Contact Us
Sponsored Content

Freddie Mac Launches Workforce And Targeted Affordable Mezzanine Loans To Strengthen Housing Preservation


Despite strong economic activity and job growth in the U.S., the affordable housing crisis continues to worsen as the number of renters continues to grow. Of the 43 million renter households in the country, 21 million, or almost half, pay rent higher than 30% of their monthly income.

The type of product built during this past construction cycle is part of the problem. While nearly 1 million Class-A apartment units hit the market between 2013 and 2017, less than 20,000 Class-B and C apartments opened their doors during the same time. Since 2000, the share of Class-B and C multifamily inventory declined 9%. In response to rising construction costs, developers have long focused on Class-A properties, and only 35% of new supply in 2016 was priced below $1,100/month.

To help preserve affordable housing, Freddie Mac recently launched two mezzanine loan products: a Workforce Housing Mezzanine Loan that is originated alongside a conventional Freddie Mac loan, and a Targeted Affordable Housing (TAH) Mezzanine Loan that is originated alongside a Freddie Mac TAH loan.

In both cases, borrowers receive preferred financing terms, such as 90% leverage and debt service coverage ratio as low as 1.05%, in exchange for agreeing to limit rent increases on 80% of their projects' units.

“Freddie is providing products that focus on maintaining affordable housing for low-income properties and workforce housing,” Hunt Real Estate Capital Director Suzanne Cope said. “These programs create a strong financial incentive for borrowers through leverage and pricing in order to tackle the big affordable housing issue occurring throughout the country.”

Cope works alongside Hunt Real Estate Capital Affordable Housing Director Kevin Deegan to help borrowers find the capital needed to either acquire or refinance affordable properties. The addition of these two new Freddie Mac loan products meets a growing demand from borrowers looking to acquire affordable properties with a high-leverage, low-cost debt product while meeting the demand for a timely loan execution.


Workforce housing can be challenging for developers and owners to navigate from a cost perspective. Rising prices for both land and labor drive up the cost per square foot of multifamily properties. In addition, most local and state tax incentives also tend to favor affordable housing for low-income residents. Part of this is due to worry about overamenitizing or over-renovating a unit, which can drive rents up.

Depending on the market, Freddie Mac’s workforce product allows the agency to lend outside of its federal loan issuance cap, $35B for both Freddie Mac and Fannie Mae. For cap-exempt business, loan pricing tends to be advantageous, Cope said.

Strong candidates for the mezzanine programs have experience with affordable housing and a history of transactions with a GSE like Freddie Mac. Mezzanine borrowers are required to pledge a first-priority lien for 100% of equity interests in the senior borrower. Borrowers must also keep at least 80% of the units — including the 50% that are affordable to households making 100% area median income — over the life of the mezzanine loan. Borrowers can't pay off the mezzanine loan to get out of affordability restrictions.

As affordable housing concerns continue to rise, partnering with Freddie Mac to finance affordable projects can help developers meet a growing demand for accessible multifamily units across the country.

“Freddie Mac is truly in tune with the market to come up with a structured product that allows increased leverage for the borrower or buyer looking to maintain affordability,” Deegan said. “While the two mezzanine products target different bands of income, the mission is still the same: to get long-term restrictions on properties to preserve the affordable housing stock.”

Questions about the new mezzanine loan programs? You can reach Suzanne Cope at or (212) 521-6391; or Kevin Deegan at or (212) 588-2188.

This feature was produced in collaboration between Bisnow Branded Content and Hunt Real Estate Capital. Bisnow news staff was not involved in the production of this content.