Finance & Investment

The small multifamily sub-sector ended 2022 on a high note with originations falling just behind 2021’s peak. As economic storm clouds continue circling, small multifamily appears fortified from any reverberations that may result.

Positive rent reporting, a new piece of Fannie Mae’s mission-driven lending agenda, is a leap forward for the U.S. rental housing market amid an ongoing affordability crisis. This initiative, recently launched in a pilot program in Chicago, has significant upside potential for not only tenants but landlords, owners, and multifamily borrowers as well.

Passed in the 11th hour of the 117th Congress, the $1.7 trillion federal spending package prioritizes the expansion of affordable housing in 2023 through increased funding for targeted programs.

The rental housing sector is well-insulated but not immune to market forces even as the economy edges into correction territory, Arbor Chairman and CEO Ivan Kaufman and Chandan Economics Founder Sam Chandan demonstrate in the findings of Arbor’s Special Report Spring 2023.

Until recently, full-scale optimization has skipped over the basic monthly rental payment transaction, with 78% of more than 100 million renters using paper checks. But now, two programs, backed by global leaders in financial services, are incentivizing tenants to pay the rent on credit, with perks like automatic credit reporting and points towards future purchases.

Renters 30 years of age and under, who now make up slightly more than one-quarter of the heads of households of rental units, are bolstering housing demand in markets known for their affordability and livability.

Multifamily investing involves the purchasing of properties with rentable housing units. In these types of investments, a group of investors often works together to mitigate costs, split profit shares, and reduce risk. Multifamily properties include apartment complexes, condo buildings, and townhouses, among other property types. When investing in multifamily properties is researched and undertaken prudently, it can generate steady and reliable income streams in all economic cycles.

Driven by cyclical, demographic, and technological factors, the single-family rental (SFR) sector has matured over the past decade. The once-fragmented industry has both coalesced and professionalized. While the evolution of the SFR sector has been explored at length, a clear picture of its core set of tenants is just now coming into focus.

The Federal Housing Finance Agency (FHFA) announced a $6 billion rollback of Fannie Mae and Freddie Mac’s volume cap for loan purchases for 2023 to $150 billion ($75 billion for each agency) as multifamily transaction activity has declined in 2022. FHFA also added new provisions to its mission-driven lending initiative designed to increase investment in affordable and workforce housing, two sectors with significant growth potential in a tight housing market.

Arbor Chairman and CEO Ivan Kaufman kicked off the first full day of eCore22 in Miami this November with an informative and intimate panel discussion, featuring Charles Ostroff, SVP Multifamily Chief Credit Officer at Fannie Mae, Robert Verrone, Principal at Iron Hound Management Company, and Aaron Kurlansky, Principal at Sheridan Capital, that covered the most pressing economic issues of the moment.