Freddie Mac’s commitment to affordable, quality rental housing is central to everything we do, including our research, the products, programs and services we offer, and much more. We’ve compiled this Impact Dictionary to help clarify frequently used terms that relate to housing affordability and underserved markets.
Click here to learn more about how we define a Diverse Borrower.
Click here to view statistics about our recent financings as measured by area median income.
Fundamentally, workforce housing is affordable to the ‘missing middle’ – those making modest incomes. Workforce housing properties tend to be older and have fewer amenities, but may also include newer properties intentionally built to be affordable to households with moderate incomes.
For our loan offerings and Impact Bonds, we define workforce housing as units with rents affordable to households making 80% area median income (AMI) or less in most markets, with some variation in cost-burdened markets, as defined by FHFA.
Workforce housing rent is affordable to households earning up to, and including:
- 80% AMI in standard markets
- 100% AMI in cost-burdened markets
- 120% AMI in very cost-burdened markets
- 150% AMI in extremely cost-burdened markets
Naturally Occurring Affordable Housing (NOAH)
For our loan offerings and Impact Bonds, we define NOAH as units affordable to households earning 60% of AMI or less in most markets, with some variation for cost-burdened markets. These units are located in properties that are not supported by major public subsidies, and for associated regulatory agreements.
NOAH rent is affordable to households earning up to, and including:
- 60% AMI in standard markets
- 80% AMI in cost-burdened markets
- 100% AMI in very cost-burdened markets
- 120% AMI in extremely cost-burdened markets
Targeted Affordable Housing (TAH)
For our loan offerings, TAH properties are those that receive federal, state, or municipal government subsidies to pay for a portion of development or operating costs. In exchange, developers/borrowers agree to keep all or a portion of the units affordable to renters at certain AMI levels for defined periods of time, depending on the jurisdiction and type of governmental support involved. The government subsidies can be either direct (e.g., Section 8 vouchers) or indirect (e.g., tax credits).
Mixed-income housing can help to deconcentrate poverty and/or provide access to neighborhoods of opportunity for low- and moderate-income residents. This type of housing creates economic diversity and expands the availability of quality affordable housing throughout an area. Often, federal, state or local programs will define mixed-income as a property in which (a) at least 20% of the units are affordable to households making 50% AMI or less, or at least 40% of the units are affordable to households making 60% AMI or less; and (b) at least 20% of the units are unaffordable to households making 80% AMI or less. For the purposes of our Impact Bonds offerings, we consider mixed income properties to be those that have a mix of units affordable to renters earning up to 50% AMI and those earning above 80% AMI. Mixed-income housing is an important way to further residential economic diversity and federal, state and local programs may vary depending on market.
Directing Capital Toward Historically Underserved Markets
Affordable and mixed-income housing in one of the following areas can help direct capital to provide stable, quality housing and become a foundation for economic opportunity. The following are defined by reference to the Enterprises’ Duty to Serve Underserved Markets (the Duty to Serve, 12 CFR 1282.1). A list of census tracts for each category can be found using Freddie Mac’s Mission Map or on FHFA's website.
Areas of Concentrated Poverty (ACP)
An ACP is defined as an area that is either a Qualified Census Tract or a Racially- or Ethnically-Concentrated Area of Poverty.
Qualified Census Tracts (QCT)
A census tract designated by the U.S. Department of Housing and Urban Development, or an equivalent geographic area defined by the Census Bureau, where at least 50% of households have annual incomes below 60% Area Median Gross Income (AMGI) or that have a poverty rate of 25% or more. HUD has defined 60% AMGI as 120% of HUD's Very Low-Income Limits, which are based on 50% AMI, adjusted for high cost and low-income areas.
Racially- or Ethnically-Concentrated Area of Poverty (R/ECAP)
A R/ECAP is a census tract designated by HUD that has a non-white population of 50% or more and a poverty rate that is at least (a) three times higher than the metropolitan/micropolitan area or (b) 40% or more.
High Needs Rural Regions
This category includes rural areas in Middle Appalachia, the Lower Mississippi Delta, colonias or tracts located in Persistent Poverty Counties.
High Opportunity Area
Per Duty to Serve Plan, a High Opportunity Area is designated in two ways: by HUD's Difficult Development Area (DDA) or by a state’s Qualified Allocation Plan.
High Opportunity Area designated by HUD as a Difficult Development Area (DDA)
Certain areas designated by HUD as a DDA during any year covered by an Enterprise’s Underserved Markets Plan (Plan) or in the year prior to a Plan’s effective date, with a poverty rate that falls below 10% (for metropolitan areas) or below 15% (for non-metropolitan areas), are identified by FHFA as High Opportunity Areas. It is important to note that HUD’s DDAs were developed using zip codes (for metropolitan statistical areas, MSAs) and counties (outside of MSAs) as the geographic units. Because the Duty to Serve designation using DDAs is at the census tract level, there are some cases of geographic discrepancy between HUD designations and the Duty to Serve designations. A list of census tracts can be found using Freddie Mac’s Mission Map or on FHFA's website.
High Opportunity Area designated by a state's Qualified Allocation Plan (QAP)
Certain census tracts from eligible LIHTC QAPs are identified by FHFA as High Opportunity Areas. These have a poverty rate that falls below 10% (for metropolitan areas) or below 15% (for non-metropolitan areas). A list of eligible LIHTC QAPs can be found here. A list of census tracts can be found using Freddie Mac’s Mission Map or on FHFA's website.
A rural area is defined as:
- A census tract outside of an MSA as designated by the Office of Management and Budget (OMB); or
- A census tract that is in an MSA, as designated by OMB, that is outside of the MSA’s Urbanized Areas as designated by the U.S. Department of Agriculture’s Rural-Urban Commuting Area (RUCA) Code #1, and outside of tracts with a housing density of over 64 housing units per square mile for USDA’s RUCA Code #2 (per 12 CFR 1282.1).
Persistent Poverty Counties (PPC)
PPC are defined as counties in rural areas that have had 20% or more of their population living in poverty over the past 30 years, as measured by the most recent decennial census data.
Per the Internal Revenue Service, Opportunity Zones are economically distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination has been certified by the U.S. Secretary of the Treasury via their delegation of authority to the IRS.
Opportunity Zones are designed to spur economic development and job creation by providing tax benefits to investors who invest eligible capital into those communities. Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. The IRS maintains current lists of Opportunity Zones and has posted a list of Frequently Asked Questions on their website.
The Rental Assistance Demonstration (RAD) Program
The HUD RAD program was created to give public housing authorities a powerful tool to preserve and improve public housing properties and address the $26 billion nationwide backlog of deferred maintenance. The RAD program also gives property owners of three HUD "legacy" programs (Rent Supplement, Rental Assistance Payment and Section 8 Moderate Rehabilitation) the opportunity to enter into long-term contracts that facilitate the financing of improvements. For more information visit https://www.hud.gov/RAD.
Some examples, as listed in the Social Bond Principals, of underserved populations include:
- Persons living below the poverty line
- Excluded and/or marginalized populations and/or communities
- Persons with disabilities
- Migrants and/or displaced persons
- Underserved, owing to a lack of quality access to essential goods and services
- Women and/or sexual and gender minorities
- Aging populations and/or vulnerable youth
- Other vulnerable groups, including refugees, as a result of natural disasters
Low-Income Housing Tax Credit (LIHTC)
LIHTC was created by the Tax Reform Act of 1986 to help finance the construction, rehabilitation and preservation of affordable multifamily housing for lower income households. The program is designed to encourage private investment in affordable housing by providing a tax credit over a 10-year period — a dollar-for-dollar reduction in federal taxes owed on other income. In order for a property to qualify for LIHTC, a property owner must ensure that during the compliance period and extended use period (normally 30 years), either (a) at least 20% of the units are rent restricted and occupied by households with incomes at or below 50% of AMI; or (b) at least 40% of the units are rent restricted and occupied by households with incomes at or below 60% of AMI.
Subsidy end date is available for some LIHTC properties. Generally, the end date signifies the end of the federally mandated extended use period (normally 30 years) or the state-mandated extended use period, where applicable. For more information, please see the NHPD Data Dictionary.
Transit-oriented development (TOD) includes a mix of commercial, residential, office and entertainment built around or located near a transit station. Dense, walkable, mixed-use development near transit attracts people and adds to vibrant, connected communities. Transportation is one of the largest contributors of U.S. greenhouse gas emissions, and transit-oriented development encourages alternate transportation that can help to reduce transportation related emissions. For the purposes of our Impact Bonds offerings, we consider transit-oriented developments to include properties within half of a mile of public transportation, including bus stops (urban areas only), train lines and subway lines.