As the United States continues to see a shortfall in its housing supply, rents continue to outpace household incomes while units with lower rents have continued to fall out of the supply. These dynamics have exacerbated a housing crunch, especially for low- and moderate-income households and families. To tackle this challenge, we must build more homes, preserve the homes we already have, and support the stability of housing providers and households.
Small to medium multifamily (SMMF) properties – properties with 2 to 49 units – can be found in urban, suburban, and rural communities across the country and are a critical source of affordable housing for low- and moderate-income households (low-income households are those with incomes at or below 80 percent of the area median income and moderate-income households are those with incomes between 80 and 120 percent of the area median income).
SMMF properties provide 48 percent of the nation’s rental housing units and 19 percent of the housing stock nationwide. Among the estimated 23 million rental units in SMMF buildings, 80 percent are affordable to households at or below 80 percent of the area median income; 93 percent of SMMF units are affordable to households at or below the area median income, and 97 percent of SMMF units are affordable to households at or below 120 percent of median renter income. For more information about SMMF properties in your community, see the State of the Market Briefs section.
While property managers in these buildings often accept tenant-based rental assistance, many SMMF properties are affordable without government subsidy or affordability restrictions. Often, this is due to this rental stock’s older age, location, ownership type and, in some locations, is strengthened by rent stabilization laws. This portion of the SMMF stock—properties that are affordable to lower-income households without receiving project-level subsidies —is the focus of this toolkit.
Preserving the long-term affordability in SMMF buildings is a place-based and direct anti-displacement strategy that can promote economic and racial diversity, insulating residents from the negative impacts of gentrification and disinvestment. However, conditions that place affordability out of reach for SMMF residents and create instability for existing and new SMMF property owners vary by jurisdiction, neighborhood, and property This Toolkit will highlight a range of strategies and solutions that preserve affordability, prevent resident displacement, and help owners and operators to start or sustainably continue acquisition, rehabilitation, and operations of SMMF properties.
 According to the Joint Center for Housing Studies, 46 percent of renters were housing cost burdened in 2019, paying more than 30 percent of their income on rent and utilities, marking a slight improvement from a peak of 51 percent of renters in 2011. In 2019, approximately 1 in 4 renter households were paying more than half of their income towards rent. During the COVID-19 economic recession, lower-income renters and Black, Indigenous, people of color (BIPOC) renters were hit particularly hard and more likely to fall behind on rent payments.
 Source: 2020 1-Year ACS
 Source: Enterprise estimates based on 2016-2020 5 Year PUMS, 2022 HUD Income Limits, and the Missouri Data Center PUMA to County Crosswalk.
What is Preservation?
Preservation of unsubsidized SMMF properties is one approach of a suite of affordable housing solutions that invests in place and provides housing stability for people. Preservation presents an opportunity to slow the loss of affordable rentals, provide stability for low- and moderate-income residents who live in these homes, keep communities intact by combating residential and cultural displacement, and deepen the impact of all affordable housing strategies.
Acquisition of affordable properties by mission aligned developers and owners,
Stabilization of existing owners so they can continue to provide affordable housing,
Capital investment to rehabilitate and improve housing conditions for residents,
Financing strategies to extend, preserve, or deepen existing affordability levels for current and future residents, and
Continued stewardship of properties as a long-term source of affordability
Small to medium multifamily stock faces unique challenges and risks. Communities across the country are losing a vital source of the existing affordable housing supply faster than new affordable units can be added to the stock, and the SMMF segment faces a variety of specific challenges that pose a risk to its long-term stability. In neighborhoods experiencing housing market pressures, SMMF properties can be vulnerable to rising rents, price appreciation, and conversions to more profitable housing types and uses. On the other hand, SMMF properties located in disinvested communities may face deterioration, vacancy, and difficulties attracting investment. Even in the same neighborhood, SMMF properties may face very different challenges due to the varied ownership, property conditions, financing needs, and resident affordability levels of these properties.
We need more targeted tools, resources, and policies to mitigate and prevent the risk of loss for SMMF properties. Although the SMMF housing stock is a significant source of the nation’s affordable housing, there are few targeted programs, policies, and financing tools to protect affordability and property condition. Meanwhile, some of the most effective existing affordable housing resources – such as the Low-Income Housing Tax Credit – are not well suited to meet the needs of SMMF properties. Targeted resources, programs, and policies are critical to maintain the existing affordability of SMMF properties and mitigate the risk that they will be lost permanently from the affordable housing supply. Once these units are lost, they are very difficult and cost prohibitive to replace, risking the displacement of long-time residents.
Protect existing affordability where it currently exists. Unsubsidized, SMMF properties without restrictions or dedicated affordability protections are particularly vulnerable to being lost to local market conditions. Owners of unsubsidized SMMF properties do not have any incentives to continue to provide affordable housing other than personal interest or mission. Once these properties are lost, they are extremely difficult, if not impossible, to replace without significant investment.
Provide housing stability and prevent displacement of existing residents and families. Preservation and resident stability go hand in hand. SMMF preservation can help maintain housing choice diversity and preserve affordable options for existing and future residents, particularly long-term and legacy low-income residents and Black, Indigenous and people of color (BIPOC) residents. Preserving the continued affordability of SMMF properties can be a proactive resident stability approach when jurisdictions may not have strong tenant protection policies.
Invest in healthy, sustainable, and resilient homes. Depending on the level of rehabilitation needs, preservation can be faster and more cost effective than new construction. SMMF properties are often older and suffering from deferred maintenance. Preservation can address unmet and ongoing capital needs and repairs, and health, safety, sustainability, and resilience needs that improve living conditions for current residents and reduce operating costs. Preservation is also likely to avoid significant changes to the existing built environment, mitigating community concerns over neighborhood change that can stall or prevent new affordable development.
Foster responsible stewardship by mission-aligned owners. Preservation can help ensure our affordable housing stock remains in, or is transferred to, the hands of responsible owners and operators who prioritize resident stability and have the ability to provide affordable homes for the long-term.
 A study of small to medium multifamily properties between 2 and 49 units in 11 major urban counties found that these properties sell at a discount compared to single family homes and larger multifamily buildings. Neighborhood characteristics accounted for roughly half of the difference, while half of the discount is unexplained. An, B.Y., Bostic, R.W., Jakabovics, A. et al. Why Are Small and Medium Multifamily Properties So Inexpensive?. J Real Estate Finan Econ 62, 402–422 (2021). https://doi.org/10.1007/s11146-019-09729-5
Importance of Race and Equity in SMMF Preservation
As we move to preserve this critical source of affordable rental housing, it is important to acknowledge that the benefits of housing policy and practice have accrued disproportionately to white people and communities. The U.S. housing market and tax system is designed to favor homeowners, who are disproportionately white, which has led to a widening of the gap in wealth accumulation and other outcomes between renters and homeowners. Unjust and discriminatory practices such as redlining, restrictive covenants and exclusionary zoning were created to exclude BIPOC, particularly Black Americans, from the benefits of homeownership and of living in well-resourced communities and neighborhoods. These housing-related injustices combine with those experienced in other sectors such as employment, education, and criminal justice to create the range of racial disparities in outcomes we see today.
Preserving a SMMF property has the potential for both positive and negative impacts on a range of actors, including current and future residents, people and businesses in the surrounding neighborhood, and building owners and other organizations involved in preservation. In contemplating SMMF preservation, consider the following (see By the Numbers for more details):
Given these relationships, efforts meant to improve and maintain the affordability of the nation's SMMF housing stock have an outsized impact on BIPOC populations and communities. It is therefore critical that those of us working to create and preserve housing ask ourselves who benefits and who bears the burden of our activities with an eye toward race. Our work can either encourage greater racial equity or perpetuate the longstanding injustices and inequitable outcomes our housing policies and practices have created.
This is a critical and complex issue for those seeking to preserve SMMF housing and will be discussed in more detail in a forthcoming Racial Equity brief in this toolkit.
This Preservation Toolkit aims to equip established and emerging developers, existing owners, and housing providers with the resources, information and tools they need to acquire, rehabilitate, and preserve the long-term affordability in their communities. It also aims to support partners and advocates who help to educate and pursue resources to continue preservation efforts in their region.
Mission aligned non-profit and for-profit developers can use this toolkit to:
Employ best practices and strategies at the project level, assess future acquisition and rehabilitation opportunities, and develop a long-term strategy to embark on a larger SMMF preservation strategy
Incorporate a strong housing stability and eviction prevention strategy within preservation projects
Affordable housing practitioners, policymakers, and advocates can use this Toolkit to:
Assess how their jurisdiction can strengthen its enabling environment for preservation activities and look to case studies and best practices from across the country
Owners and operators of SMMF properties can use the information in this Toolkit to:
Keep their properties stable, healthy, and affordable in the long-term through strategies that promote sustainability and resilience of their properties and promote the health of residents
Find guidance related to rehabilitation, property and asset management, and resident engagement