Fannie Mae and Freddie Mac tighten lending on NYC rent-stabilized buildings after the rent freeze

The two government-backed giants that buy most apartment mortgages have made it much harder to borrow against New York City's rent-stabilized buildings since the Rent Guidelines Board froze rents in June, THE CITY reported Monday.

According to the report, Fannie Mae, which has become the lender of last resort for privately owned rent-regulated buildings, has toughened its underwriting standards since the freeze passed, and Freddie Mac has put a "pause" on new loans while it assesses the freeze's impact. Numerous landlords, advocates and nonprofit housing executives confirmed the changes to THE CITY, many on condition of anonymity.

What changed

• Frozen rents baked in: Fannie Mae's new requirements assume rents on stabilized units will not rise for four to eight years, which covers Mayor Zohran Mamdani's current term and a potential second one, THE CITY reported.
• Rising costs: Fannie and lenders like the Community Housing Preservation Corp. (CPC) assume operating expenses rise at least 5% a year, squeezing a building's margin every year.
• More unpaid rent: lenders have raised their expected shortfall in collections. CPC doubled its expected loss to 10%.
• Smaller loans: lenders are also lending a smaller share of a property's value, so owners must put up more equity.

Fannie Mae's published multifamily guide already tells lenders to underwrite rent-stabilized properties at current rents, exclude any expected bump from units converting to market rate, and stress-test the building's value. Fannie did not return THE CITY's request for comment. Freddie Mac told the outlet it "continuously reviews market conditions" and adjusts its lending in real time.

Who gets hurt, and who doesn't

THE CITY reported that two kinds of buildings are most exposed: older buildings that are almost entirely rent-regulated and already in financial distress, which may struggle to refinance and could face foreclosure or be sold cheaply, and 100% affordable buildings built with city help, which will need bigger city subsidies to get financing. CPC chief executive Rafael Cestero said his group will make 50% fewer loans to all-affordable projects in the city than it did two years ago. "It's one thing to have a freeze when interest rates are at 3%," he told the outlet. "It's another when they are at 7%."

Buildings that mix market-rate apartments with regulated units, including newer towers with 20% to 40% of units set aside at below-market rents, remain in good financial shape because market rents have climbed sharply, THE CITY said. Long-time owners with low debt, such as Rudin Management and Glenwood Management, can still refinance, according to veteran loan broker Jon Estreich.

The outlet also pointed to A&E Real Estate Holdings, one of the biggest owners of regulated housing, which is facing foreclosure on a $103 million loan tied to 22 buildings in downtown Jamaica, as first reported by Crain's New York Business.

What the city says

Deputy Mayor for Housing and Planning Leila Bozorg told THE CITY that the city's housing finance agencies support tens of thousands of affordable homes each year amid changing conditions, including higher interest rates, and that the city is "always prepared to work with our financing partners and explore new lending practices." She pointed to a city-backed insurance program, faster permitting and new financing tools, most of which are still being planned or rolled out.

What it means for tenants

The Rent Guidelines Board voted June 25 to freeze rents at 0% for both one-year and two-year stabilized leases starting between Oct. 1, 2026 and Sept. 30, 2027. The lending change does not alter those lease rules. The longer-term risk advocates describe is to building finances and upkeep: Michelle de la Uz of the Fifth Avenue Committee told THE CITY her nonprofit has had to lend money to some of its affordable projects to keep them from defaulting.