Greystone’s Clive Lipshitz explains why institutional investors could find the multifamily finance sector one of interest, in “Seeking Cash Flows,” published in the March 2023 issue of Institutional Real Estate, Inc. Lipshitz explains why multifamily assets are attractive overall: they generate predictable yield; carry low downside risk; and include reduced reinvestment risk.
A main driver for the strength of the sector is the demand for multifamily housing, which has increased as the homeownership rate drops. Lipshitz notes that the National Multifamily Housing Council anticipates homeownership to plateau at 64 percent (down from a peak of 69 percent during the global financial crisis). Today, one-sixth of households live in multifamily rental units, and a further 10 percent of households live in single-family rental homes.
Financing the continuous creation of new households – anticipated to be 1 million per year according to the US Census Bureau – covers the refinancing of existing loans, acquisition financing, and loans for new construction. Fannie Mae, Freddie Mac, FHA, banks, life companies and debt funds all provide financing solutions for the multifamily sector.
Fannie Mae and Freddie Mac, particularly, have strict underwriting criteria and low default rates, and play a critical role in providing liquidity to the single-family and multifamily housing markets when other lenders are prone to hold back.
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