With challenges continuing for the overall multifamily housing market, Fannie Mae will focus on staying nimble and meeting the needs of underserved communities this year, according to Michele Evans, executive vice president and head of multifamily.

Evans shares the government-sponsored enterprise’s 2023 results, priorities for 2024, and an assessment of the lending environment at the midyear point.

Michele Evans, executive vice president and head of multifamily, Fannie Mae
Michele Evans, executive vice president and head of multifamily, Fannie Mae

What were the highlights of multifamily and affordable lending for Fannie Mae in 2023?

Last year was defined by a volatile interest rate environment, high inflation, and lower market volume, but Fannie Mae Multifamily remained a stable source of liquidity to support the market. We acquired over $52 billion in new debt business, reached a cumulative $4 billion in low-income housing tax credit (LIHTC) investments since our reentry in 2018, and financed approximately 482,000 units of multifamily rental housing in 2023. A significant majority of those units were affordable to households earning at or below 120% of the area median income (AMI), providing support for both workforce and affordable housing throughout the year.

We also brought new products to market last year, including Sponsor-Dedicated Workforce (SDW), which provides incentives for borrowers that establish rent restrictions as part of a private financing approach to address the missing-middle affordability crisis for renters. We also achieved impressive results under our Positive Rent Payment Reporting pilot program, which, as of March, has been utilized by more than 185 property owners, 2,568 properties, and 544,000 units. According to our vendors, without whom this wouldn’t be possible, more than 35,000 new credit scores have been established because of our Positive Rent Payment Reporting initiative, and, for those renters who already had a credit score and saw an improvement, they had an average increase of 35 points.

I’m immensely proud of what the Fannie Mae team, our DUS [Delegated Underwriting and Servicing] lenders, and other industry partners were able to accomplish during a very demanding year, and we’ve carried that momentum into 2024.

What do you expect the lending environment to look like for the sectors in 2024?
We continue to maintain a cautious outlook for the national multifamily sector in 2024. Our Economic & Strategic Research (ESR) Group expects to see further softening in demand and below-average rent growth this year, primarily due to an elevated amount of new supply entering the market over the next 12 months, coupled with tenants who are dealing with higher levels of consumer debt and may not be able to absorb higher rent increases.

At a metro level, demand will vary. In some metros, especially those with a large amount of supply expected to come online during the year, our ESR Group believes rents could remain flat to negative for much of 2024. That could push up concession rates, as well as the number of units offering them, but that's likely to be at a localized, submarket level. In other metros that are undersupplied, rent growth is expected to be positive, but still not at levels that are sufficient enough to dramatically alter the national outlook. Overall, we expect multifamily origination volume levels will remain subdued this year.

What are Fannie Mae’s Multifamily priorities for 2024?

Fannie Mae Multifamily is focused on providing liquidity, maintaining strong credit standards, and managing our book of business. Given our loss-sharing business model, working closely with our DUS lenders to help manage and mitigate emerging risk will remain a priority for us this year. We also remain focused on meeting pressing housing needs in underserved communities and for the “credit invisible,” including through our Positive Rent Payment Reporting pilot program, which is demonstrably helping renters establish, maintain, and improve their credit scores.

Are there any new lending initiatives coming online in the near future?

We don’t have any announcements to make at this time, but we are constantly strategizing and exploring new initiatives and products to bring to the market while rethinking how to use existing tools creatively to address current and emerging housing challenges. Fannie Mae Multifamily has served the secondary market as a reliable source of capital for more than 35 years, and it’s through our new and refined lending initiatives that we can enhance our ability to provide liquidity, stability, and affordability in a disciplined fashion while maintaining our credit standards and minimizing losses. Our Sponsor-Initiated Affordability and Sponsor-Dedicated Workforce products are evidence of this. Both are increasingly popular within the DUS lender and borrower community, and because these programs are exempt from the 2024 multifamily volume cap, the opportunities to make an impact are essentially limitless. We're excited about the immense potential of these solutions to increase the supply of affordable workforce housing without government subsidy.

What advice would you give to borrowers in today’s uncertain environment?

We know several challenges remain and that the industry will continue to face headwinds. That's why we are staying nimble and closely monitoring what’s happening in the market, and we encourage others to do the same. We’re bringing the same commitment, urgency, and creativity to bear this year, which will help us meet the needs of our multifamily lenders and their borrowers so we can best support the nation’s renters.

In addition to providing liquidity, how else is Fannie Mae addressing the affordability crisis?

Making sure households with modest means can access quality, affordable housing—in every market, every day—is central to what Fannie Mae does. As the need for affordable units continues to grow, we are providing innovative products and solutions that preserve, promote, and expand affordability in communities across the country.

Arguably our most impactful initiative is our LIHTC program. Since 2018, we have committed approximately $4 billion in net equity to LIHTC investments, which is in line with FHFA’s annual limits. These investments support the creation and preservation of rental housing when and where those needs are not being met. We’ve committed to investments in 49 of 50 states and Washington, D.C., in addition to Guam, Puerto Rico, and the U.S. Virgin Islands, including hundreds of rural investments.

I mentioned our SDW loan product earlier. This is a creative new financing solution we launched in October to help to alleviate rental affordability, accessibility, and sustainability challenges that many renters are seeing. Through this product, Fannie Mae provides incentives to multifamily borrowers to restrict rents for the life of the loan, preserving housing affordability to renters earning up to 80% of the AMI, and up to 100% to 120% of the AMI in cost-burdened markets. Among its many benefits, SDW offers lower-cost financing, underwriting flexibility, and an opportunity to combine with other programs to maximize the benefit to our borrowers and the communities they serve.

Separately, our Expanded Housing Choice (EHC) initiative also increases access to affordable multifamily housing by encouraging greater acceptance of Department of Housing and Urban Development Housing Choice Vouchers, which can be a lifeline for individuals and families in need. Fannie Mae's EHC pricing incentive offers lower-cost financing and flexible loan terms for property owners who accept HCVs in North Carolina and Texas—jurisdictions where vouchers are not a protected source of income. EHC creates opportunities for property owners, who can unlock a new market of potential renters, and for voucher holders, who have more choice in where they can use their voucher to secure an affordable place to call home.

We're committed and eager to put these and other Fannie Mae products, initiatives, and relationships to work to continue supporting the multifamily industry and providing vital liquidity to the market.