Anyone in multifamily who hoped that conditions would turn and that 2023 would be a replay of previous years was just hit in the face with a bucket of cold water tossed by the Federal Housing Finance Agency.

The FHFA announced the multifamily loan purchase caps for both Fannie Mae and Freddie Mac: $75 billion for each, $150 billion total. That’s down from the $78 billion each had in 2022 because the FHFA expects multifamily family originations to contract this year.

Given uncertainty about a potential recession and Federal Reserve policy, questions of whether markets will support continued rent increases to offset higher property prices and continued pressure on cap rates, inflation, and higher financing costs, the take isn’t surprising.

That said, FHFA indicated that it will continue estimate reviews of market sizes and mission-driven minimum requirements during 2023. “To prevent market disruption, if FHFA determines that the actual size of the 2023 market is smaller than was initially projected, FHFA will not reduce the caps,” the agency wrote.

The phrase “mission-driven minimum requirements” is significant. FHFA will require that at least half of the enterprise lenders’ multifamily business be “mission-driven affordable housing.” However, it is making a number of changes to multifamily requirements for affordable housing.

First, it will remove the requirement that a quarter of the multifamily lending will be “affordable at 60 percent of AMI [area median income] or below to reduce inconsistencies with FHFA’s Housing Goals regulation.”

Next, the agency is creating a new category of affordable workforce housing. It will focus on apartments living close to places of employment, hospitals, and schools  and encourage financing loans for properties “with rent or income restrictions affordable at levels that meet market needs.”

Senior housing and 5-to-50-unit multifamily buildings will now be in the “Other Affordable mission-driven” category.

Loans to help with energy and water efficiency improvements with units at or below 80% of AMI will be considered mission driven. That’s up from 60% of AMI. If at least 20% and under 50% of units are at or below 80% AMI, then half the loan amount is mission-driven. If the percentage of units is 50% or greater, than 100% of the loan is mission driven.

And here are some other details of how the FHFA will treat mission-driven loans for the 2023 scorecard:

Loans on targeted affordable housing properties, where there’s some restriction on rets for at least some portion of the building. “FHFA will classify as mission-driven 50 percent of the loan amount if the percentage of restricted units is less than 50 percent of the total units in a project, and 100 percent of the loan amount if the percentage of restricted units is equal to or more than 50 percent.”

“Loans to preserve affordability at workforce housing properties have units that are subject to either rent or income restrictions

codified in loan agreements. FHFA will classify as mission-driven units where the loan agreements require a sponsor to preserve affordability at the “other affordable” market levels outlined below or that adhere to the standard of a state or local housing affordability initiative, for at least 10 years or the term of the loan.” Again, the same 50% of units rule as above applies.

If a property is senior housing or has 5 to 50 units and affordable rents but not subject to regulatory agreement or recorded use restriction, that too will be considered mission-driven units.

For properties in rural areas, the percentage of units affordable at 100% of AMI or below will determine the pro rata portion of the loan that is mission driven.

“Loans to manufactured housing communities are blanket loans secured by the land and the rental pads,” the agency noted. “FHFA will classify as mission-driven the share of the loan amount of a manufactured housing community blanket loan that reflects the share that receives credit under the Duty to Serve regulation.”


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