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Landlords of Last Resort: Should the Government Subsidize the Mortgages of Privately-Owned, Small Multifamily Buildings?

Western New England Law Review, Vol. 32

Brooklyn Law School, Legal Studies Paper No. 170

30 Pages Posted: 12 Oct 2009 Last revised: 8 Jul 2010

David J. Reiss

Brooklyn Law School

Date Written: October 12, 2009

Abstract

The absence of stable financing options has long caused difficulties for owners of small multifamily buildings. Despite the ongoing maturation of a secondary mortgage market for small multifamily mortgages, this housing stock continues to shrink due to abandonment, demolition, foreclosure and other causes. As these buildings house many low-income households, some have suggested subsidizing the financing costs for the owners of these buildings. Any proposal to subsidize these landlords to meet affordable housing goals, however, should be predicated on determinations that (i) it is an efficient means to provide housing to the neediest tenants and (ii) the multifamily mortgage market is subject to failures that make such government intervention appropriate.

This article first describes what little is known about small multifamily properties and their owners. It then describes the lending environment for real estate entrepreneurs over the last hundred years. Finally, it evaluates the role the government should play in the small multifamily mortgage sector. The article concludes that subsidizing owners of small apartment building is an inefficient and unwarranted affordable housing policy and that more direct subsidies to low-income households, such as housing vouchers, are preferable.

This Article was presented at Western New England College School of Law’s 2008 “Entrepreneurship in a Global Economy” Conference.

Keywords: multifamily, mortgage, housing finance, secondary mortgage market, cmbs, commercial mortgage-backed security, landlord, tenant, rental, residential, apartment

Suggested Citation

Reiss, David J., Landlords of Last Resort: Should the Government Subsidize the Mortgages of Privately-Owned, Small Multifamily Buildings? (October 12, 2009). Western New England Law Review, Vol. 32; Brooklyn Law School, Legal Studies Paper No. 170. Available at SSRN: https://ssrn.com/abstract=1487646

David J. Reiss (Contact Author)

Brooklyn Law School ( email )

250 Joralemon Street
Brooklyn, NY 11201
United States

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