurance of multifamily mortgages
insured also increased from about $1.6 billion in the fiscal year
were fairly evenly divided between new construction or
ending in 2009 to approximately $6.0 billion for the fiscal year
rehabilitation loans and purchase or refinance loans.
ending in 2010.
The lack of private sector financing available for multifamily
Despite FHAs recent increase in multifamily production,
projects has resulted in a significant increase in FHA- insured
Fannie Mae and Freddie Mac historically provide significantly
multifamily mortgages. The amount of FHA-endorsed new

more financing for the multifamily sector, as shown in the
Despite FHAs recent increase in multifamily production, Fannie Mae and Freddie Mac historically provide significantly more
construction/rehabilitation
loans
moreasthan
doubled
following chart:
financing
for the multifamily
sector,
shown
in theyearfollowing chart:
MULTIFAMILY MORTGAGES AND SECURITIES PURCHASED BY GSEs 2006-2009

AS PER THE ANNUAL HOUSING ACTIVITIES REPORTS
100.0
75.0
($ Billions)
Freddie Mac
$41.1
Fannie Mae
50.0
$59.9
25.0
$23.0
$26.9
$16.3
$32.0
$36.6
2006
2007
2008
Calendar Year
$19.4
2009
Source: 2007-2010 Annual Housing Activities Report provided to the Federal Housing Finance Agency (FHFA)
Ginnie
Ginnie Mae
Mae Multifamily
MultifamilyVolume
VolumeFollows
FollowsSuit
Suit
Since the dislocation of the credit markets in 2008 and thanks to increased FHA endorsements, Ginnie Mae has experienced
a significant increase in issuance, as seen in the following table. Ginnie Mae does not buy or sell multifamily loans but instead
a significantthat
increase
in issuance,
seen in
the following
table.and
Ginnie
Mae does
not buy
or sell multifamily
loans but instead
guarantees
investors
receiveastimely
payment
of interest
principal
for MBS
consisting
of FHA multifamily
loans.
guarantees that investors receive timely payment of interest and principal for MBS consisting of FHA multifamily loans.
More than $9 billion in Ginnie Mae multifamily securities were issued during the first nine months of 2010, compared to $6.7
billion issued in all of last year, for an annualized pace of over $12 billion for this year. However, even with the recent increase
in activity, Ginnie Mae still holds less than 6% of the total mortgage debt outstanding as of the second quarter of 2010.
24
MULTIFAMILY MRS ISSUANCE
Source: 2007-2010 Annual Housing Activities Report provided to the Federal Housing Finance Agency (FHFA)
Ginnie Mae Multifamily Volume Follows Suit

a significant increase in issuance, as seen in the following table. Ginnie Mae does not buy or sell multifamily loans but instead
guarantees that investors receive timely payment of interest and principal for MBS consisting of FHA multifamily loans.
billion issued in all of last year, for an annualized pace of over $12 billion for this year. However, even with the recent increase in
billion issued in all of last year, for an annualized pace of over $12 billion for this year. However, even with the recent increase
activity, Ginnie Mae still holds less than 6% of the total mortgage debt outstanding as of the second quarter of 2010.
in activity, Ginnie Mae still holds less than 6% of the total mortgage debt outstanding as of the second quarter of 2010.
MULTIFAMILY MRS ISSUANCE

($BN)
2009 2010 YTD
MRS issuance ($BN)
26.4
24.5
Fannie Mae
17.5
10.6
Freddie Mac
2.1
4.4
Ginnie Mae
6.7
9.1
CMBS
0.1
0.4
Share:
Fannie Mae
Freddie Mac
Ginnie Mae
CMBS
66.3%
7.8%
25.5%
0.4%
43.2%
18.1%
37.1%
1.6%
Q309
6.7
5.3
1.4
78.9%
0.0%
21.1%
0.0%
Q409
8.2
4.5
1.0
2.6
55.6%
12.2%
32.2%
0.0%
Q110
7.8
3.2
2.1
2.3
0.1
41.5%
27.2%
30.3%
1.1%
Q210
7.1
2.7
1.2
2.9
0.3
Q310
9.6
4.6
1.2
3.8
-
38.2% 48.4%
16.4% 12.1%
41.2% 39.5%
4.2% 0.0%
Source: Fannie Mae
FANNIE MAE
WORKFORCE
HOUSING
WHAT
ISAND
FANNIE
MAES
ROLE IN THE
MULTIFAMILY MARKET?
23
The share of multifamily financing from private sources moved
in the opposite direction. The CMBS share of multifamily
Fannie Maes Multifamily Market Share
mortgage debt outstanding increased from slightly less than
Fannie Mae currently provides the largest share of the U.S.
12% in the early 2000s to a high of 16.5% in the third quarter
multifamily mortgage financing, and traditionally has been a

Fannie Maes Multifamily Market Share
leader
in thisMae
market.
Fannie
currently provides the largest share of the U.S.
of 2007. With the dislocation of the credit markets starting in
WHAT IS FANNIE MAES ROLE IN THE MULTIFAMILY MARKET?

leader in this market.
Prior to 2007, Fannie Maes share of total multifamily mortgage

Prior to 2007, Fannie Maes share of total multifamily
debt outstanding, as reported by the Federal Reserve, tended
mortgage debt outstanding, as reported by the Federal
to beReserve,
fairly stable,
in the 16% range. That market share has
tended to be fairly stable, in the 16% range. That
MULTIFAMILY MORTGAGE DEBT

OUTSTANDING 2Q2010
Other
Life Insurers 4.8%
5.6%
State & Local
Entities
8.7%
Fannie Mae
20.0%
market
share
has
increased
since
the housing
crisis began.
The
increased
since
the
housing
crisis
began.
The companys
share
Freddie Mac
11.2%
companys share of mortgage debt outstanding (not including
of mortgage debt outstanding (not including bond credit
bond credit enhancements) was 20% as of the second quarter
enhancements)
was 20%
as share
of thewas
second
quarter of 2010.
of 2010. Freddie
Macs
11.2%
Freddie Macs share was 11.2%
BanksThrifts
31.6%
CMBS
12.5%
The share of multifamily financing from private sources moved

in the opposite direction. The CMBS share of multifamily
Ginnie Mae
5.6%
Source: Federal Reserve
mortgage debt outstanding increased from slightly less than

12% in the early 2000s to a high of 16.5% in the third quarter of 2007. With the dislocation of the credit markets starting in
the fall of 2007, the CMBS originators retreated, as seen in the chart to the
right. The
share fell to 12.5%
in the
second
FANNIE
MAECMBS
AND WORKFORCE
RENTAL
HOUSING
quarter of 2010.
25
MULTIFAMILY
WHAT IS FANNIE MAES ROLE
IN THE MULTIFAMILY MARKET?
MORTGAGE
Fannie Maes Multifamily Market Share BUSINESS
Fannie Mae currently provides the largest share of the U.S.
the fall of 2007, the CMBS originators retreated, as seen in the
leader in this market.
chart to the right. The CMBS share fell to 12.5% in the second
Prior to 2007, Fannie Maes share of total multifamily
quarter of 2010.
mortgage debt outstanding, as reported by the Federal
Reserve, tended to be fairly stable, in the 16% range. That
MULTIFAMILY MORTGAGE DEBT

OUTSTANDING 2Q2010
Fannie Maes multifamily 60+-day delinquency rate was 0.80%

Other
4.8%
Life
Insurers
as of June 30, 2010. The 60+ multifamily CMBS
delinquency
Fannie Mae
5.6%
20.0%
& Local
rate asState
of the
same date was 13.18%, and the banks and thrifts
Entities
8.7%
90+-day delinquency rate was nearly 4.0%
Fannie Mae Offers Product Standardization
market share has increased since the housing crisis began. The
In an effort
to of
promote,
enhance,
and maintain(not
product
companys
share
mortgage
debt outstanding
including
Fannie Mae Serves the Entire Rental Sector 11.2%
bondstandardization
credit enhancements)
was 20%marketplace,
as of the second
in the multifamily
Fanniequarter
Mae
Fannie Mae serves the rental housing needs of a wide range of
Freddie Mac
of 2010.
Freddie
Macs share
was 11.2%
created
the Delegated
Underwriting
and Servicing (DUS)
BanksGinnie Mae
5.6%scale up
Americans,Thrifts
from those at the lower end of the income
31.6%
in 1988 for
purchasing
individual
multifamily
The product
share ofline
multifamily
financing
from
private sources
moved
through middle-income households.
in the
opposite
ThetoCMBS
share
ofMaes
multifamily
loans.
DUS hasdirection.
since evolved
become
Fannie
CMBS
12.5%
Source: Federal Reserve
mortgage
debt
outstanding
fromis slightly
less
principal
network
wherebyincreased
underwriting
delegated
to than
the
As seen on the chart on page 27, Fannie Mae has financed a
12% in the early 2000s to a high of 16.5% in the third quarter of 2007. With the dislocation of the credit markets starting in
DUS lenders, who retain credit risk over the life of the loan,
wide array of affordable rental units over the past few years.
the fall of 2007, the CMBS originators retreated, as seen in the chart to the right. The CMBS share fell to 12.5% in the second
enabling them to move quickly to arrange financing for
Approximately 87% of multifamily units financed by Fannie
quarter of 2010.
borrowers.
Mae in 2009 were affordable to households at or below
Fannie Mae Offers Product Standardization
the median income of their communities. About 49% of all

In an effort to promote, enhance, and maintain product standardization in the multifamily marketplace, Fannie Mae created
The DUS program has been effective in providing liquidity
multifamily units financed by Fannie Mae were affordable to
the Delegated Underwriting and Servicing (DUS) product line in 1988 for purchasing individual multifamily loans. DUS has
affordable
multifamily
properties.
majority
of loanswhereby lowand very-low
income households
in low-income
areas,
sinceforevolved
to become
Fannie
Maes The
principal
network
underwriting
is delegated
to the DUS
lenders, who
retain
credit
risk overthrough
the lifeFannie
of the Maes
loan, 25-member
enabling them
move quickly and
to arrange
financing
for borrowers.
48% of the
multifamily
units financed were located in
purchased
DUStolender
underserved markets.
are secured by properties with units that are largely
The network
DUS program
has been effective in providing liquidity for affordable
multifamily properties. The majority of loans
affordable
to households
at or below 100%
AMI. network are secured by properties with units that are largely
purchased
through
Fannie earning
Maes 25-member
DUSoflender
affordable to households earning at or below 100% of AMI.
MULTIFAMILY DELINQUENCY
COMPARISONS
Fannie
Credit
Quality
Fannie
MaeMae
andand
Credit
Quality
10%
8%
CMBS
(60+)
CMBS (60+)
Fannie (60+)
Banks & Thrifts (90+)
Banks & Thrifts

(90+)
6%
4%
2%
Fannie (60+)
J10
M
-1
-0
9
D
S09
J09
M
-0
M
-0
-0
8
0%
each loan. The impact of this combination of clear standards

each loan. The impact of this combination of clear standards
and loss sharing is evidenced in Fannie Maes low delinquency
and loss sharing is evidenced in Fannie Maes low delinquency
rate, as seen in the chart to the right.
rate, as seen in the chart to the right.
12%
S08
loans
following
thethe
DUS
riskon
on
loans
following
DUSguidelines
guidelinesand
andretains
retains credit
credit risk
14%
J08
Central
to the
DUS
program
thatthe
thelender
lenderunderwrites
underwritesthe
the
Central
to the
DUS
program
is isthat
Source: Fannie Mae, FDIC, Barclays
26
24
As seen in the following charts, Fannie Mae has financed a wide array of affordable rental units over the past few years.
Approximately 87% of multifamily units financed by Fannie Mae in 2009 were affordable to households at or below
the median income of their communities. About 49% of all multifamily units financed by Fannie Mae were affordable to
low- and very-low income households in low-income areas, and 48% of the multifamily units financed were located in
underserved markets.
DISTRIBUTION OF RENTAL UNITS

FINANCED WITH MULTIFAMILY MORTGAGE AND SECURITIES PURCHASES
BY FANNIE MAE 20022009 AS PER THE ANNUAL HOUSING ACTIVITIES REPORTS
600,000
Units
500,000
Affordable at no more than 60% of

Median Income
400,000
Affordable at more than 60% but no

more than 100% of Median Income
300,000
Affordable at more than 100% of

AMI
200,000
Not Provided by Lender

100,000
0
2002
2003
2004
2005
11%
9%
8%
2006
2007
2008
2009
100%
90%
9%
31%
80%
70%
60%
46%
49%
44%
10%
42%
31%
50%
45%
9%
11%
Not Provided by Lender

43%
44%
40%
30%
20%
40%
10%
33%
41%
43%
2004
2005
34%
33%
37%
37%
2006
2007
2008
2009
Affordable at more than 100% of AMI

Affordable at more than 60% but
no more than 100% of Median Income
Affordable at no more than 60% of
Median Income
0%
2002
2003
Source: Fannie Mae Annual Housing Activities Report 2002-2009 (Table 4)
25
Fannie Mae Participates in Subsidized Affordable Housing

While focusing on workforce rental housing, Fannie Mae is also active in the subsidized affordable market. The layering of
subsidies necessary to make rents affordable to the lowest income households makes this a difficult segment of the market to
serve through debt financing.
27
Fannie Mae has several programs designed specifically for this market, including Affordable Delegated Underwriting and
MULTIFAMILY
Servicing (DUS), Fixed-Rate Bond Credit Enhancement
and Forward Commitments which are all designed to aid in the
MORTGAGE
development and preservation of rental unitsBUSINESS

affordable to households earning 60% of AMI or less.
FANNIE MAE MULTIFAMILY BOOK OF BUSINESS BY

AFFORDABILITY RELATIVE TO AMI
Estimated Share of
5+ units
Fannie
Mae Book
Lower Income Households
(Affordable to income 60% of AMI)
Workforce Housing
(Affordable to 60% AMI < income 100% of AMI)
Subtotal Housing available to Working
Households
Higher than Median Income
(Affordable to income > 100% of AMI)
Total
1,602,557
42.5%
1,715,951
45.5%
3,318,508
88.1%
449,884
11.9%
3,768,392 100.0%
Note: Fannie Mae AMI category for loan level affordability determined based on category at year of acquisition.
Source: Fannie Mae, December 31, 2009
Fannie Mae has several programs designed specifically for this market, including Affordable Delegated Underwriting and
Servicing (DUS), Fixed-Rate Bond Credit Enhancement and Forward Commitments which are all designed to aid in the
development and preservation of rental units affordable to households earning 60% of AMI or less.
WHAT IS THE OUTLOOK FOR THE

MULTIFAMILY SECTOR?
Multifamily Fundamentals Improving
According to REIS, the second and third quarters typically are

stronger periods, as most households make decisions to move
and lease new apartments during this time.
WHAT
IS THE OUTLOOK FOR THE MULTIFAMILY SECTOR?
The multifamily sector improved in 2010 despite stubbornly
high unemployment and an extremely modest economic

recovery
and is expected
end extremely
the year onmodest
a strong economic
note.
high
unemployment
andto an
Effective
rents
have now
risen
three
quarters
a row.
In
In
addition,
effective
rents
have
now
risen in
three
quarters
in
aaddition,
row. In concessions,
addition, concessions,
which expressed
are usuallyinexpressed
which are usually
the form
in the form of a month or more of free rent, have been
of a month or more of free rent, have been contracting all year.
contracting all year.
8.0
7.5
7.0
6.5
6.0
1.0
0.5
0.0
Effective Rent Change (%)
quarter and from 8.0% in the first quarter.
Vacancy Rate (%)
quarter
frombasis
8.0%points
in theto
first
quarter.
fell
againand
by -60
7.2%
from 7.8% in the second
8.5
2.0
Effective Rent Change

1.5
Vacancy Rate
-0.5
5.5
-1.0
5.0
-1.5
2:
2
Q 005
4:
2
Q 005
2:
2
Q 006
4:
2
Q 006
2:
2
Q 007
4:
2
Q 007
2:
2
Q 008
4:
2
Q 008
2:
2
Q 009
4:
2
Q 009
2:
20
10
fell again by -60 basis points to 7.2% from 7.8% in the second
REIS, Inc. reported that the third quarter, 2010 vacancy rate
9.0
REIS, Inc.and
reported
that thetothird
rate
recovery
is expected
end quarter,
the year2010
on avacancy
strong note.
RENT GROWTH AND VACANCY RATE
Source: REIS
According to REIS, the second and third quarters typically are stronger periods, as most households make decisions to move
It appears that rental rates have fallen far enough to warrant an increase in occupancy levels. Other likely reasons for
28 overall improvement in multifamily include landlords experiencing a higher rate of tenant retention and declines in new
the
26
WHAT IS THE OUTLOOK FOR THE MULTIFAMILY SECTOR?

9.0
high unemployment and an extremely modest economic

Vacancy Rate (%)
recovery and is expected to end the year on a strong note.
2.0
Effective Rent Change

1.5
Vacancy Rate
8.5
8.0
1.0
Effective Rent Change (%)
RENT GROWTH AND VACANCY RATE
It appears that rental rates have fallen far enough to warrant

REIS, Inc. reported that the third quarter, 2010 vacancy rate
Healthy
7.5 Long-Term Fundamentals
an increase
occupancy
levels.
Other from
likely 7.8%
reasons
fell
again byin-60
basis points
to 7.2%
in for
the second
7.0the elevated unemployment rate, housing demand

Despite
quarter
andimprovement
from 8.0% in
first quarter.
the overall
in the
multifamily
include landlords
is expected to continue growing, with an ongoing need -0.5

for
experiencing
a higher rate
tenant
retention
and declines
In
addition, effective
rentsofhave
now
risen three
quartersin in
-1.0
5.5
reliable
and stable financing for the multifamily sector. Some
anew
row.
In addition,
concessions,
which
are usually
expressed
apartment
completions,
thereby
limiting
the amount
of
former homeowners will turn to renting. In addition, the labor
in
the form
of a month or more of free rent, have been
competing
supply.
contracting all year.
market is slowly stabilizing and household formations are up
0.5
0.0
6.5
6.0
-1.5
Q
2:
2
Q 005
4:
2
Q 005
2:
2
Q 006
4:
2
Q 006
2:
2
Q 007
4:
2
Q 007
2:
2
Q 008
4:
2
Q 008
2:
2
Q 009
4:
2
Q 009
2:
20
10
5.0
Source: REIS
from recently historic low levels.
According to REIS, the second and third quarters typically are stronger periods, as most households make decisions to move
The lack of new supply is clearly demonstrated in the following
More importantly, demographics are in the multifamily
chart. McGraw-Hill Constructions Dodge Pipeline data shows
It
appears
that rental
rates have projects
fallen far
to warrant
an increase
in occupancy
levels.
likely reasons
for
sectors
favor over
the long-term.
TheOther
Echo Boomers
are
that
new multifamily
construction
thatenough
are currently
the overall improvement in multifamily include landlords experiencing a higher rate of tenant retention and declines in new
starting to form independent households. The prime renting
underway and expected to complete and become available
apartment completions, thereby limiting the amount of competing supply.
age cohort, which consists of individuals aged 20-34 years old,
for new tenants will keep declining over the next 12 months.
The lack of new supply is clearly demonstrated in the following chart. McGraw-Hill Constructions Dodge Pipeline data shows
is expected to grow substantially between 2010 and 2030.
that new multifamily construction projects that are currently underway and expected to complete and become available for
new tenants will keep declining over the next 12 months.
U.S. MULTIFAMILY CONSTRUCTION PIPELINE
70
Apartments
Thousands
60
Condos
50
40
30
20
10
Q
2*
1*
11
20
20
11
4*
3*
20
10
2*
Q
10
20
20
10
4
Q
20
10
20
09
Q
2
20
09
09
20
20
09
3
20
08
20
08
1
20
08
08
20
20
07
2
20
07
1
Q
20
07
4
20
07
20
06
2
Q
06
20
06
20
20
06
* Estimated completion dates as of 2010Q2.

Source: CBRE-EA/Dodge Pipeline
27
29
slowly stabilizing and household formations are up from recently historic low levels.
and stable financing for the multifamily sector. Some former homeowners will turn to renting. In addition, the labor market is
More importantly, demographics are in the multifamily sectors favor over the long-term. The Echo Boomers are starting to
slowly
stabilizing and household formations
are up from recently historic low levels.
MULTIFAMILY
form independent households. The prime MORTGAGE
renting age cohort, which consists of individuals aged 20-34 years old, is expected
More importantly, demographics are in the multifamily sectors favor over the long-term. The Echo Boomers are starting to
BUSINESS
to grow substantially between 2010 and 2030,
as seen below.
form independent households. The prime renting age cohort, which consists of individuals aged 20-34 years old, is expected
to grow substantially between 2010
andRENTER
2030, as seen
below.
U.S.
POPULATION:
70
Millions
Millions
68
70
AGE 20-34 COHORT
U.S. RENTER POPULATION: AGE 20-34 COHORT
66
68
64
66
62
64
60
62
58
60
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
56
58
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
56 U.S. Census
Source:
Source: U.S. Census
an
theCenter
demand
for rental
housing
the next
Theincrease
Harvard in
Joint
for Housing
Studies
alsoover
projects
The Harvard Joint Center for Housing Studies also projects
decade. In The State of the Nations Housing 2010,
an increase
increase in
housing
over
the the
nextnext
an
in the
thedemand
demandfor
forrental
rental
housing
over
the Center projects that changes in the age distribution of
decade.
In The
The
State
ofNations
the Nations
decade. In
State
of the
HousingHousing
2010, the2010,
Center
households will likely lift demand for rental housing over the
the Center projects that changes in the age distribution of
projects
that changes in the age distribution of households
next
decade.
households will likely lift demand for rental housing over the
will likely lift demand for rental housing over the next decade.
In addition
next
decade. to growth in the prime renting cohort, the Center
projects that the number of older renter households will
In addition to growth in the prime renting cohort, the Center
increase.
Although
figures
vary
depending
onthe
immigration
In addition
to growth
in themay
prime
renting
cohort,
Center
levels, as the adjacent chart shows, not only will the 20-34
increase. Although figures may vary depending on immigration
year old group increase substantially, but the number of
increase.
figures
mayshows,
vary depending
levels,
as Although
the adjacent
chart
not only on
willimmigration
the 20-34
renter households over age 55 will likely rise by more than
year
old
group
increase
substantially,
but
the
levels,
as the
adjacent
chart
shows,
will
the number
20-34
yearof
3
million
in the
coming
decade
asnot
theonly
Baby
Boom
generation
renter households over age 55 will likely rise by more than
old group
substantially,
but the
numberfor
of renter
ages.
Withincrease
the lack
of new supply,
demand
multifamily
3 million in the coming decade as the Baby Boom generation
housing
should
strong
over
coming
decade.
households
overremain
age 55 will
likely
risethe
by more
than
3 million
ages. With the lack of new supply, demand for multifamily
in the coming
the Baby
Boom
generation
ages. With
housing
shoulddecade
remainasstrong
over
the coming
decade.
the lack of
new
supply,
demand for
multifamily housing should
FANNIE
MAE
AND
WORKFORCE
HOUSING
PROJECTED RENTER HOUSEHOLD GROWTH

2010-2020
1,500
PROJECTED RENTER HOUSEHOLD GROWTH
1,250
2010-2020
1,500
1,000
Thousands
Thousands
The Harvard Joint Center for Housing Studies also projects
1,250
750
1,000
500
750
250
5000
250
-250
35-44 45-54 55-64 65-74 75 and

over
Age of Householder
-250 Assuming Low Immigration
Assuming High Immigration
15-24 25-34 35-44 45-54 55-64 65-74 75 and
Notes: High immigration projection
immigration rises from over
Age ofassumes
Householder
1.1 million in 2005 to 1.5 million in 2020, as estimated by the
Assuming
Low Immigration
AssumingLow
High
Immigration
Census Bureau's
2008 population projections.
immigration
0
15-24
25-34
projection assumes immigration is half the Census Bureau's

Notes: High immigration projection assumes immigration rises from
projected totals.
1.1 million in 2005 to 1.5 million in 2020, as estimated by the
Census Bureau's 2008 population projections. Low immigration
Source: JCHS household projections.
projection assumes immigration is half the Census Bureau's
projected totals.
Source: JCHS household projections.
28
remain strong over the coming decade.

30
28
BIBLIOGRAPHY
Belsky and Drew, Taking Stock of the Nations Rental Housing
Challenges and a Half Century of Public Policy Responses, March
2007, Joint Center for Housing Studies of Harvard University.
Meeting Multifamily Housing Finance Needs During and After
the Credit Crisis, January 2009 policy brief, Joint Center for
Housing Studies of Harvard University.
Cohen, Wardrip and Williams, Rental Housing Affordability,
A Review of Current Research, October 2010, The Center for
Housing Policy.
DeCrappeo and Pelletiere, Out of Reach 2010: Renters in the
Great Recession The Crisis Continues, June 2010, The National
Low Income Housing Coalition.
Fowler, Policies and Programs to Preserve Affordable Housing: A
Review of Incentives and Recommendations for Northern Virginia
Prepared for The Alliance for Housing Solutions in July 2006,
George Mason University School of Public Policy Center for
Regional Analysis.
Government-Sponsored Enterprises and Multifamily
Housing Finance: Refocusing Core Functions, October 2010,
Commissioned by the National Housing Conference and
prepared by Recap Real Estate Investment Advisors.
Priced Out: Persistence of the Workforce Housing Gap in the
Washington, D.C., Metro Area, 2009, Urban Land Institute (ULI) J.
Ronald Terwilliger Center for Workforce Housing
Beltway Burden: The Combined Cost of Housing and
Transportation in the Greater Washington DC Metropolitan Area,
2009, Urban Land Institute (ULI) J. Ronald Terwilliger Center for
Workforce Housing.
Smith, Building Stronger Sponsors, September 7, 2010, Recap

Advisors: State of the Market, issue 31.
The GSEs Role in Housing Finance, February 3, 2009, The
National Multi Housing Council (NMHC) Research Notes Series.
The National Multi Housing Council (NMHC), the National
Apartment Association (NAA) and the American Seniors
Housing Association (ASHA) recommendations on the
future of the housing finance system, public letter to The
Honorable Timothy F. Geithner Secretary U.S. Department of
the Treasury and to The Honorable Shaun Donovan Secretary
U.S. Department of Housing and Urban Development, July 21,
2010.
Statement by James Arbury Senior Vice President of
Government Affairs on Behalf of the National Multi Housing
Council and the National Apartment Association Before the
Senate Committee on Small Business and Entrepreneurship:
Small Business Access to Capital: Challenges Presented by
Commercial Real Estate, November 17, 2010.
The State of the Nations Housing 2010, 2010, Joint Center for
Housing Studies of Harvard University.
The State of Floridas Assisted Rental Housing, June 2009, The
Shimberg Center for Housing Studies.
The 2008 State Housing Finance (HFA) Factbook, 2009, The
National Council of State Housing Finance Agencies.
Vandenbroucke, Housing in America: 2009 American Housing
Survey Results, 2010, The U.S. Department of Housing and
Urban Development (HUD).
31
MULTIFAMILY
MORTGAGE
BUSINESS
CONTACTS
Multifamily Economics and Market Research Team
Opinions, analyses, estimates, forecasts and other views of Fannie Maes

Multifamily Mortgage Business Economics and Market Research Group
(MRG) included in these materials should not be construed as indicating
Kim Betancourt
Fannie Maes business prospects or expected results, are based on a
202-752-4656
number of assumptions, and are subject to change without notice.
Kim_Betancourt@fanniemae.com
How this information affects Fannie Mae will depend on many factors.
Although the MRG bases its opinions, analyses, estimates, forecasts and
other views on information it considers reliable, it does not guarantee
Tanya Zahalak
202-752-4944
Tatyana_M_Zahalak@fanniemae.com
that the information provided in these materials is accurate, current or

suitable for any particular purpose. Changes in the assumptions or the
information underlying these views could produce materially different
results. The analyses, opinions, estimates, forecasts and other views
published by the MRG represent the views of that group as of the date
indicated and do not necessarily represent the views of Fannie Mae or its
management.
32

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Fannie Mae and Workforce Rental Housing

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FIRST QUARTER 2011

FANNIE MAE AND

WORKFORCE RENTAL HOUSING

What is Affordable Rental Housing?

Why is it Important to Preserve

demographic forces and a change in attitudes towards homeownership versus

12 How Much Rental Housing is There?

13 How Affordable is Multifamily Rental

20 Is There Enough Rental Housing to

21 What is the State of Lending in the

mortgage-backed securities and providing a credit guarantee on the securities.

25 What is Fannie Maes Role in the

The vast majority roughly 90 percent of Fannie Maes multifamily housing

28 What is the Outlook for the Multifamily

finance currently supports rental housing that is affordable to households earning

workforce rental housing:

Subsidized Affordable Housing consists of rental

1. MOST MULTIFAMILY HOUSING IS AFFORDABLE

keeping rents affordable to those at the lowest-income

According to data from the 2009 American Housing Survey

levels. These properties rely on a mix of public subsidy

by the U.S. Department of Housing and Urban Development

and private financing, and typically support households

(HUD), about 14 million of the estimated 17 million rental

earning between 30% and 80% of AMI.

housing units across the nation are considered affordable to

Conventional Market Rate rental housing is also

people earning less than their areas median income (AMI)

privately owned but charges rents consistent with the

where rent payments comprise no more than 30% of income.

property amenities as well as local housing market prices

A subset of affordable rental housing is known as workforce

not receive direct subsidies. Conventional market-rate

rental housing, defined by the Urban Land Institute (ULI) as

properties may offer rental housing that is affordable to

affordable to households earning 60% to 100% of AMI.

In addition, there are different levels of rental affordability.

2. MOST MULTIFAMILY PROPERTIES OFFER A MIX OF

For instance, a rental unit may be affordable to a household

RENTAL UNITS AND RENT LEVELS

earning 100% of AMI, but not affordable to one earning 50%

A common misperception is that an entire apartment building

With these distinctions, multifamily housing is often classified

reality, apartment buildings frequently offer a variety of units

into three distinct categories: Public Housing, Subsidized

with different rent levels some tenants may pay market-rate

Affordable Housing, and Conventional Market Rate Housing.

rents while their neighbors pay below-market or government-

Public Housing consists of rental housing properties

that are both publicly funded and publicly owned and

The mix of rent levels is effective in leveraging public

the federal government and typically serves the lowest

subsidies while increasing economic integration and limiting

income households those earning less than 30% of AMI.

the concentration of poverty. For example, 70% of all the

affordable to various levels of AMI, with the remaining 30% of

during the housing run-up. Rental housing saw a rapid influx

the properties offering units affordable to just one AMI level.

of investment capital, decreased affordability for tenants,

3. A SHORTAGE OF AFFORDABLE AND WORKFORCE

financing structures created for securities that were sold to

RENTAL HOUSING PERSISTS

Rental housing affordable to lower-income households

The housing market collapse reversed this dynamic and