Could Multifamily Lead Single-Family Out of its Recession?


Posted today by Costar the following article shows that the multifamily sector could have a strong impact in helping housing market as fewer people own and more turn to rentals.  

The nation’s housing finance overseer and Freddie Mac are citing the strong multifamily investment market as a reason for pushing ahead on their agenda to gradually eliminate government guarantees in the multifamily sector business and replace them with new private capital sources well ahead of efforts to begin unwinding their single-family finance operations.

Earlier this year, the Federal Housing Finance Agency (FHFA), issued a strategic plan for Freddie Mac and Fannie Mae that envisioned different kinds of roles for the two big government-sponsored enterprises (GSE) within the single-family and multifamily financing business. Doing so, the FHFA argued, could help revive the lagging housing market.

Unlike their single-family credit guarantee business, the GSEs’ multifamily businesses have performed quite well, generating positive cash flow. Last year, the GSEs multifamily businesses produced $1.9 billion in net income, with Freddie Mac accounting for 70% of this gain, as investors poured into the apartment sector. The trend continued in the first quarter of 2012, with Freddie Mac alone producing $624 million in multifamily net income.

This week, David Brickman, senior vice president of the multifamily business for Freddie Mac, pressed the case further by outlining other reasons why multifamily finance should have a separate and distinct role in housing.

With fewer people owning homes, Brickman said there is a clear need to support more rental housing.

Private capital is beginning to flow back into the multifamily market.

The business processes and systems for single-family and multifamily financing and development are not alike.

Multifamily might aid in the recovery of single-family housing by transforming the large volume of distressed single-family properties into rental housing.

But for such a plan to work, the private sector would have to step up their role significantly in multifamily finance, CoStar Group’s financial analysts argue.

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