Fannie Mae and Freddie Mac Workforce Housing Lending

How It Works

Fannie Mae and Freddie Mac are government-sponsored enterprises that buy and guarantee mortgages, including loans on apartment buildings. Most of their multifamily lending finances ordinary market-rate properties. Their workforce housing products add a condition. In exchange for favorable loan pricing, the owner agrees in the loan documents to limit rents on a share of units.

There is no tax credit, voucher or grant involved. Affordability comes from a private promise written into the loan agreement. Under Freddie Mac’s products, the rents are checked once a year. Freddie Mac describes the approach as borrower-led rent preservation.

FHFA, which regulates both companies, named four products that support eligible workforce housing loans in its fact sheet on the 2025 caps:

Affordability is measured with the familiar thirty percent rule. Freddie Mac’s Tenant Advancement Commitment, for example, treats a rent as affordable if a year’s rent is no more than 30% of the income at the target AMI level, adjusted for unit size.

Who It Serves

FHFA sets the affordability threshold at 80% to 120% of area median income, depending on the market: 80% in standard markets, 100% in markets it designates as cost-burdened and 120% in very cost-burdened markets. Most federal rental programs do not reach that far up the income scale.

FHFA’s definition covers loans with either rent or income restrictions written into the loan agreement. Freddie Mac’s materials say no income tests are required. Its restrictions apply to the rent charged for the unit, not to the household living there.

How to Access It

Owners and developers work through a lender approved by Fannie Mae or Freddie Mac (Freddie Mac calls its lenders Optigo lenders). The loan is underwritten like other multifamily loans. Freddie Mac’s Workforce Housing Preservation product sheet, for example, lists “1.25x/80%” as its maximum credit parameters. In lending shorthand, that means a debt service coverage ratio of at least 1.25 and a loan of up to 80% of the property’s value. For renters there is no separate application or waitlist. They rent from the property like any other tenant.

History

FHFA hosted a workshop on moderate-income rental housing in June 2018. That year it also directed both companies to study the shortage of such housing. In its caps for 2023, announced in November 2022, FHFA created a new mission-driven category for loans that preserve affordable rents at workforce housing properties. Starting in 2024, it let those loans fall outside the annual volume caps. According to FHFA, the two companies financed more than $4.5 billion in workforce loans through the third quarter of 2024, more than double their combined 2023 total.

FHFA kept the exemption for 2025, when each company’s cap was $73 billion, and for 2026, when it is $88 billion. The agency’s 2026 announcement used the name U.S. Federal Housing.

Limitations

• Affordability is temporary. Restrictions are tied to the loan. Under Freddie Mac’s Workforce Housing Preservation product, they last 10 years or the loan term, whichever is shorter.
• No income targeting. Where a product restricts rents rather than incomes, as Freddie Mac’s do, a higher-earning household can rent a restricted unit.
• Modest depth. In some markets, a rent affordable at 80% to 120% of AMI may be close to the going market rent. In those places the restriction mainly limits future rent increases.
• Policy-dependent. FHFA sets the definitions and cap rules each year and can change them.

See how workforce housing is financed for how these loans fit with other tools.