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.
A panoramic view of how Arbor grows financial partnerships through successful
product executions that deliver results for our clients
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Santa Barbara County
Year Built
The borrower was interested in refinancing a vintage townhome-style apartment community in Santa Barbara County, California, to improve cash flow for their growing portfolio. With interest rates rising, the borrower was in search of cost savings during the refinancing of a loan. The environmentally conscious borrower, who already intended to make improvements to their properties, was interested in exploring how going green could result in short- and long-term savings.
Through a focus on developing client relationships, Arbor keenly understood the borrower’s objectives to cut down costs and protect the environment. Arbor was able to fulfill both goals in one transaction. First, Arbor utilized the Fannie Mae Green Financing® program to lower the borrower’s interest rate and increase net operating income. Then, Arbor closely monitored trends in U.S. Treasurys and moved quickly to lock in the best possible rate at the time.
Fannie Mae’s Green Financing program enabled the borrower to save money on interest by committing to make enhancements to the property that improve energy efficiency by 30% within 12 months of closing. By enrolling in this program, they will save a significant amount of money due to locking in at a lower interest rate and the longer interest-only period of the loan. Ultimately, Arbor’s borrower received a better rate at a higher loan amount and will likely achieve a high net operating income over the life of the loan.