MBA Warns Against Tenant Protections on Multifamily Loans

On the last day to comment on adding tenant protections at multifamily properties with federally backed loans, a major industry group unleashed a fusillade of objections.

Rent control and other regulations attached to multifamily loans from government-sponsored entities would discourage the industry from using the financing, the Mortgage Bankers Association said.

The result would be less affordable housing production, the group said.

The MBA argued that added protections would make enterprise loans more cumbersome and imposing compared with other means of financing. They would also violate the “sacrosanct” landlord/tenant relationship, which is unrelated to commercial mortgage servicing, the group said.

“Lenders and servicers do not have a direct connection with tenants or the ability to monitor and report on the landlord/tenant relationship,” the MBA said, adding that loans are serviced on behalf of borrowers, entirely separate from tenants.

The tenant protections would be temporary in any case, the group noted, because they would expire when the loans do — often in five years or less.

The Biden administration has been looking for ways to enhance tenant protections, such as by using the leverage of federal financing agencies. Regulation of multifamily properties generally falls to states and local governments, but some apartment complexes have loans supported by government-sponsored entities such as Fannie Mae and Freddie Mac.

The administration has said it aims to prevent “egregious rent increases” at those multifamily buildings.

The real estate industry prefers to limit federal involvement to subsidies for financing, properties, development and tenants.

“The most effective way to help renters in need is to increase the supply of affordable housing by fully funding successful, proven programs like Section 8, Low-Income Housing Tax Credits and more,” the Mortgage Bankers Association said.

The FHFA issued the request for input in May on tenant protections at multifamily properties with mortgages backed by Fannie and Freddie.

The two agencies have a “public mission to support the availability of safe, decent and affordable housing,” the FHFA said; the request for input, due July 31, aimed to help the agency find ways to advance the GSEs’ mission.

But the cost of staffing and systems required to monitor and enforce new requirements on GSE-backed loans would do the opposite by making the financing more expensive, the MBA asserted.

The FHFA has been collecting information about tenants’ experiences, stakeholder perspectives, and ideas to improve data collection regarding the size and scope of tenant issues.

“Rent control,” the MBA said in its letter, “runs completely counter to the White House’s Housing Supply Action Plan, which stated that ‘President Biden believes the best thing we can do to ease the burden of housing costs is to boost the supply of quality housing.’”