The number of apartments deemed affordable for very low-income families across the United States fell by more than 60 percent between 2010 and 2016, according to a new report by Freddie Mac.
The report by the government-backed mortgage financier is the first to compare rent increases in specific units over time. It examined loans that the corporation had financed twice between 2010 and 2016, allowing a comparison of the exact same rental units and how their affordability changed.
“We have a rapidly diminishing supply of affordable housing, with rent growth outstripping income growth in most major metro areas,” said David Brickman, executive vice president and head of Freddie Mac Multifamily. “This doesn’t just reflect a change in the housing stock.”
Rather, he said, affordable housing without a government subsidy is becoming extinct. More renters flooded the market after people lost their homes in the housing crisis. The apartment vacancy rate was 8 percent in 2009, compared to 4 percent in 2017. That trend, coupled with a stagnant supply of apartments, resulted in increased rents.
Most new construction of multifamily housing generally serves high-income renters, according to Freddie Mac. The corporation -- along with Fannie Mae, another government-sponsored enterprise with a similar mission -- significantly reduced its role in financing multifamily housing after the Great Recession.
Together, they had financed about 70 percent of all original loans for multifamily properties in 2008 and 2009 as private capital pulled back, said Karan Kaul, a research associate at the Housing Finance Policy Center at the Urban Institute. By the end of 2014, their market presence declined to 30 percent.
"The affordability issues are becoming more severe at the lower end of the market," said Kaul, a former researcher at Freddie Mac. "Absent some kind of government intervention or subsidy, there is just not going to be any investments made at that lower end of the market."