Affordable housing developers often run the gauntlet when it comes to bringing together different financing sources to move projects forward. But the job of accessing capital has gotten a lot easier lately as lenders and agencies step up their focus on the sector.
It is an “absolutely awesome” time to be a borrower on the affordable housing side, Berkadia Commercial Mortgage Senior Vice President Frank Lutz told the National Real Estate Investor. “Banks are incredibly aggressive and both Fannie Mae and Freddie Mac have increased their lending to affordable housing projects,” Lutz said.
Freddie Mac reported a 67 percent spike in its multifamily loan purchase volume last year, with a total volume of $47.3 billion. That represents an increase of $19 billion over 2014. As Freddie Mac had a firm cap of $30 billion for its market rate housing for 2014 and 2015 that increase occurred largely on the uncapped side — lending that includes affordable housing, workforce housing, seniors housing, manufacturing housing and some smaller multifamily properties.
Fannie Mae also has reported growth in its affordable housing business. Although its market rate lending remained flat due to its $30 billion cap, Fannie Mae reported a total lending volume last year of $42.3 billion.
“The access to capital in the market is really good right now from both a debt and equity standpoint,” Dominium Vice President Ryan Lunderby said in the news release. “The agency lending seems to be the most attractive execution currently. Both Fannie and Freddie have gotten more aggressive with their pricing. It seems like they have an increased desire to lend in the affordable space, which they don’t have a cap on.”
One example of that involves the new products the agencies are introducing. For instance, Fannie Mae has a new Reduced Occupancy Affordable Housing (ROAR) product that provides loans for existing affordable housing assets that don’t have stabilized operations.
There are a number of factors fueling the increase from agency lenders, according to the release. Robust lending on the market rate apartment side may be partly responsible. Last year, Fannie and Freddie were racing towards their $30 billion caps on the market rate side fairly early in the year. That resulted in a shift in focus to more lending related to the uncapped side of the business. In May 2015, the FHFA also expanded the definition of what could be included on the uncapped side. So the pool of potential deals has been expanding.
“I think lenders like Berkadia and others recognize that there is opportunity on the uncapped side. We are all focusing a little bit more on the uncapped business. So that is probably part of the explanation of why you are seeing more business in that area,” Lutz said.