An Ever-Changing Mark
Owning a home hasn’t always been the dream of two-thirds of Americans. In 1900, less than half of Americans owned their homes, according to the U.S. Census Bureau. Those numbers fell off even more until the roaring 1920s, when a bustling economy and a government housing policy in its infancy pushed the homeownership rate to nearly 45 percent.
What Might Really Happen?
The outlook for the GSEs is unclear at best. Either way, multifamily wants a seat at the table.
The mystery surrounding Fannie Mae and Freddie Mac could soon end. The Obama administration says it will have a plan for the controversial two entities early next year. While single-family housing lobbyists from the National Association of Home Builders (NAHB) and the National Association of Realtors (NAR) will certainly have their say, the multifamily industry doesn’t want to be forgotten.
The multifamily sector harbors concerns that an effort to fix the single-family side of Fannie and Freddie could hurt apartment financing in the process. “There’s no silver bullet for the system if we were to replace Fannie Mae and Freddie Mac,” says Doug Bibby, president of the Washington, D.C.-based National Multi Housing Council (NMHC). “You can’t say the banks and life companies and covered bonds will do it. They can’t. There’s a huge shortfall in any scenario you paint.”
The apartment industry is trying to show how important Fannie and Freddie’s lending is to people making 100 percent of area median income or less. In fact, a recent NMHC study found that over the past 10 years, more than 90 percent of the volume handled by the GSEs was affordable to families in that range. The NMHC’s message is not to shut them down during whatever transition they go through and continue to wind down their portfolios.
“Let’s figure out the best ways to incentivize private sector companies to come back in and play a more meaningful role,” Bibby says. “Do not throw Fannie and Freddie out with the bath water. To me, the most important thing we can do is remind policymakers of the role that Fannie and Freddie have to play going forward, even as we take steps to wind their size down.”
But others aren’t so sure anything of consequence will happen to Freddie or Fannie—in part because of pressure from Wall Street to keep the status quo. “I’m sure there will be hearings and a lot of shouting, but my expectation is there will be no action,” predicts John McIlwain, a senior resident fellow at the Washington, D.C.-based Urban land Institute. “There will be so much disagreement in the new Congress that very little will move forward.”
Then the Depression hit, and homeownership rates plummeted until they bottomed out at 44 percent in 1940. But in the post-World War II boom years, a strong economy, pent-up housing demand, easier financing, and the GI Bill (which provided a low-interest, no-money down loan for a home or business) thrust the homeownership rate up to more than 60 percent by 1960.
Through most of the 1990s, the homeownership rate generally stayed in the 62 percent to 65 percent range. Then, in 1998, for the first time in the nation’s history, the homeownership rate rose above 66 percent, hitting 66.3 percent. That rise continued under President George W. Bush, topping out at 69 percent in 2004.
When things began to unravel, with foreclosures mounting around the country and subprime loans failing left and right, many of those people whose purchases pushed the homeownership rate up to 70 percent found themselves in trouble. “This has been a disaster for many families,” says Ron Terwilliger, former chairman of Dallas-based multifamily builder and owner Trammell Crow Residential (TCR) and creator of the Urban Land Institute’s (ULI) J. Ronald Terwilliger Center for Workforce Housing. “Millions and millions of people are being foreclosed upon in the principal asset that they own.”
Terwilliger and a number of others, particularly on the multifamily side of housing, say the government has had a large role in the meltdown of the housing market. The for-sale collapse has, not surprisingly, elicited a bunch of “I told you so’s” from the rental industry. Granted, in their defense, many of them had sounded warnings about impending danger long before the air came back into homeownership. “The government policy was so slanted for homeownership that it created a bubble of financial institutions piled on the bubble,” says Ric Campo, CEO of Camden Property Trust, a Houston-based REIT with more than 50,000 units.
