Continually challenged by low inventory, affordable housing sits at a crossroads following the 2024 election. Incoming leadership plans to introduce market-based principles to an agenda that may also include an expanded Housing Choice Voucher program. Arbor’s Affordable Housing Trends Report Winter 2024/2025, developed in partnership with Chandan Economics, provides insight into a pivotal multifamily sector about to embark in a new direction.
The skies surrounding commercial real estate markets are clearing, suggest the Emerging Trends in Real Estate 2025 (ETRE 2025) findings. As pandemic-related structural changes settle into place, cyclical economic trends, such as interest rates, demand, and construction levels, are now the key drivers to watch.
As more single-family rental (SFR) operators rely on build-to-rent (BTR) development to supply new inventory, construction starts have steadily risen, reaching another record high in the third quarter of 2024. SFR/BTR construction has eclipsed 92,000 units in the last four quarters — an all-time high and an annual increase of 31.4%.
As renters face a national shortage of 7 million low-income rental homes, the U.S. Department of Housing and Urban Development’s (HUD) Low-Income Housing Tax Credit (LIHTC) program is pivotal in helping to close the affordability gap for renters. It is the nation’s most significant resource for affordable apartment housing construction, which gives state and local agencies approximately $10 billion in annual budget authority to issue tax credits for affordable housing development.
The Federal Housing Finance Agency (FHFA) announced a $3 billion boost to Fannie Mae and Freddie Mac’s volume cap for loan purchases in 2025 to $146 billion ($73 billion for each agency). This increase in FHFA loan caps for 2025 aligns with industry expectations, given the anticipation of improving market conditions and lending activity expected in a lower interest rate environment. Next year’s cap for the Government-Sponsored Entities (GSEs) is an increase of approximately 4% from the $140 billion limit set for 2024.
The U.S. multifamily market held steady in a more normalized cycle through the first three quarters of 2024, following its skyrocketing recovery from the pandemic-related contraction. Rental demand remained strong, driven by the continued nationwide housing shortage and strong wage growth, while the high levels of new construction seen over the last two years appears to have peaked.
Small multifamily’s normalization pushed forward last quarter as the Federal Reserve made a long-awaited reduction to the target federal funds rate. Arbor’s Small Multifamily Investment Trends Report Q4 2024, developed in partnership with Chandan Economics, shows signs of stability have multiplied. Robust rental demand, a limited supply of quality affordable housing, and several other promising developments should support the subsector’s strength heading into 2025.
The U.S. multifamily market held steady in a more normalized cycle during the third quarter of 2024. Rental demand remained strong, while new leaders emerged among the top markets for rent growth.
Arbor is committed to diversity and inclusion, employee satisfaction, and human rights. We also strive to develop safe and sustainable products and services.
Affordable housing and the extension of financing to customers investing in affordable housing is not a new concept for Arbor. In fact, Arbor has, for more than two decades, funded affordable loans and has the expertise required to execute across a variety of lending platforms and programs. Arbor was also an early and active participant in our agency partners’, Fannie Mae and Freddie Mac, “green” lending programs, which require willing borrowers to make improvements to their properties that help reduce energy and water consumption and lower utility costs to tenants. Furthermore, Arbor has made a commitment to educating its employees and engaging with its clients to make known the newly revamped “green” lending programs offered by our agency partners.
Our people remain at the core of who we are and how we define ourselves, and so we are proud to have partnered with two organizations to actively support the recruitment, development, and retention of diverse professionals across our organization.
Arbor has continued to grow its partnership with Project Destined (“PD”), a real estate finance-focused internship program, providing minority college students with the ability to gain and fine tune technical, financial and leadership skills and which, as a by-product, gives us the opportunity to source additional diverse talent. Six talented Arbor employees, representing several different areas of our business, represented Arbor as mentors in PD’s Summer 2022 and Spring 2023 sessions and looks forward to another great year of partnership in 2024 and beyond.
Additionally, Arbor continues to participate with Future Housing Leaders (“FHL”), which is a Fannie Mae-led recruiting service that helps companies create a more diverse workforce through intentional sourcing and recruiting.
We look forward to nurturing and evolving these partnerships over time, helping to shape future leaders from a variety of backgrounds with the active participation of our existing employees and the support of management.
Arbor also encourages its employees to support industry-focused organizations and committees that are committed to creating, launching, and managing DEI initiatives within our space. Such organizations include Commercial Real Estate Women Network (CREW) and the CRE Finance Council (CREFC) Women’s Network.
We plan to continue developing initiatives and supporting organizations that ultimately further espouse our DEI goals and values.
Arbor actively encourages its employees to support the communities in which we live and operate. Each year, Arbor and its employees support local food banks, and clothing drives, hospitals and medical research, and community-based organizations focused on the welfare of families and children.
As part of Arbor’s support of volunteerism and philanthropy amongst our employees, Arbor introduced a series of volunteer activities across its offices in 2023. Further, we continue to proudly support our clients and counterparties in their charitable efforts.
