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Expert: Growing multifamily sector could demand new debt sources

Fundamentals that make multifamily good investment aren’t going away

As multifamily continues to grow, one expert explained new debt sources could soon be required to match the demand.

“Lower rates, together with strong fundamentals, produce increased demand for debt,” said Deborah Jenkins, Freddie Mac executive vice president and head of multifamily business and 2018 HousingWire Vanguard. “So, if we remain on our current course, the debt market will be bigger in 2020.”

HousingWire’s Vanguards represent some of the top influencers in the housing space. It is one of the highest awards housing professionals can earn.

And now, we are accepting nominations through September 27, 2019.

The HW Vanguard Awards program recognizes C-level industry professionals and business unit leaders who have become leaders in their respective fields within housing and mortgage finance — those whose leadership is moving markets forward, each and every day.

And they will be featured in HousingWire Magazine, so nominate your Vanguard today!

How do you become a leader in your space? Jenkins says it like this:

“Freddie Mac is fundamentally a mission driven business,” Jenkins said. “Our drive for success is built on the basic idea that our work makes home possible for millions of American families.”

“That’s why we’re developing new ways to lead the market, whether it’s through products that respond to the needs of our lenders, innovative securities that engage private capital and transfer risk away from taxpayers, or technological innovations that make our company more efficient and easier to work with,” she said.

HousingWire sat down with Jenkins to talk about the year ahead for the multifamily market.

HousingWire: What do you expect to see from the multifamily market in 2020?

Deborah Jenkins: Occupancy is high, and rents continue to grow faster than inflation, producing growing net operating incomes. Strong fundamentals and low interest rates are producing apartment price appreciation and demand for debt. Looking ahead, the fundamentals that make multifamily a great investment aren’t going away. We can’t predict the future, but our outlook remains very positive based on current information.

HW: What could low rates do to the multifamily market if they keep decreasing?

DJ: Lower rates, together with strong fundamentals, produce increased demand for debt. So, if we remain on our current course, the debt market will be bigger in 2020. Freddie Mac, as it always does, will manage its business to remain in the market on a consistent basis, within the caps set by our regulator. If the market continues growing at its current rate, new debt sources will need to enter the market to help meet demand.

HW: How can lenders adequately serve the affordable multifamily market even as prices continue to rise?

DJ: We all have to recognize that we have an affordable housing crisis and as leaders in the industry we have a role to play in helping address it. The reality is that a long run supply shortage has caused rent growth to outpace income growth, squeezing budgets for low-income and workforce families, and in some cases has resulted in homelessness. One way we address this is by working with our Optigo lenders to support the core middle-market. About 95% of the units we financed in the second quarter of 2019 were affordable to low- and moderate-income families. We have also built a mission-critical Targeted Affordable Housing business to target rent-restricted properties, and last year we re-entered the Low-Income Housing Tax Credit Equity investment space. By the end of this year we will have invested a billion dollars in LIHTC equity across the country.

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