Photographer: Brent Lewin/Bloomberg
Freddie Mac Acquires Its First Loan Backed by Rental HousesBy
Mortgage giant is financing portfolio of almost 200 houses
House-rental industry seen as important to affordability
Freddie Mac is using its balance sheet to finance a portfolio of U.S. single-family rental homes, the first deal of its kind for the mortgage giant in the growing industry.
The company’s multifamily arm is acquiring a loan backed by almost 200 houses owned by TrueLane Homes, a landlord focused on affordable rentals in small metropolitan areas in the South and Midwest. Ninety-two percent of the homes in the deal are affordable to households earning no more than 80 percent of the area household income, according to David Leopold, who leads the affordable-housing program at Freddie Mac Multifamily.
The deal is the first loan purchase under a pilot program, approved by the Federal Housing Finance Agency, that allows Freddie Mac to invest a little more than $1 billion in the single-family rental industry.
“With standard multifamily becoming less and less affordable in a lot of markets, we think it’s important that Freddie Mac serve this need,” Leopold said.
While the $11 million deal is relatively small, it marks the first time that Freddie Mac has used its balance sheet to finance a large portfolio of rental houses, Leopold said. Rival Fannie Mae jumped into the market last year with a $1 billion financing transaction with Invitation Homes Inc., the largest U.S. single-family landlord. That agreement drew criticism from some housing advocates, who said supporting the Wall Street-backed company wasn’t in line with Fannie Mae’s mission of helping affordability.
A representative for Fannie Mae didn’t respond to a request for comment on the Freddie Mac purchase. Pete Bakel, a Fannie Mae spokesman, said last year that the Invitation Homes deal was consistent with the company’s existing business and mission to provide liquidity in the housing market for the benefit of renters and homeowners.
An Invitation Homes spokeswoman said in an email that the company “provides an important housing option, delivering affordable, high-quality homes near good schools and good jobs” and that one of its rental houses “can often represent the most affordable choice” for tenants.
Invitation Homes owns more than 80,000 homes. Its average tenant paid about $1,700 in rent in the three months that ended in September. By contrast, TrueLane owns 1,000 homes with rents that range from $800 to $1,150.
More than 18 million households lived in single-family rental homes in 2016, up 39 percent from 2006, according to a December report from Harvard’s Joint Center for Housing Studies. Single-family homes are an important source of affordable housing for larger families and in rural markets, and became an institutionalized industry as firms such as Blackstone Group LP and American Homes 4 Rent started buying properties en masse after the foreclosure crisis.
TrueLane got into the rental business in 2012, after chief executive Alan True sold his previous company, which manufactured office furniture, to Hong Kong-based Li & Fung Ltd. TrueLane owns homes across 11 markets, including Pittsburgh; Omaha, Nebraska; and other areas that were mostly ignored by the stampede of private equity firms.
“The working-class markets and price point we operate in have been largely overlooked by other institutional investors,” True said in an email. “We have been using internal capital to invest in communities and rehabilitate homes since 2012, and it’s great to know that there is attractively priced debt to help fund additional acquisitions and renovations.”
In December, Freddie Mac announced a deal to guarantee securities issued by CoreVest American Finance Lender LLC, which specializes in single-family rental homes.