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As Dallas Rents Skyrocket, a Rule Change Hopes to Motivate Lending for New Affordable Rentals

Rents continue to climb, but new proposed federal lending benchmarks may spur an increase in affordable multifamily housing.
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A government agency that regulates the secondary mortgage market is recommending a change in affordable multifamily housing goals for Fannie Mae and Freddie Mac for the next two years in a bid to improve affordable housing stock.

In North Texas, the need for affordable housing only continues to grow. A report by the Child Poverty Action Lab found that between 2008 and 2018, there was a 42 percent decrease in units renting for less than $800, and the Dallas-Fort Worth-Arlington Metropolitan Statistical Area lost more than 230,000 low-rent units during that time. A minimum-wage worker paying the fair market value rent for a one-bedroom apartment pays almost 90 percent of his income in rent.

The Federal Housing Finance Agency Tuesday proposed a new rule for measuring the two federally-backed home mortgage companies’ multifamily housing goals. Right now, the Freddie and Fannie are required to show that out of all the multifamily properties they finance, a set number of units are affordable by government standards. 

The new rule would instead measure those goals by a percentage of each lender’s annual multifamily loans. While current goals call for 415,000 low-income units, for example, the proposed rule would require 61 percent of units fall under that category. A subgoal of 88,000 units for very-low-income units would change to 12 percent, and low-income small multifamily loans would have a 2 percent subgoal.

Why would this help?

For one, it should spur the creation of more affordable units. The current rules don’t actually provide any incentive for Freddie or Fannie to continue to acquire affordable mortgages after they’ve met the benchmark number of units. The new rule doesn’t change any criteria on what units qualify as affordable, but it does mean that as either lender continues to purchase mortgages, the number of affordable units they’re expected to report also increases.

“The proposed change to the methodology will make the multifamily housing goals more responsive to market conditions,” FHFA Director Sandra Thompson said.

This new incentive will come at a pivotal moment. Nationally, almost 60 percent of renters say their rent has increased, and 1 and 3 said they saw increases of more than 10 percent or higher, a new Freddie Mac survey found. Just 38 percent of renters also saw their pay increase, and a third of respondents said that their raise this year can’t cover their increased rent. Almost 1 in 5 said they are extremely likely to miss a payment.

In Texas, there is a shortage of somewhere around 614,000 rental homes that would be affordable to extremely low-income renters, who make a median wage annually of $26,200, the National Low Income Housing Coalition said. To afford a two-bedroom home at fair market rent in Texas, a household would need almost $47,000. In Dallas-Fort Worth, the NLIC says there are almost 200,000 low-income renter households, and a mere 38,785 affordable and available units.

Now that the FHFA has proposed the rule change, it must allow for a 60-day public comment period. If the proposed rule is adopted, it will likely go into effect in January.

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Bethany Erickson

Bethany Erickson

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Bethany Erickson is the senior digital editor for D Magazine. She's written about real estate, education policy, the stock market, and crime throughout her career, and sometimes all at the same time. She hates lima beans and 5 a.m. and takes SAT practice tests for fun.

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