David Brickman
WASHINGTON, DC—Rent control measures have been put into place in Oregon and New York City and are gaining momentum in several other jurisdictions. The case for it is well-known: housing affordability has become a serious issue for the working class and even, in many cases, the middle class as well. Rent control measures, the theory goes, provides some relief to consumers already stretched for housing.
So what does Freddie Mac CEO David Brickman have to say about this trend? Housing affordability, after all, is among the top mandates for the GSE. “As a 20-year veteran at Freddie Mac I embrace our mission of affordability,” he tells GlobeSt.com, “and these days affordability is one of our biggest challenges and opportunities. We are always asking ourselves ‘how can we do more with helping affordability and the issue of supply.’” Simply put, he adds, the US is not building enough affordable housing.
But Brickman is cautious on the subject of rent control and declines to comment on the specific initiatives cropping up around the US.
“I would just make the observation that there is a point at which rent control—that is, the limitation by which rent increases—does create risk for lenders.” If landlords are able to tightly control expenses it paints a better picture for lenders, he says. But at some point rent controls will force a lender to examine underwriting policies in terms of how a loan is sized, he continues, “because one key thing we look at refinance risk. We have to project forward economic conditions of the property ten years in the future.”
By all accounts, the GSE is doing a good job of underwriting multifamily risk. Its newly-released second quarter earnings showed that credit quality remains strong: its single-family serious delinquency rate declined to 0.63%, while the multifamily delinquency rate continues near zero at 0.03%. And as Brickman points out, Freddie Mac continues to have 90ish percent of its business ultimately securitized in way that distributes all of the risk to private investors.
Growth is also strong for the GSE. For Q2, Freddie Mac reported a 5% total guarantee book growth, year over year: its single-family portfolio grew 4% while multifamily increased by a robust 13%.
“Multifamily growth is certainly a big part of our story in terms of our book and the market broadly,” Brickman says. “We continue to believe that the market is growing—and growing faster than we are growing.”
Unfortunately, he says, so is the affordability issue. “It is a bigger and bigger problem.”
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
