Fannie Mae is addressing the nation’s affordable housing shortage with sponsor-initiated affordability (SIA) incentives for multifamily borrowers through its Delegated Underwriting and Servicing (DUS) network of lenders.
The SIA incentives aim to preserve workforce and naturally occurring affordable housing by encouraging borrowers who are seeking financing from Fannie Mae to agree to rent and income restrictions. In the form of lower borrowing costs, the incentives will be offered to property owners who agree to preserve or create a minimum of 20% of units in a multifamily community affordable for households earning less than 80% of the area median income (AMI), adjusted for family size, with rents no more than 30% of the AMI. The rent and income restrictions will be documented in an affordability agreement, requiring annual certification.
“SIA pricing incentives help address the shortage of affordable housing in America at a time when rent growth is outpacing wages. Nearly half of the families and individuals renting their home spend more than 30% of their income on rent, and this share continues to rise,” said Rob Levin, senior vice president of multifamily customer engagement at Fannie Mae. “SIA allows borrowers to strengthen communities by keeping rents affordable over the life of the loan, and helps ensure renters have more stability when it comes to housing-related expenses.”
The government-sponsored enterprise is creating new opportunities through the SIA incentives to attract investors motivated by social impact. The securities backed by a SIA loan will be disclosed as Multifamily Affordable Housing mortgage-backed securities, which are eligible to be labeled as a “social” bond or a “sustainable” bond when coupled with green financing.
Fannie Mae had a record 2020, providing $76 billion in financing for the multifamily market—the highest volume in the history of its 32-year DUS program. For multifamily affordable housing, including rent-restricted properties and properties receiving other federal and state subsidies, volume increased more than 9% to $7.8 billion in 2020 from $7.2 billion the prior year. For 2021, Fannie Mae Multifamily has a $70 billion cap, with at least 50% of the business being mission-driven affordable housing, defined as affordable for residents at or below 80% of the AMI.