At the onset of the pandemic, dramatic economic shocks resulted in millions of people around the nation losing 

their jobs. Since most renters residing at multifamily Low Income Housing Tax Credit (LIHTC) properties rely on 

employment income to pay their rent, there was some concern about the potential impact of the sudden recession 

and lingering economic after-effects of the pandemic on these types of properties. Unlike certain other federally 

assisted housing programs, renting a LIHTC unit does not guarantee that a renter household will spend no more 

than 30 percent of its income on rent and utilities. Because less than a third of LIHTC residents are also covered by 

Project-Based Section 8 rental assistance, many LIHTC renters could spend more than 30 percent of their 

household income on housing costs. Nevertheless, fundamentals at LIHTC properties remained stable between 

2019 and 2022 and, in some cases, outperformed similar conventional properties, including Market Rate Seniors 

Housing – Majority Independent Living (Market Rate Seniors) and Market Rate Class B/C properties. 

1

FEBRUARY 2023

2023 MF Affordability Outlook: LIHTC Outperforms but Affordability Still a Challenge

LIHTC Seniors Vacancy Trends Stable

As shown in the adjacent chart, both Moody’s Analytics CRE 

and CoStar data show the average vacancy rate barely 

moved at LIHTC Seniors properties even at the height of 

economic recession in 2020. Prior to the roll-out of the 

COVID-19 vaccine, many seniors housing properties 

experienced some of the highest COVID-19 infection and 

death rates, leading to an increase in their overall vacancy 

rate as some residents with means likely moved out. 

However, the vacancy rate at LIHTC Seniors properties only 

rose by 0.4 percent from Q4 2019 to Q1 2021 to a high of 2 

percent, according to data from Moody’s Analytics CRE, with 

the vacancy rate now back in line with its pre-pandemic 

average. CoStar data shows a similar trend, with the average 

vacancy rate hovering around 2.7 percent.

Market Rate Seniors housing fared much worse. The average 

vacancy rate at these properties rose by 7.8 percent points 

from Q4 2019 to Q1 2021 to a high of 18.1 percent. While the 

vacancy rate has been stabilizing – declining to 14.2 percent 

as of Q4 2022 – it remains much higher than the 1.7 percent 

average vacancy rate at LIHTC properties. 

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2019 Q22019 Q32019 Q42020 Q12020 Q22020 Q32020 Q42021 Q12021 Q22021 Q32021 Q42022 Q12022 Q22022 Q32022 Q4

Market Rate Seniors

LIHTC Seniors (Moodys CRE)

LIHTC Seniors (CoStar)

LIHTC Seniors Average Vacancy Rate vs. 

Market Rate Seniors 

(Q2 2019 – Q4 2022)

Source: Moody’s Analytics CRE, CoStar Group Inc., NIC MAP 

Primary and Secondary Markets.

The lower vacancy rate for LIHTC Seniors properties is likely due to these lower-income residents simply having 

fewer housing options, keeping them from moving out. In addition, many of these seniors have a stable source of 

income in Social Security and are paying rents that are much lower than those offered at Market Rate properties. 
2

Multifamily Economic and Market Commentary

LIHTC Seniors Rents Much Lower

As shown in the adjacent chart, Moody’s Analytics CRE data 

estimates that the average asking rent at LIHTC Seniors 

properties for units affordable at 60 percent of Area Median 

Income (AMI) is generally only about a quarter of the rent at 

Market Rate Seniors properties. 

In fact, despite double digit vacancy rates, rents have continued 

to grow at Market Rate Seniors properties with the average 

asking rent increasing to $3,811 as of Q4 2022 from $3,460 as of 

Q4 2019. By contrast, the average asking rent at LIHTC Seniors 

properties for units affordable at 60 percent of AMI only 

increased to $982 as of Q4 2022 from $904 as of Q4 2019. 

However, it is important to note that Market Rate Seniors 

housing properties offer far more amenities and personal 

services than what is available at Seniors LIHTC properties.

LIHTC Family Vacancy Trends Also Stable

As shown in the adjacent chart, Moody’s Analytics CRE data 

estimates the average vacancy rate remained unchanged at 

LIHTC Family properties even at the height of the economic 

recession in 2020. The vacancy rate at LIHTC Family properties 

remained at 2.5 percent from Q4 2019 to Q3 2021 before 

declining to 2.2 percent as of Q4 2022. 

The closest comparable market rate segment also tracked by 

Moody’s Analytics CRE, Market Rate Class B/C, also remained 

fairly stable with the average vacancy rate rising by just 0.2 

percentage points over the same time period. But it had a higher 

average vacancy rate of 3.8 percent as of Q1 2021 before falling 

and rebounding to 3.5 percent as of Q4 2022. RealPage, which 

defines Class C properties as those with rents in the bottom 20 

percent of a market, also estimates a slightly higher vacancy 

rate for Class C properties of 4.0 percent as of Q1 2021. 

While vacancy at LIHTC properties is expected to be low by 

design, the stability of their lower average vacancy rate over the 

past several years demonstrates that the various federal 

stimulus programs, as well as a quickly rebounding job market, 

generally helped both tenants and borrowers of subsidized 

properties. 

LIHTC Seniors Asking Rent Per Unit vs. 

Market Rate Seniors 

(Q2 2019 – Q3 2022)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2019 Q22019 Q32019 Q42020 Q12020 Q22020 Q32020 Q42021 Q12021 Q22021 Q32021 Q42022 Q12022 Q22022 Q32022 Q4

Market Rate Asking Rent ($) Asking Rent 60% AMI ($)

Source: Moody’s Analytics CRE, NIC MAP Primary 

and Secondary Markets.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2019 Q22019 Q32019 Q42020 Q12020 Q22020 Q32020 Q42021 Q12021 Q22021 Q32021 Q42022 Q12022 Q22022 Q32022 Q4

Market Rate Class B/C (Moody's CRE)

Market Rate Class C (RealPage)

LIHTC Family Properties

LIHTC Family Average Vacancy Rate vs. 

Market Rate 

(Q2 2019 – Q4 2022)

Source: Moody’s Analytics CRE, RealPage Inc.
3

Multifamily Economic and Market Commentary

LIHTC Family Asking Rents Rose Fairly Steadily 

Through Q4 2022

Unlike Seniors LIHTC properties where residents have 

some guaranteed sources of income like Social 

Security, residents of LIHTC Family properties rely on 

continued employment to pay rent. However, some of 

the strongest income growth in recent years helped 

support the gradual but generally consistent 

increases in rent necessary to support the ongoing 

operation of LIHTC properties.

As shown in the adjacent chart, LIHTC Family asking 

rents slightly exceeded Market Rate Class B/C 

properties during the height of the economic 

recession, according to Moody’s Analytics CRE data. 

While the Market Rate Class B/C average rent fell by -

2.3 percent from Q1 2020 to Q1 2021, the average rent 

at LIHTC Family properties rose by 1.7 percent. 

LIHTC Family Asking Rent Growth Per Unit vs. 

Market Rate

(Q2 2019 – Q4 2022)

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2019 Q22019 Q32019 Q42020 Q12020 Q22020 Q32020 Q42021 Q12021 Q22021 Q32021 Q42022 Q12022 Q22022 Q32022 Q4

Asking Rent Growth (%)

Market Rate Class B/C (Moody's CRE)

LIHTC Family at 60% AMI

Market Rate Class C (RealPage)

Source: Moody’s Analytics CRE, RealPage Inc.

Nevertheless, even with the temporary decline, the average asking rent at Market Rate properties overall as of Q4 

2022 was estimated at $1,794, about 53 percent higher rent than for units affordable at 60% of AMI at LIHTC Family 

properties as shown in the chart below. The average asking rent at Market Rate Class B/C properties was estimated 

by Moody’s Analytics CRE to be $1,434 as of Q4 2022, about 22 percent higher. RealPage, which defines Class C 

properties as those with rents in the bottom 20 percent of a market, estimated the average asking rent for Class C 

properties to be just under $1,400 as of Q4 2022 or about 19 percent higher.

$650

$850

$1,050

$1,250

$1,450

$1,650

$1,850

$2,050

2019

Q2

2019

Q3

2019

Q4

2020

Q1

2020

Q2

2020

Q3

2020

Q4

2021

Q1

2021

Q2

2021

Q3

2021

Q4

2022

Q1

2022

Q2

2022

Q3

2022

Q4

LIHTC Seniors LIHTC Family LIHTC Other

Market Rate Market Rate B/C Class C (RealPage)

Average Asking Rent for LIHTC Units vs. Market Rate Family Units (Q2 2019 – Q4 2022)

Source: Moody’s Analytics CRE, LIHTC rents affordable at 60% of AMI, RealPage, Inc.
4

Multifamily Economic and Market Commentary

Share of Rent Paid at LIHTC Properties Stable During Pandemic

Most units at LIHTC properties are rented to residents earning no more than 60 percent of AMI. However,

maximum rent increases are set by income limits released by the U.S. Department of Housing and Urban Development 

(HUD) and, in many non-coastal markets, rents for LIHTC units may be below the maximum allowable rents due 

to local market conditions. Therefore, federal stimulus payments, emergency rental assistance, and extended 

unemployment benefits were able to go further at LIHTC properties than at most types of market rate multifamily 

properties during the height of the economic lock-down during the pandemic. This supported steady 

fundamentals and the share of rents paid by month’s end hovered around 90% from April 2020 to March 2021. 

Still, there has been some deterioration in both LIHTC and certain market rate properties in rents paid by 

month’s end since the start of the pandemic. RealPage defines Class C units as units in the bottom 20% of rents 

for a market. Rents paid by month’s end at Class C properties declined from 96.3% of all rents in March 2019 to 

94.4% as of December 2022. In addition, rents paid at month’s end at LIHTC properties declined from 92.7% of all 

rents as of March 2019 to 89.5% as of December 2022. 

We believe the multifamily sector may face softening demand in 2023 due to the combination of a recession and 

stubbornly high inflation, but there is far greater demand for affordable units than supply. This bodes well for the 

continued stable performance of LIHTC properties, particularly since we believe that rental affordability will 

continue to be a challenge in 2023.

Share of Rents Paid by End of Month for LIHTC vs Class C Properties 

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

100.0%

Jan-19

Feb-19

Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Jul-22

Aug-22

Sep-22

Oct-22

Nov-22

Dec-22

LIHTC Properties Class C Properties

Beginning of COVIDrelated Mitigation 

Efforts

Source: RealPage, Inc. , U.S. Department of Housing and Urban Development (HUD) 

Note: As of Q4 2022, RealPage updated the rent payment methodology for market rate units to include rents paid early, rents paid by 5th but not 

processed by the property manager until after the 5th, and rents paid after the 5th. This more inclusive methodology may result in different 

results than shown previously.
5

Multifamily Economic and Market Commentary

Ongoing Rent Growth Nationwide

We project that the multifamily sector will see a decline in demand during the first half of the year, resulting in 

negative rent growth for at least the first quarter of 2023. However, we also expect demand to increase during 

the second half of the year, which will likely result in a more normal rent growth resumption averaging about 

1.5% for the full year of 2023. After two years of above-average rent increases, a decline in rent growth would be 

welcome news for many renters but is not expected to contribute much to increased affordability, at least not at 

a national level.

Wage Growth More Relevant for Rent

Wages measure earnings from work, while income 

can include non-work income such as interest and 

dividends. While growth in overall income will help 

with rental affordability, many renters rely solely on 

wages, making wage growth an important indicator 

of affordability. 

Middle Market Affordability Continues to Erode

Improvement in rental affordability is primarily 

attained when wage growth meaningfully outpaces 

rent growth. Multifamily data provider RealPage, Inc., 

defines Class B rents as those rents that fall between 

the top 20% and bottom 20% of the rent distribution 

for a given metro (and are therefore in the mid-60% of 

the rent distribution). However, as shown in the top 

adjacent chart, except for the 13-month period at the 

start of the pandemic-induced recession, year-overyear rent growth in the middle market Class B 

segment has outpaced or kept pace with wage 

growth almost every month since January 2011. The 

gap is narrowing. As of December 2022, year-overyear Class B rent growth was 5.5%, only 0.6 

percentage points higher than the 4.8% wage growth 

recorded.

Class C Affordability Also Eroding

RealPage defines Class C rents as those in the bottom 

20% of the rent distribution for a given metro, making 

them the most affordable rents. These are also the 

types of units that tend to be affordable for 

production and non-supervisory employees. 

*Based on Same Store effective rents at multifamily properties. 

Same-store data includes only multifamily properties surveyed 

in all observation periods, which excludes lease-ups or other 

changes in sample. 

Source: Moody’s Analytics, RealPage

Year-over-Year Change in Private Sector Nominal 

Average Hourly Earnings and Effective Rent*

Jan. 2011– Dec. 2022 

4.8%

6.5%

5.5%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0% All nonfarm employees wage

growth

CPI-U

Class B Effective Rent Growth

5.0%

5.8%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0% Production and Non-Supervisory

Employees Wage Growth

CPI-U

Class C Effective Rent Growth
6

Multifamily Economic and Market Commentary

0%

2%

4%

6%

8%

10%

12%

14%

Average Vacancy Average Asking Rent Growth

Average Vacancy and Asking Rent Growth Class B

Multifamily (Q4 2013 – Q4 2025)

0%

1%

2%

3%

4%

5%

6%

7%

8%

Average Vacancy

Average Asking Rent Growth

Average Vacancy and Asking Rent Growth Class C

Multifamily (Q4 2013 – Q4 2025)

As shown in the lower chart on the previous page, the gap between the wages of production and non-supervisory 

employees and effective rent growth has been smaller for Class C units than for Class B units and, even prior to the 

pandemic, there were 20 months when wage growth slightly outpaced Class C effective rent growth. Even so, since 

January 2011, overall cumulative Class C effective rent growth has outpaced the wage growth of production and nonsupervisory employees, despite some of the strongest wage gains in a decade. In 2022, Class C effective rent growth 

was 5.8%, still outpacing wage growth of 5.0% for production and non-supervisory employees, leading to a further 

erosion in affordability for the workers who can least afford it.

Vacancy Rates Expected to Rise Slightly...

Based on our currently predicted moderate recession in the second quarter of 2023, combined with Class B 

properties having to adjust rents to compete with an above-average amount of Class A new supply being delivered 

in certain markets, both Class B and Class C fundamentals are projected to soften in 2023. As shown in the left chart 

below, CoStar projects that the average Class B vacancy rate is expected to rise to 7.2% in 2023, then 7.5% in 2024, 

which is slightly above the 6.1% average over the past 10 years. Similarly, as shown in the right chart below, the 

average Class C vacancy rate is expected to rise to 4.6% in 2023, then again in 2024 to 4.9%. Even so, it is expected 

to remain below the 5.1% average over the past 10 years leaving a tight market for the lowest income renters.

...and Rent Growth is Expected to Slow Slightly

In addition, CoStar projects that the average Class B asking rent will likely slow to 2.9% in 2023, followed by a 2.0% 

increase in 2024. Excluding the double-digit spike in 2021, the average rent increase for Class B apartments was 

3.0% since 2013. 

We believe that Class C rent growth will likely be slightly stronger at 3.1% in 2023 followed by a 2.0% increase in 

2024. While the average asking rent is expected to grow more slowly than the 3.8% average over the past decade, 

nationwide, we do not expect Class C asking rents to fall.

Source: CoStar Group Note: * Projected
7

Multifamily Economic and Market Commentary

New Supply Will Have Limited Impact

While Fannie Mae is expecting a recession in the second quarter of 2023, there are over 780,000 new 

multifamily units slated for completion by the end of 2023, consisting primarily of Class A units, which are 

the most expensive to rent. In addition, due to construction delays resulting from labor shortages and 

elevated materials prices, it is unlikely that all new units will be delivered as scheduled, making it unlikely 

that new supply will have a significant impact on affordability nationwide. 

Even in metros such as Phoenix, Austin, and Dallas, where job growth is not expected to support the level of 

new supply provided, we believe Class B properties will likely have to drop their rents to compete with the 

new Class A coming online in only certain submarkets. As a result, we do not see a reversal in the long-term 

trend of declining affordability in 2023.

Tanya Zahalak

Multifamily Economics and Strategic Research – Economics – Advisor Economist

Multifamily Economics and Strategic Research

February 2023

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic and Strategic Research (ESR) Group included in 

these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number 

of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. 

Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it 

does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. 

Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, 

opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date 

indicated and do not necessarily represent the views of Fannie Mae or its management.

© 2023 Fannie Mae