FHFA to mandate tenant protections on multifamily properties

The Federal Housing Finance Agency will introduce tenant protections on multifamily developments that receive capital funding from the government-sponsored enterprises.

The move comes after consultation with various industry stakeholders and it is the first time tenant protections are included within multifamily finance policy, the agency said in an announcement Friday.

"These requirements reflect basic best practices to ensure housing providers effectively communicate with tenants and that tenants understand their rights and responsibilities under their leases," said FHFA Director Sandra Thompson in a press release. 

Under the rules, owners of properties financed by Fannie Mae or Freddie Mac will be required to provide tenants 30 days written notice before any increase in rent or lease expiration. A five-day grace period for rent payments will also be mandated. 

"The tenant protections announced today are the culmination of a collaborative effort between FHFA, the enterprises, tenants and landlords to address challenges faced in rental housing today," Thompson said. 

Fannie Mae and Freddie Mac will enforce tenant protections, with details of the policy to be published in August. The regulation becomes effective for new multifamily loans signed on or after Feb. 28, 2025, and noncompliance could lead to borrower penalties under terms of the contract. 

The policy was developed after FHFA issued a public request for information in 2023 aimed at finding solutions to protect renters and increasing fairness in the market. The agency published a full report based on its findings earlier this year.

Issues raised among some respondents regarding tenant-protection requirements included enforcement concerns, particularly when lenders or servicers were not aware of relationships between renter and landlords. 

Tenant advocates said the agency should consider enacting policies to prevent excessive rent increases at GSE-financed properties. Suggestions included an annual percentage cap on increases or stabilization of annual rents based on economic and market factors. 

Freddie Mac previously reported multifamily investment conditions in the first quarter this year on the backs of lower interest rates. Property prices declined nationwide on both a quarterly and yearly basis. Meanwhile, net operating income for investors came in flat from the previous quarter but increased annually. 

The latest regulation arrives in what is becoming an eventful year for policy development at the FHFA. In May, the agency published a new RFI to obtain feedback on the Federal Home Loan bank system and the way it can fulfill its housing finance mission. Last month, FHFA also appointed 19 housing leaders to a new committee focused on home affordability. 

The government-sponsored enterprises are currently in the process of introducing new FHFA-approved pilot programs exploring title-insurance waivers on some refinances as well as a controversial initiative to purchase closed-end second liens.