Mortgage Affordability: Affordable Housing Goals

Promoting mortgage affordability is the third "leg" of the GSE statutory responsibilities. In this era of declining housing affordability and a critical shortage in the supply of affordable housing any and every effort to lower the cost of buying or renting a home is sorely needed. Over the years, Freddie Mac has made important contributions to affordability, including driving down the cost of origination through automated underwriting; developing new products, with very low down payments and other underwriting flexibilities, like Home Possible; and making sizeable investments in housing related tax credits and mortgage revenue bonds (MRBs).

For example, for the past three years, Freddie Mac has set records in new multifamily business transactions, totaling $78.8 billion in financing for more than 1.5 million apartment homes. This figure includes $4.9 billion in targeted affordable housing products which finance apartments that receive some form of government subsidy; $3.1 billion in low-income housing tax credits (LIHTCs) which provides important support for the creation or rehabilitation of rental housing for America's lowest-income families; and over $2.7 billion in rental housing for senior citizens. Freddie Mac has a long history of increasing the availability of affordable rental housing in the United States. More than 90 percent of the rental units we have financed are affordable to people whose incomes are at or below area median income.

The affordable housing goals, administered by the Department of Housing and Urban Development (HUD), are perhaps the most well-known measure of our success in meeting the affordability aspect of our mission. Established by Congress, the three statutory housing goals direct that specific percentages of our mortgage purchases and investments be targeted to borrowers at the lower end of the income scale, or living in particular communities that may be underserved by mortgage markets.

We make strong efforts to make all the goals (and the subgoals) each year, but the challenge of meeting housing goals that have been increasing significantly in recent years begs the question of whether we are over-relying on housing finance to solve the nation's housing affordability problem. In the current environment, we are being reminded that housing finance that is not sustainable is not affordable housing. Instead, we need solutions that embrace the totality of the housing equation. A growing body of research suggests that some of the greatest opportunities for progress may be found on the supply side of the equation – including such things as zoning, permit requirements, and other man-made restrictions on supply that raise the cost of housing.²¹

²¹ See, for example "Regulation and the Rise of Housing Prices in Greater Boston" by Edward L. Glaeser, Jenny Schuetz, and Bryce Ward, Cambridge: Rappaport Institute for Greater Boston; "Zoning's Steep Price" by Edward L. Glaeser and Joseph Gyourko, Regulation, Fall 2002, pp. 24-30; "Why Have Housing Prices Gone Up?" by Edward L. Glaeser, Joseph Gyourko and Raven E. Saks, Harvard Institute of Economic Research Discussion Paper Number 2061, February 2005. See also "An Economic History of Zoning and a Cure for its Exclusionary Effects" by William A. Fischel, Urban Studies, Vol. 41, No. 2, pp.317–340, February 2004.