Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, and Representatives Al Green (D-TX), Juan Vargas (D-CA), Ayanna Pressley (D-MA), Rashida Tlaib (D-MI), Nikema Williams (D-GA), Ritchie Torres (D-NY), and Steven Horsford (D-NV) sent a letter to the Director of the Federal Housing Finance Agency (FHFA), urging the agency to use its full authority in providing permanent and meaningful protections for tenants residing in multifamily housing financed with mortgages backed by Fannie Mae and Freddie Mac (the Enterprises). This includes taking action against unfair and exorbitant rent hikes, bolstering fair housing enforcement, and more. In the letter, Committee Democrats sound the alarm on the worsening state of our nation’s housing crisis and propose key recommendations for the FHFA to implement in order to stabilize housing costs, protect renters, and ensure the safety and soundness of the Enterprises.
“For too long, our country has not prioritized the needs of renters even though they make up a growing share of the U.S. population and often lack protections and representation. Everyone, no matter who they are, deserves the right to a safe and stable home in the community of their choice,” said Committee Democrats. “It is time to strengthen and expand the Enterprises’ tenant protection toolkit. With the backing of U.S. taxpayers, the Enterprises provide reliable and affordable financing options for multifamily real estate, which also come with strong borrower protections and federal oversight. As such, these public benefits should be passed onto the families who rent from Enterprise-backed borrowers in the form of safe, decent, and affordable housing options with strong tenant protections.”
The Honorable Sandra Thompson Director
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20024
Dear Director Thompson:
I commend the Federal Housing Finance Agency (FHFA) for its historic Request for Input (RFI) regarding the need for tenant protections in multifamily housing that is financed with mortgages backed by Fannie Mae and Freddie Mac (the Enterprises).[1] As regulator and conservator of the Enterprises, which back mortgage loans used to finance approximately 8 million multifamily housing units,[2] I write to urge FHFA to use its full authority in providing permanent and meaningful protections for tenants residing in Enterprise-backed multifamily homes by putting an end to unfair and exorbitant rent hikes, bolstering fair housing enforcement, improving housing quality standards, creating an Office of Tenant Protections, and more.
We are facing one of the worst housing crises in our nation’s history and for most of America’s 44 million renter households today, housing is their biggest monthly expense.[3] In fact, median rents have skyrocketed over the last two years by between 20% and even 40% in some communities, which disproportionately affects low-income households and people of color.[4] As former Chairwoman of the House Financial Services Committee, last Congress I held 55 hearings highlighting how these mounting affordability pressures are not only leading to greater housing instability and evictions, but are also exacerbating our nation’s homelessness crisis and making the dream of homeownership unattainable for current and future generations.[5] From hearings on health, safety, and affordability, to the role of private equity and corporate landlords, many of our witnesses, including numerous renters and people experiencing homelessness, highlighted the need for tenant protections against rent hikes, substandard housing conditions, and landlord violations. For too long, our country has not prioritized the needs of renters even though they make up a growing share of the U.S. population and often lack protections and representation. Everyone, no matter who they are, deserves the right to a safe and stable home in the community of their choice.
Unfortunately, while the Enterprises have affordability and social equity missions under the Affordable Housing Goals, Duty to Serve, and the Equitable Housing Finance Plans, the financing of multifamily housing with Enterprise-backed multifamily loans has not always resulted in fair and affordable housing options.[6]For example, following FHFA’s 2012-2018 Single-Family Rental Pilot Program that provided access to single-family mortgage lending to promote the purchase of foreclosed properties by private equity investors following the 2008 housing crisis, we witnessed a jumpstart in investor-owned single-family rental (SFR) housing.[7] As a result, we have seen SFR rents set at above the national average, excessive fees, deferred maintenance requests, and higher rates of evictions, with a concentration in low-income communities and predominately Black communities.[8] Similarly, in the multifamily space, there have been reports of rent hikes, substandard conditions, exorbitant fees, real estate speculation and other questionable practices by owners of Enterprise-backed multifamily housing.[9] In fact, after reports of egregious pad rent hikes, evictions, and other predatory practices in manufactured housing communities purchased by investors using Enterprise-backed loans, FHFA implemented consumer and tenant protections for manufactured housing residents.[10] It is time to strengthen and expand the Enterprises’ tenant protection toolkit. With the backing of U.S. taxpayers, the Enterprises provide reliable and affordable financing options for multifamily real estate, which also come with strong borrower protections and federal oversight. As such, these public benefits should be passed onto the families who rent from Enterprise-backed borrowers in the form of safe, decent, and affordable housing options with strong tenant protections.
As I and my Democratic colleagues on the House Financial Services Committee continue to fight for the investments needed to increase the supply of affordable housing and reduce the cost of rent and homeownership, I urge FHFA to utilize its full regulatory and administrative authority to stabilize housing costs and protect renters in the following ways:
Track rent hikes and mitigate skyrocketing rents by implementing reasonable limits on rent increases for Enterprise-backed multifamily properties.
While some industry comments to the RFI have urged FHFA to focus on its role in providing market liquidity to increase supply rather than on tenant protections, the reality is that the Enterprises have both liquidity and affordability mandates that FHFA must ensure are met. Ending exorbitant rent hikes while ensuring property owners can still manage and maintain quality housing is central to those mission-driven goals. Recent studies have shown that rent stabilization policies do not reduce housing quality or new construction when implemented effectively.[11] They can also be a helpful response to private sector interventions, such as homebuilding and lending, that while often generate high returns for investors, fail to increase supply and reduce housing costs for those most in need.[12] For example, every state in the country has seen a decline in low-cost rental housing and an uptick in higher cost housing over the last decade.[13] Affordable and stable rents support housing stability and choice, financial well-being through increased savings, as well as on-time rental payments for landlords—a critical factor for ensuring the safety and soundness of the Enterprises.[14]
Implement housing standards that ensure housing quality, safety, accessibility, and resilience/energy efficiency across Enterprise-backed housing.
The Departments of Housing and Urban Development (HUD) and Agriculture (USDA) are required to maintain and enforce physical inspection and accessibility standards for all HUD and USDA assisted housing. FHFA should look to HUD’s National Standards for the Physical Inspection of Real Estate (NSPIRE) as a starting point for model housing quality, habitability, and safety standard.[15] FHFA should also look to align with HUD and USDA housing construction standards by requiring that any Enterprise-backed mortgages used to purchase newly constructed single-family and multifamily housing be built to the latest energy and building codes.[16] These standards are not only shown to lower household utility bills, which help reduce housing cost burdens and default risk, but also make housing more energy efficient and resilient in the wake of worsening climate change and more frequent disaster events.[17]
Create tenant remedies for non-compliance with housing quality standards, including by creating an Office of Tenant Protections to enforce all tenant protections required by FHFA and the Enterprises.
It has been reported that some owners of multifamily properties with Enterprise-backed mortgages employ business models that rely on increasing rents while deferring critical maintenance.[18] This not only puts renters’ health and safety at risk while threatening their financial stability, but it also diminishes the quality and value of the underlying asset that secures the Enterprise-backed mortgage and therefore, ensures the safety and soundness of the Enterprises. If necessary, FHFA and the Consumer Financial Protection Bureau (CFPB) should enter into a data sharing agreement to ensure FHFA can access any relevant consumer complaint database information, which often includes tenant complaints.[19] The creation of an Office of Tenant Protections within FHFA’s Division of Housing Mission and Goals would help with the enforcement of required tenant protections, ensure accountability, and coordinate federal agency partnerships.
Strengthen anti-discrimination protections and ensure full compliance with federal fair housing laws.
The Enterprises should coordinate with HUD and the CFPB to share fair housing and consumer complaint data that can help identify any violations of federal fair housing and consumer protection laws that perpetuate illegal housing discrimination as well as unfair, deceptive, or abusive practices in Enterprise-backed multifamily housing.[20] FHFA should also prohibit source of income discrimination, which has been found to exacerbate residential segregation and discrimination as it is often used as a proxy to deny renters fair and affordable housing based on race and other protected characteristics under the Fair Housing Act.[21] Additionally, FHFA should work with HUD’s Office of Fair Housing and Equal Opportunity to develop a policy that prohibits 1) screening of applicants based on a criminal disposition that did not result in a conviction and 2) blanket prohibitions on prospective tenants with any conviction record that does not “achieve a substantial, legitimate, nondiscriminatory interest.”[22] Lastly, as part of their mission driven work, the Enterprises should consider investing in local fair housing enforcement efforts conducted by private, nonprofit fair housing organizations.
Prohibit evictions without just- or good-cause to protect renters against unfair and harmful eviction practices.
As stated in the White House’s historic Blueprint for a Renters Bill of Rights, “renters should have access to just- or good-cause eviction protections that require a justified cause to evict a tenant, and tenants need to receive adequate notice if their lease is not being renewed.”[23] As part of their mission driven work, the Enterprises should invest in eviction diversion and prevention programming, which has been well-documented as an effective tool.[24] These programs not only help increase access to quality housing, improve individual and community well-being, and increase economic mobility, but they also reduce government costs including less reliance on emergency shelters, and promote cost savings for the housing asset.[25] In one case in the Midwest, every $1 invested in eviction prevention services between 2015 and 2017 created $4 in social benefit.[26]
FHFA should work with HUD in defining “good-cause” or “just-cause” evictions and should prohibit termination of tenancy based on criminal dispositions not deemed convictions under State or Federal law. Furthermore, owners should be required to establish an eviction policy that distinguishes between criminal conduct that indicates a demonstrable risk to the property or resident safety and criminal conduct that does not pose such a risk.[27]
In the wake of the pandemic, we have seen exponential pressures on renters and the housing market, showing how volatile our nation’s housing crisis has become and the challenges it poses to equitable economic recovery.[28] Maintaining the status quo is no longer sufficient. Building on FHFA’s existing tenant protections for manufactured housing residents, as well as the White House’s Blueprint for a Renters Bill of Rights, I urge FHFA to move expeditiously in its review and consideration of RFI comments and to prioritize the experiences of renters living in Enterprise-backed multifamily housing. FHFA has a once-in-a-generation opportunity to protect renters and help stabilize our nation’s housing market for all. I thank you for your full consideration of the recommendations outlined above and please contact Alia Fierro (alia.fierro@mail.house.gov), Director of Housing and Insurance Policy, with any questions.
Sincerely, MAXINE WATERS
Ranking Member
U.S. House of Representatives
House Committee on Financial Services
AL GREEN
Member of Congress
Ranking Member, Subcommittee on Oversight and Investigations
JUAN VARGAS
Member of Congress
AYANNA PRESSLEY
Member of Congress
RASHIDA TLAIB
Member of Congress
NIKEMA WILLIAMS
Member of Congress
RITCHIE TORRES
Member of Congress
STEVEN HORSFORD
Member of Congress
CC: Patrick McHenry, Chair, Committee on Financial Services, U.S. House of Representatives
