The last few months have been a whirlwind, in the best way possible. It’s officially been 100 days since Debby Jenkins tapped me to lead Freddie Mac Multifamily’s new Equitable Housing effort and I, along with my counterpart Alexis Sofyanos, have been speaking openly and working diligently with many of you since.
The fact is that unfair and discriminatory housing practices from the past have significantly contributed to the current wealth gap in our country, exacerbating the disparity in net worth between majority and minority groups.
We’re taking a fresh look at all aspects of multifamily housing and making changes that will help give all parties an equitable shot at renting, owning or financing a multifamily building. Our initial focus is on Borrower Advancement, Tenant Advancement and Advancing Affordability in the industry.
There are 43 million renters in the United States and our efforts could eventually benefit each of them directly or indirectly. That raises the stakes, but conversely, if we collectively get this right, we can make real, sustainable change in our industry.
Alexis and I have both short- and long-term plans, but some of the ways we intend to address the wealth gap head-on include:
Our conversations with credit agencies tell us that less than 10% of on-time rent payments are currently reported — meaning most renting households are seeing no impact on their credit score from their largest monthly payment.
It’s easy to see why there is such a huge delta in credit scores from renters (who average low- to mid-600 scores) compared with homeowners (who average low- to mid-700 scores) as the renters’ on-time housing payments are largely invisible while homeowners benefit from theirs. We are working with fintech disrupter Esusu to make credit-reporting for on-time rent payments an industry standard.
One of our early projects was to define ‘Diverse Borrowers,’ and we did so in the latest version of the Multifamily Seller/Servicer Guide. We identified this classification to include entities owned or partially owned by women, minorities, veterans, those who identify as LGBT and individuals with disabilities.
Freddie Mac has never previously tracked this data, so we are currently unaware of how big this universe is or who falls into it. As we build this audience, we intend to help diverse borrowers grow and scale their business, down the road.
There is no way to fully address the wealth gap without getting into tangible elements such as making sure that tenants are able to afford housing for their families without sacrificing other necessities such as food, clothing and electricity. We are exploring ways to replicate and scale some of the unique financing structures we utilized in the past. One of those products is our social investment commitment, where we’ve funded about $1 billion since inception. With this product, borrowers pledge to maintain affordable rents on units serving America’s workforce.
There’s no doubt about it that there is a lot to do and this won’t be an overnight venture. We encourage you to visit our new webpage for updates on the latest and to work with us and within your organizations to help us bring equitable solutions to the multifamily industry. We are thankful to have partners like you join us.
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