Apartment Industry Calls for Ongoing Federal Role to Ensure Capital in All Markets at All Times

WASHINGTON, DC -  As lawmakers consider housing finance reform, the meaningful differences between the single-family and multifamily sectors require unique solutions for each. The National Multi Housing Council (NMHC) and National Apartment Association (NAA) Joint Legislative Program has issued a white paper outlining the key principles a reformed housing finance system needs to embrace to preserve liquidity and stability for the well-performing multifamily sector.

One in three Americans rent, and apartments are helping meet the housing needs of 17 million households across all income levels in every corner of the country. But the private apartment sector's ability to meet the growing demand for rental housing depends on consistently reliable and competitively priced capital.

"The industry supports a return to a system dominated by private capital; however, even in healthy economic times, private capital has not been able to meet the broad liquidity needs of the apartment industry," said NMHC President Doug Bibby.

"A private-only housing finance system results in an overabundance of capital for high-end properties in top-tier markets, but leaves secondary and smaller markets underserved," said Bibby. "Private capital is returning to the market, but as has been the case historically, it is concentrating in a handful of cities and on trophy assets."

Ensuring capital is available in all markets and at all times so the apartment industry can continue to provide housing from coast to coast and should be the goal of housing finance reform," said NAA President, Doug Culkin, CAE.

The NMHC/NAA white paper points out that the very successful multifamily programs of Fannie Mae and Freddie Mac were not part of the meltdown and have actually generated $7 billion in net profits to the government since conservatorship.

"A solution that doesn't recognize the unique needs of the multifamily sector would have disastrous consequences for the nation's supply of workforce housing," said Culkin.

A reformed housing finance system should retain the successful components of the existing multifamily programs in whatever succeeds them. The key principles for multifamily housing reform as outline by the NMHC/NAA white paper are:

1. Provide Access to Federal Credit Support
2. Provide Broad Liquidity Support at All Times, Not Just "Stop-Gap" or Emergency
3. Mission Should Focus on Liquidity, Not Mandates
4. Restrict Federal Credit Support to the Security Level
5. Support Private Capital and Protect Taxpayers Through Effective Guarantee Structure and Pricing
6. Encourage Competition
7. Empower a Strong Regulator
8. Impose Effective Capital Requirements
9. Retain Limited Portfolio Lending (without a Federal Guarantee) While Expanding Securitization
10. Reduce Existing Portfolios in a Responsible Manner
11. Create Certainty and Retain Existing Resources/Capacity During the Transition

The key principles outlined by NMHC/NAA reflect meaningful differences between the current/historical GSE structure and a future one. The four main differences are:

1. Government Guarantee at the Security Level Only
2. Separately Accounting for Multifamily Activities
3. Market Pricing to Avoid Crowding Out Private Capital
4. Limited and Capped Retained Mortgage Portfolios

NMHC/NAA's white paper is available at www.nmhc.org/goto/FinanceReformPrinciples.