SAN DIEGO-Experts argue that the GSEs are needed since they play such a significant role in multifamily financing. MBA Chairman-Elect E.J. Burke recently told the Senate Banking Committee that lawmakers and regulators must craft a long-term plan for multifamily housing that ensures a role for both private capital and the federal government. At the same hearing, Committee Chairman Tim Johnson noted the important role of Fannie Mae and Freddie Mac in the multifamily housing market and cautioned that broad access to credit must continue to be available as GSE reform moves forward.
Closer to home, Gerson Law Firm APC closed more than $100 million in commercial real estate loans in September on GSE lender engagements, plus additional amounts for other lender financings in which the firm was representing lenders or borrowers. Gordon Gerson, managing partner of the firm, tells GlobeSt.com, “People who need rental housing should not be subject to the harsh effects of capitalism, and thus the case for the continued role for GSEs in multifamily housing. Stability in the housing market means stability in multifamily finance. If you take the GSEs out of their traditional role, it could rocket out of control.”
Gerson says that housing—particularly affordable housing—is a core American value and, as such, should be protected by government entities. “Affordable rental housing is as much a part of the American Dream as single-family housing.”
He points out that before the Great Recession, single-family ownership was 67% of the total housing supply, but it has dropped to 64%. Some economists predict this number could drop to 51% within the next decade.
He also makes the case that the GSE market for multifamily today is comparable to where it was during pre-Great Recession levels and that Fannie Mae and Freddie Mac multifamily loss during the Great Recession was less than 1%. “Multifamily mortgages and the multifamily market performed better than any other sector of the real estate economy during that period. One reason: GSEs. The GSEs expanded to meet market need while other sectors of the lending industry went dark.”
Gerson says there is healthy competition in the multifamily market today among lenders from multiple capital sources, including life-insurance companies, banks and CMBS. Also, private capital does have its place in multifamily financing and will always be a major player in our world of finance. “But do we really want a multifamily market 100% subject to a free-market economy? Whether it is Obamacare, Romneycare or 95% of the alternative proposals or plans envisioned or desired, that has not been the approach.”
Gerson says that he is told the mood in Washington is shifting to a greater acceptance of GSEs among both parties. “We have gone from fighting words to bipartisan affection.”
Only 275,000 new units will be built this year, even though there is a demand for 350,000 to 400,000 units, therefore proving a diminishing supply of rental housing, he adds. The Boomlet generation's demand will worsen this situation. “The apartment market today is healthy and strong, although demand is outpacing supply and may for years to come.”
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
