SBA 7(a) Multifamily Feasibility Study

Residential lessors and an SBA door that closed

SBA lends to apartment owners only rarely, and this page shows how rarely. The 7(a) program approved 204 multifamily loans from FY2017 to FY2026, worth $122.1 million, and nearly all of them came before FY2024. Approvals ran at 41 loans and $12.7 million in FY2017, 37 loans and $33.8 million in FY2021, and 29 loans and $24.3 million in FY2023. Then the record all but stops: 1 loan worth $150,000 in FY2024, 3 worth $195,000 in FY2025 and 5 worth $322,300 in FY2026. SBA treats a business that leases residential property to others as passive, which makes it ineligible, so from FY2024 this class has almost no SBA lending, and what remains on this page describes older loans.

Loan sizes and lenders

The median loan is $152,500, and half of the apartment loans fall between $50,000 and $686,825. PNC Bank, National Association holds 18 multifamily loans worth only $495,000 in all, and Manufacturers and Traders Trust Company 10 worth $309,600, while Live Oak Banking Company's 13 loans total $27.9 million. The Huntington National Bank holds 7 and U.S. Bank, National Association 6. New York leads with 19 loans, California and Texas have 17 each, Pennsylvania 11 and Ohio 10. Outcomes were weak: the cancellation floor and ceiling for apartment approvals of FY2017 to FY2024 are both 18.4%, and 4.3% of the 117 multifamily loans funded in FY2017 to FY2021 were charged off, all of them within five years. Franchised borrowers account for 3.9%.

What an apartment study has to test today

For a borrower today the question comes before feasibility: an apartment building held for rent will rarely qualify for SBA credit, so the study usually serves a conventional, agency or bridge lender instead. That lender will want demand shown from household growth, rents and vacancy in competing buildings, and the pipeline of new units in the submarket. Cost has to cover purchase or construction, renovation, and the reserves for repairs an older building needs. Debt service coverage is tested on net operating income, with rents and occupancy below the seller's or developer's plan and with expenses, taxes and insurance at current levels. The appraisal will capitalize that income, so the study's rent and vacancy figures should match the evidence the appraiser uses. One caution on the data: build-to-rent housing has no code of its own, so it cannot be traced in these figures.