We have had several posts about rent control and its harmful unintended consequences, and now this: The Wall Street Journal (as reposted by Realtor.com) is reporting that Freddie Mac (in a new twist in controlling rent increases) is launching a new program that will offer lower-cost financing to owners who agree to cap rent increases for the life of their loans. While similar to “rent control” it differs dramatically in that it is a voluntary arrangement between the private owner and the lender. The program launched in early August and is available nationwide. Eligible properties start with at least 50% of rents affordable to households earning 100% of Area Median Income or less. Borrowers then agree to limit rent growth on 80% of the units for at least the 10-year loan term.
“The initiative comes at a potentially appealing time for real-estate investors who are facing a slowing rental market. Freddie Mac will provide mezzanine debt—which is more risky but pays a higher interest rate than senior debt—at below market cost.”