Freddie Mac has announced two new affordable rental programs.  The first is a pilot in three markets (Atlanta, Orlando, and Tallahassee) that supports both affordable housing and the surrounding community. The company is providing $7.8 million to The Promise Homes Company, which owns and operates single-family rental units, to purchase 117 of them to provide affordable housing for low-income and working families.

Promise Homes is a non-profit with the mission of offering affordable housing to families unable to buy a home due to finances and/or credit history. In addition to housing, Promise Homes offers financial literacy and economic support services and its property management companies place a priority on contracting with local minority or woman-owned small businesses for services, thereby supporting local job creation.  Tenants are also provided incentives for improving their credit scores.

Introduced in 2017, this represents the latest transaction in Freddie Mac's $1.3 billion limit for its affordable single-family rental pilot. Of the 117 properties in the new transaction, 96 percent qualify as "affordable housing," based on 80 percent of the area median income. Six percent will be rented to market-rate tenants or tenants with Section 8 vouchers.

The second initiative is designed to incentivize multifamily owners to hold rent levels at affordable levels. The Workforce Housing and Targeted Affordable Mezzanine Loan pilot program will provide favorable pricing and additional debt capital in return for keeping rents for 80 percent of a project's units at levels affordable to low- and moderate-income families, while limiting rent growth throughout the life of the loan. Rents will be checked on an annual basis and property owners out of compliance will be assessed a penalty fee until they return rents to compliant levels.

Mezzanine financing effectively operates as a subordinate loan, delivering additional debt capital necessary to fill in the gap between borrower equity and the first lien mortgage loan amount.  The Mezzanine loan-to-value (LTV) ratio can only be 10 percent above the LTV of the Freddie Mac first mortgage loan, or up to 15 percent for experienced nonprofits with a history of successful multifamily property operations. The total combined LTV cannot exceed 90 percent.

The new program will be offered through Freddie Mac Multifamily Conventional platform for workforce and affordable housing and through its Targeted Affordable Housing platform for refinancing or acquiring Section 8 properties and year 11 or later Low-Income Housing Tax Credit (LIHTC) properties, or repositioning any affordable property for resyndication