How Fannie and Freddie Shape Market Conditions

Amid a higher rate environment, government-sponsored enterprises (GSEs) are providing competitive debt terms in the market for multifamily owners. GSEs deliver the necessary liquidity to bring stability to a choppy environment of challenging operations and muted investment sales activity, making them a central force in shaping market conditions.

A sharp increase in volume caps for Fannie Mae and Freddie Mac multifamily loan purchases in 2026 indicated robust demand for financing in a cycle defined by supply constraints and affordability challenges. Multifamily mortgage loan originations increased 24% year-over-year in the first half.¹ As we move through the back half of the year, Fannie and Freddie still have ample capital left to deploy — a positive indicator for U.S. multifamily housing amid an uneven recovery.

The Federal Housing Finance Agency (FHFA) sets yearly limits on the total amount of multifamily mortgage loans that government-sponsored enterprises can purchase. The FHFA allotted Fannie Mae and Freddie Mac $88 billion apiece in 2026, for a total volume cap of $176 billion. This marked a 20.5% increase from a $146 billion combined cap in 2025, enhancing liquidity in multifamily lending while supporting affordable housing finance.²

GSEs are well positioned to deliver liquidity and transparent terms to a multifamily market that faces rate volatility, softer investment sales, and thinning supply. Fannie Mae’s monthly loan volumes for 2026 totaled $36.6 billion through July, still under half (41.6%) of its cap.³ It was a similar story at Freddie Mac, whose year-to-date loan volumes were $35.7 billion (40.6%).⁴

Exhibit 1: GSEs hold ample liquidity in reserve

As part of its volume caps, the government requires that Fannie Mae and Freddie Mac allocate at least half of their loans toward mission-driven or affordable housing. Mission-driven housing refers to properties that, unlike the FHFA’s definition of affordable housing, are not subject to rent or income restrictions. The mission-driven business requirement, along with an exemption that excludes workforce housing loans from volume caps, increases the availability of financing for affordable housing.

Agency Lending’s Role in Making Housing More Affordable

Housing affordability has become one of the top economic challenges for Americans. Rate volatility and a sharp rise in median home prices during the pandemic have squeezed budgets, putting ownership out of reach for more people. A Gallup survey found that only 25% of non-homeowners in the U.S. expect to buy a home within the next five years, the lowest result since the pollster first asked the question in 2013.⁵

Demand for more affordable multifamily housing is rising among Americans, young and old, who are showing a preference for renting or for living near urban centers.

While a majority of Americans still favor larger homes in less-dense areas, the share (44%) that prefers smaller dwellings where schools, stores and restaurants are within walking distance has risen in the post-pandemic period, according to the Pew Research Center. The youngest (ages 18-29) and oldest (ages 65-plus) cohorts in the survey were most likely to report a preference for urban living (54% and 47%, respectively).⁶

However, the supply pipeline is relatively weak. At the end of the second quarter, there were roughly 475,000 multifamily units under construction, the lowest mark since 2013, with capital becoming more selective and costs rising for financing and building. Asking rents have nonetheless risen, driven by supply-constrained markets such as the Bay Area and Reno, Nevada.⁷

Exhibit 2: New construction slowed as borrowing costs climbed

The affordability crunch and consequent demand for multifamily living are driving legislative and regulatory efforts to bolster the supply side of the market. The One Big Beautiful Bill Act (OBBBA) of 2025 included a provision that doubled the amount that Fannie and Freddie can invest annually in Low Income Housing Tax Credit properties to $2 billion each. These equity investments help drive additional supply in the affordable housing market. The 21st Century ROAD to Housing Act, which took effect in July 2026, aimed to lift regulatory barriers to construction and facilitate the conversion of commercial properties into affordable residences, among other objectives.

These actions, as well as the increase to GSE volume caps, arrived just as a large maturity wall loomed. Approximately 60% of apartment loans originated at historically low rates during the 2021-2022 vintage are expected to come due in the second half of 2026, creating a funding gap as borrowers refinance at a higher cost. An estimated $162 billion in multifamily loans are set to mature in 2026, up 56% from the previous year. Another $168 billion will mature in 2027.⁸ To alleviate stress on borrowers and support existing inventory, expectations among market participants suggest that volume caps could be poised for another material increase in 2027.⁹

Managers with localized expertise and deep relationships with agency lenders and borrowers will play a role in expanding the nation’s supply of affordable housing, inspiring the development of vibrant communities that make a positive impact on daily life. With the ability to structure loans under a variety of federal programs and local regulatory agreements, participants in the agency financing market support the production of multifamily rental housing through a wide range of creative solutions for rental housing owners, including individual loans on conventional and affordable multifamily properties as well as complex, tailored solutions such as credit facilities.

A Foundation for Multifamily Financing

In a supply-constrained environment, Fannie and Freddie can provide a strong and durable foundation for the multifamily market. Agency-driven liquidity makes housing more accessible and affordable for millions by encouraging healthy market activity, expanding the supply of new units, and promoting stability of the existing housing stock.

Given the GSEs’ influence in driving market conditions, regulatory developments bear watching as housing affordability, efforts to boost production, and a wave of maturities remain in focus.

Financing decisions and underwriting become more complex when real estate markets diverge and capital becomes more selective. In this environment, Fannie and Freddie serve as a key source of liquidity and competitive terms. For borrowers and other market participants, specialists with access to agency financing and who are active in all facets of multifamily finance can be beneficial partners.