NCPA - National Center for Policy Analysis

Understanding the Multifamily Mortgage Market

August 31, 2012

The health of the housing market has generally been tied to the health of the wider economy, and its sluggish growth has been a cause for concern. Policymakers are calling for several changes to the roles that government-sponsored enterprises (GSEs) play in the housing market, says Satya Thallam, deputy director for research and policy at the Law & Economics Center at George Mason University School of Law.

Traditionally, single-family mortgages have been the focal point of discussions involving the mortgage market and housing. However, GSEs play a substantial role in the multifamily sector, which warrants more consideration of the separate role GSEs play in multifamily mortgages.

Several factors make the multifamily market increasingly important in policy discussions.

  • Currently, multifamily rental housing accounts for 15 million, or 13 percent, of households and 43 percent of renters.
  • Furthermore, the growth of large cities and dense urban environments will deemphasize the traditional single-family household with a yard.
  • In addition, there will be a net growth of over 122 million people by 2050. This demand for housing and shrinking space forces people to move into multifamily properties.
  • Despite housing prices continuing to fall, the demand for rental housing rises as people look at the housing market with increasing pessimism.

Financing for multifamily housing loans comes in many different forms, which separates it from the single-family market because multifamily housing is under the umbrella of commercial real estate.

  • As of the end of 2011, GSEs held 30 percent of the multifamily mortgage debt outstanding in the overall market.
  • In 2010, Fannie Mae provided more than 50 percent of the secondary market funds for multifamily housing financing.
  • In 2009, 94 percent of Fannie Mae's multifamily business volume operated through the Delegated Underwriting and Servicing program, which was created in 1988 as a separate business division for purchasing multifamily loans.

The nature of GSEs in financing housing allows for two distinct areas of reform, one for the single-family market and the other in the multifamily market.

Source: Satya Thallum, "Understanding the Multifamily Mortgage Market," American Action Forum, August 2012.


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