Dive Brief:

• The Federal Housing Finance Agency has established 2024 lending caps of $70 billion each for Fannie Mae and Freddie Mac, giving them a total of $140 billion. 
• This year, the government-sponsored enterprises had $75 billion each to allocate for multifamily loans. In 2022, they were given $78 billion each for apartment lending.
• Loans classified as supporting workforce housing, which are generally between 80% and 120% of area median income, will be exempt from the volume caps. 

Dive Insight:

FHFA’s reduced 2023 lending caps were still above what apartment owners needed as the market slowed this year. 

“I think it is a relative non-issue,” Kyle Draeger, senior managing director of multifamily debt and structured finance at CBRE Capital Markets, told Multifamily Dive. “I don't think the market is going to explode next year, at least in the first half of the year. So, it’s probably fine.”

Rather than exploding, apartment lending volume has been falling throughout 2023. In the third quarter, the GSE’s multifamily lending fell 27% year over year, according to the Mortgage Bankers Association. Overall, apartment lending dropped 50%.

“FHFA’s reduction of the purchase caps for Fannie Mae and Freddie Mac multifamily loans is a direct reflection of current market conditions,” said Perry Freitas, managing director at New York City-based commercial real estate investment management firm Hudson Realty Capital. “We have seen a drop in multifamily volume across all lending products as the sector continues to face headwinds due to higher interest rates and a lack of liquidity in the market.”

FHFA will monitor the multifamily mortgage market and will increase the caps upward if needed. It will not reduce the limits if the 2024 market is smaller than expected. 

Workforce changes

FHFA is also continuing to hone in on mission-driven lending with the workforce housing exemption. 

“The 2024 multifamily loan caps, coupled with the exemption for workforce housing properties from the caps, will promote the enterprises’ continued strong commitment to addressing the need for affordable rental housing,” said FHFA Director Sandra L. Thompson in a release announcing the loan limits. “The workforce housing exemption should encourage conventional borrowers to commit to preserving rents at affordable levels for extended periods of time.”

Draeger called the focus on workforce housing “a good thing for the industry.” Others agree.

“Obviously, the devil is in the details, in the definition, but that is great news for borrowers because that is the deepest part of the market,” said Jon Siegel, co-founder and chief investment officer at Bethesda, Maryland–based apartment owner RailField Partners. “We have seen the agencies moving more and more toward the workforce and affordable spaces and this will continue that.”

However, borrowers for class A deals could face more challenges getting financing from Freddie Mac and Fannie Mae.

“It is on the other hand a little concerning for those of us that also buy [or build] core and core-plus and borrow from the agencies, as I would see pricing on those deals being potentially less advantageous going forward,” Siegel said.

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