The Diminishing Supply of Affordable Units
Steve Guggenmos, VP Research & Modeling
Recent research shows that an increasing number of multifamily units are not affordable for low- and very low-income households, and this trend is especially prevalent in the nation’s fastest growing metros.
In this paper, we track multifamily rental affordability by comparing Federal Housing Finance Agency data with rent data from the American Community Survey. These results tell the story of how rental affordability has changed since 2010 and finds that it continues to be a national issue that is most pronounced in fast growing metropolitan areas. The chart below shows the breakout of multifamily housing affordability in all metro areas nationwide.
Metro-Level Multifamily Housing Supply by AMI
As shown by the blue bars above, the supply of very low-income units has declined sharply since 2010. Meanwhile, the percentage of units unaffordable to households making 100% AMI has continued to increase, and the core driver is rent growth. Median rent for multifamily units has increased 27% since 2010, whereas median income only grew by 6.1% during this time.
When looking at just the Top 50 metro areas in the United States, there is a direct correlation between population growth and the rate of affordable housing decline and this is especially pronounced in the fastest growing metro areas. Nationally, the percentage of multifamily rental units affordable to very low-income households dropped by 16.5 percentage points, compared with 32.7% for the fastest growing metros. Regardless of location, the general trend is apparent: Higher population growth tends to bring about higher loss of affordable units. Read the full report.
-
Feedback
Have a comment or question? Email us to let us know what's on your mind.
Viewpoints
-
Aug 3, 2021Managing Our Counterparty Risk
-
Jul 26, 20212021 Midyear Outlook
-
Jun 10, 2021Markets in Focus: Las Vegas
About This Author
Steve Guggenmos
VP Research & Modeling
Steve leads multifamily related research at Freddie Mac. In this role he performs research related to national and market-specific multifamily conditions. His team supports the multifamily business by developing models and quantitative approaches that determine risk-based capital allocations. The models capture loan level risks and also the benefits of the diversification and structural credit support for pools of multifamily mortgages, supporting the core business strategies of Freddie Mac Multifamily.
More From This Author
2021 Midyear Outlook
With improving economic conditions throughout the country, the outlook for the apartment market has improved. Learn more in our report.
New Multifamily Cap Rules: How They Could Impact Our Business
The Federal Housing Finance Agency recently announced new 2021 loan purchase caps for Freddie Mac and Fannie Mae. The new rule consists of many changes, with the most broadly impactful being to the area median income thresholds under which conventional units are considered mission-driven.
Multifamily 2021 Outlook
Despite the disruptions of 2020, we expect the multifamily market to see improving conditions in 2021.
2020 Midyear Outlook
Strong overall performance during the past decade is a key factor in the possible outcomes we may see the rest of this year as the effects of the pandemic unfold.
Multifamily 2020 Outlook
Performance in the multifamily market was strong during 2019 and is expected to remain healthy into 2020, but with the potential for moderated growth in comparison to recent years.
Multifamily 2019 Midyear Outlook
In our research, we find that strong economic growth and the robust labor market continue to support the strength in the multifamily market. 2018 ended much stronger than anticipated with near record absorptions and stronger rent growth compared with the prior few years.
Assessing Rental Burden in Metropolitan Areas
Rental affordability is a significant challenge for metropolitan statistical areas across the United States. Our research shows that supply just hasn't kept pace with demand in many metros, and that's pushing affordable rents out of reach for millions of American families.
Multifamily 2019 Outlook
In our research, we find that performance in the multifamily market remained healthy during 2018, despite high levels of new supply entering the market. We expect this trend to continue into 2019, but with more modest growth in comparison to recent years.
Multifamily 2018 Mid-Year Outlook
Performance in the multifamily market remained healthy in the first half of 2018, and is expected to continue throughout the second half of 2018 and into 2019, but with continued moderation from the prior few years.
The Cost of Missing Out on LIHTC-Program Rents
Market rate multifamily rents have been dramatically increasing in recent years as housing demand significantly exceeds available supply. In contrast, during the same period rent growth has been moderate for units with restricted rents, such as those funded by the Low-Income Housing Tax Credit (LIHTC) program.
How Do I Envision the Multifamily Market in 2018?
More of the same! By most measures, the multifamily market will continue to grow with moderately increasing demand, with the growing population fueling the rental housing market.