Fannie, Freddie Slash Financing After Mamdani’s Rent Freeze

15 minutes read

We interrupt your election fallout coverage for an important development in the slow-moving train wreck that is rent-stabilized housing:

Freddie Mac has paused its lending to those buildings and Fannie Mae has baked years of rent freezes into its underwriting, the City Reporter’s Greg David reported.

These actions, along with the collapse of Signature Bank and the withdrawal of other rent-stabilized lenders, are “making it impossible or extremely difficult for landlords to get financing,” David wrote.

This was not a secret in the world of affordable and rent-stabilized housing. People have been talking about it for many weeks, and surely the Mamdani administration knew.

“It is 100 percent accurate, and as a large owner of this type of product, I can confirm from first-hand experience that this is exactly what is happening,” tweeted Ben Siscovick, a partner and president of multifamily operator Spaxel. “Lenders are arguably the most rational economic actors and their decision to flee the affordable housing market is a direct result of conditions on the ground. The situation is absolutely dire.”

But there was no official announcement. No one knew for sure that Freddie had stopped lending or how many years Fannie loans assume the rent freeze will continue for rent-stabilized units.

Some people heard it was five years, or eight, or even 10. David’s story said four to eight — the length of Zohran Mamdani’s mayoralty — but Fannie didn’t confirm it. Freddie later said, vaguely, that it’s still doing some lending.

Whatever the specifics are, the new underwriting standards slash the amount of debt the government-sponsored enterprises are willing to extend to rent-stabilized buildings.

As a result, when mortgages mature, the property owners will not be able to get enough new financing from Fannie or Freddie to repay the expiring loans.

In many cases, this means they will get no financing at all, because owners must make up the difference out of their own pockets. That might be impossible or just a decision no rational person would make.

A few of the regional banks that once routinely provided mortgages to rent-stabilized buildings are still in the game. They must take a haircut or foreclose when their bad loans mature. JP Morgan Chase, I have heard, won’t lend a rent-stabilized property more than half of its value.

So that’s the situation. The question is, does the mayor care?

Mamdani hasn’t asked President Donald Trump to make Fannie and Freddie reverse course. The mayor might see a silver lining here: He is on record as wanting less debt on rent-stabilized buildings, figuring that will free up revenue for maintenance and repairs.

He likely sees loan workouts and foreclosures that reduce debt service as stabilizing a building’s finances and giving his favorite nonprofits a chance to buy the property. Never mind that they are barely holding on to the buildings they already own.

“Some affordable housing operators are hurting tremendously right now,” one told me. They are literally asking others in the industry for loans, he said.

As their buildings run short on revenue to do maintenance, the mayor is adding inspectors, pushing violation sweeps and urging tenants to call 311. “If you’re increasing inspectors, they’re going to find issues. Then they turn off your subsidy,” the operator said. “Now you’re in a death cycle.”

The devaluation strategy pursued by the state’s 2019 rent reform, and now Mamdani, saved tenants money but is worsening conditions for some. Owners who typically paid for improvements by refinancing don’t have that option if refis now deplete their coffers.

Nonprofits once got into the affordable housing business to generate revenue for their charitable mission. Today, that housing is losing money, so they are reducing other services to keep it afloat, another operator said.

“We will see nonprofit failures, dragged down by their real estate portfolios,” he said. “It’s a bloodbath out there.”

Mamdani’s deputy mayor for housing gave the City Reporter a benign quote about how the city has various financing tools and partners to help struggling owners.

Landlords who inquire about city loans may be asked to agree to fill vacancies with people from homeless shelters. Regulatory agreements always have conditions that landlords don’t like but might accept if they have no other options.

Still, the problem may be larger than the city can solve with existing programs. And neither Mamdani nor the state wants to solve it with rent increases. It seems the slow-moving train wreck will continue until every car is off the rails.

“I doubt many fully appreciate the magnitude of what is being reported,” Siscovick wrote. “The net result of absolutely horrendous government policy has been to choke off critical cash necessary to operate affordable housing for the most vulnerable populations in the city.”

What we’re thinking about: The 2025 election seems like a lifetime ago, but the bills are still coming due from the New York Apartment Association’s ill-fated attempt to elect Andrew Cuomo mayor.

The group recently sent the IRS a rather large tax payment, thought to be more than $700,000, stemming from its spending on that race. It also faces a fine for paying late.

The NYAA spent millions of dollars on an independent expenditure called Better Housing Now, knowing there would be no rent freeze if Cuomo won. But it was futile; New Yorkers had moved on from the scandal-scarred Democrat (and from the scandal-scarred incumbent, Eric Adams).

The NYAA is a nonprofit and its member dues are tax-deductible, but not the portion spent on political activity. The rules are laid out in a 66-page IRS guide, which is recommended reading for insomniacs.

The NYAA’s proxy tax payment was late because of a disagreement between its own tax attorneys and the compliance attorneys on the campaign side. Eventually, the group sent the IRS payment along with a note explaining the delay and requesting the lateness fine be waived.