In a move that could affect our multifamily members, Housing and Urban Development issued a proposed rule today to revise its regulations for the Section 542(c) Housing Finance Agencies Risk-Sharing Program.
The program provides credit enhancement for mortgages of multifamily housing projects whose loans are underwritten, processed, serviced and disposed of by housing finance agencies (HFAs). HUD and HFAs share in the risk of the mortgage, which enables HFAs to provide more insurance and credit for multifamily loans.
Under the program, qualified state and local HFAs may originate and underwrite affordable housing loans that include new construction, substantial rehabilitation, refinancing and housing for the elderly. HFAs may elect to share 10%-90% of the loss on a loan with HUD. In the event of a claim, the HFA reimburses HUD pursuant to terms of the risk-sharing agreement.
This proposed rule would amend existing regulations for the program so that they better align with policies for other HUD programs, reflect current industry and HUD practices, and conform to statutory amendments.
Additionally, this proposed rule would provide HUD with greater flexibility in operating the Section 542(c) HFA Risk-Sharing program over time, and would provide more flexibility for certain HFAs accepting a greater share of the risk of loss on mortgages insured under the program.
HUD is providing only a 30-day comment period. Comments are due on or before April 7.
NAHB will review this proposed rule in consultation with the Multifamily Finance Subcommittee. Members who wish to offer feedback for consideration as part of the Home Builders Association’s comments should email Michelle Kitchen at firstname.lastname@example.org.
Here is some good news for the multifamily building industry: The national rental vacancy rate hit 7.6 percent in 2014, the lowest in nearly 20 years, according to a new report from the Joint Center for Housing Studies at Harvard University.
Released today, the 2015 State of the Nation’s Housing highlights the continuing demand for rental housing, particularly for Generation X and millennials, as these younger households still prefer renting over buying.
It forecasts that among individuals now under age 30, there will be 20 million new households between 2015 and 2025, and while the majority of these newly formed households will move into rental housing, that demand will eventually spill over into homeownership. Minorities are expected to be responsible for 85 percent of the net household growth over the next 20 years.
In the meantime, however, rent burdens are growing: Almost half of renters in 2013 paid more than 30 percent of their income for housing, while a quarter of households were severely burdened, paying more than 50 percent of their income for housing.
The report also details how that as baby boomers move into retirement years, most expect to remain as single-family home owners. The Joint Center notes that by 2025, the growing population of seniors is likely to increase demand for housing that offers “a combination of affordability, accessibility, and supportive services.”
One thing that stays the same: Housing remains key to net worth. “For the typical home owner, home equity remains a key source of household wealth, accounting for $80,000 of the $195,500 median net wealth of home owners in 2013, while the median net wealth of renters was just $5,400,” the report said.
The National Association of Home Builder’s Multifamily Production Index (MPI) increased one point to a level of 55 for the second quarter. This is the 14th consecutive quarter with a reading of 50 or above.
The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100. The index and all its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.
The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. The MPI component tracking low-rent units stayed steady at 54, while market-rate rental units increased one point to 60 and for-sale units rose three points to 53.
“The multifamily market continues to perform quite well, and we expect that trend to continue,” said W. Dean Henry, CEO of Legacy Partners Residential in Foster City, Calif., and chairman of NAHB’s Multifamily Leadership Board. “The market is benefitting from new household formations. As these households are formed, many are choosing to live in apartments or condos.”
The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, dropped two points to 34, with lower numbers indicating fewer vacancies. This is the lowest reading since the fourth quarter of 2012.
“The MVI has shown three straight quarters of declines and the Census’ vacancy rate is the lowest it has been since 1984,” said NAHB Chief Economist David Crowe. “These are very good indicators of the overall health of the multifamily market. However, developers in certain parts of the country are experiencing lot and labor shortages, which can hinder production.”
Historically, the MPI and MVI have performed well as leading indicators of Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.
For data tables on the MPI and MVI, visit nahb.org/mms.
A rising number of new homes include renewable energy features, a trend that is apparent in both single-family and multifamily construction. McGraw Hill Construction’s data and analytics team surveyed a set of NAHB single-family and multifamily members in 2013.
According to the findings, 12% of single-family builders reported including solar photovoltaic panels in new home construction in 2013. More popular for single-family construction was geothermal groundsource heat exchange property, used for some projects by 26% of home builders. Wind power is less popular, with only 1% of single-family builders reporting its use.
Multifamily developers were more likely to use these power production features in at least some of their projects. For example, 45% of multifamily developers used solar panels, 42% installed geothermal property in some projects and 13% reported using wind turbines.
That said, the frequency of use of these items was more common on the single-family side of the market, perhaps due to incentives like the section 25D power production tax credit for new and existing homes. More than half of single-family builders who report installing solar panels do so on more than 25% of their projects. And more than 75% of single-family builders who install geothermal property do so on more than 25% of their homes.
In contrast, for multifamily developers who report installing solar panels, more than 75% do so on fewer than 25% of their projects. And nearly all multifamily developers who report using geothermal do so on fewer than 25% of their properties.
The Federal Housing Finance Agency (FHFA) is seeking public input on strategies for reducing Fannie Mae and Freddie Mac’s presence in the multifamily housing finance market in 2014.
In keeping with the goal of contracting the market presence of Fannie Mae and Freddie Mac while simplifying and shrinking their operations, FHFA’s 2013 Conservatorship Scorecard included reducing their volume of new multifamily business by 10 percent relative to 2012. FHFA expects this reduction to be achieved this year through a combination of increased pricing, more limited product offerings and stronger underwriting standards.
FHFA is now evaluating alternatives for reducing Fannie Mae and Freddie Mac’s multifamily businesses in 2014 and is seeking public input on the potential market impact of various strategies. These include:
- Restrictions on available loan terms;
- Simplification and standardization of loan products;
- Limits on property financing;
- Limits on business activities; and,
- Other options that FHFA should consider to contract the Enterprises’ multifamily businesses.
Click here to review a document outlines these specific alternatives proposed by FHFA. Interested parties are invited to answer several questions related to FHFA’s objective to reduce its exposure to multifamily housing. Input must be received within 60 days or no later than Oct. 8, 2013 and should be submitted to Federal Housing Finance Agency, OHRP Multifamily Housing Policy, 400 7th Street, S.W., Room 9-261, Washington, DC 20024 or via email to: email@example.com.