Freddie Mac CEO David Brickman shared at a George Talks Business event how the real-estate market is adjusting to millennials' postponing homeownership.
By Briahnna Brown
Growing up in New York during its economic decline in the 1970s—and its subsequent growth in the ’80s and ’90s—is what sparked David Brickman’s interest in real estate.
He took that interest with him as he began working in financial research for Freddie Mac, one of the largest mortgage financers in the United States, and just over 20 years later he now serves as the company’s CEO. Freddie Mac was established in 1970 by Congress and is a government-sponsored enterprise (GSE) that works to bring stability and affordability to the housing market. It does this by buying mortgages from banks and other financial institutions and aggregates them for the bond market.
"Knowing that we do this means that banks can effectively lend money in all cycles in all conditions on a very consistent basis throughout the country,” Mr. Brickman said. “It means that they have the capital, the money, to be able to lend on any given day.”
Mr. Brickman shared his insights on Monday during a George Talks Business event. The event series, which the George Washington University School of Business hosts and live-streams, features regularly-scheduled interviews with respected thought leaders in multiple fields.
Vanessa Perry, associate dean for faculty and research for GWSB, interviewed Mr. Brickman on how Freddie Mac plans to adjust for the future as well as what it learned from the past.
Since the 2008 recession and subprime mortgage crisis, there has been a mindset shift at Freddie Mac, Mr. Brickman said. The company shifted to a business model that allows it to transfer the credit risk of the mortgages it buys from itself to the investors. There are also more robust and rigorous standards in the mortgage loans available because of the deeper understanding of risk, and this balanced approach allows Freddie Mac to support access to housing in a more sustainable and responsible way.
"Homeownership is something that all may aspire to, and hopefully all can access at some point, but may not be the appropriate decision for everyone at all times," Mr. Brickman said. "The last thing we want to do is see somebody in a financial position that's not sustainable."
Housing affordability has been a major driving force behind the growth in rental or multifamily housing, Mr. Brickman said. More young people are moving to urbanized areas where land is more expensive, and the population is dense. He said he originally believed companies such as Airbnb were contributing to the lack of available affordable housing by displacing these rental properties, but in seeing how developers are seeking to build to accommodate the service—with floors or wings of apartment buildings and other multifamily properties dedicated to its use—he said there is some possibility to work more constructively and responsibly to accommodate both owners and potential residents.
“We have to ensure from an economic policy perspective that we're providing adequate supply of rental housing, supporting rental housing when we can, and ensuring that we can maintain affordability, particularly for our workforce housing," Mr. Brickman said.