Private capital returns to finance rental housing, but slowly

Fannie Mae, the Federal Housing Administration and Freddie Mac may repeat their dominant performance from last year in the rental housing finance market.

Freddie Mac’s John Cannon, head of production, recently told Apartment Finance Today that life insurers and other private providers of debt have not yet ramped up their operations to compete evenly with the government-sponsored enterprises. The limited activity by private interests could also restrict the pace of rental housing construction. That is likely to mean less development activity of new apartment units, which in turn may support additional single-family rental business.

While it is not the case in every market, the overall national supply of single-family homes is still considerable. The window of opportunity to purchase those properties and rent them to former homeowners, new households and Americans whose preferences have changed to favor renting remains open as a result.

Despite that, Cannon did note that private debt financing is increasing. While the growth may be slow, it still represents a trend that will likely play a part in shaping the real estate industry’s future. For now, the GSEs and particularly Freddie Mac do have several advantages that may maintain their strong position in the financing markets for some time.