In an effort to change the behavior of apartment owners and managers, Freddie Mac announced today that it’s offering a Green Rebate to multifamily borrowers on qualified property loans.
To qualify for the $5,000 rebate, borrowers must be financing a property with 20 units or more and provide an Energy Star score with their loan documents. As the largest funder of multifamily properties nationally, Freddie hopes it can boost awareness of energy consumption among apartment owners and managers.
“I’m trying to encourage borrowers to get in the habit of using this tool and thinking about creating more energy efficiencies at their properties,” says Mitchell Resnick, vice president of capital markets for Freddie Mac Multifamily.
The Energy Star score is available through the U.S. Environmental Protection Agency's (EPA's) Portfolio Manager tool, a free, online software platform that allows commercial building owners and managers to benchmark and track energy and water usage as well as greenhouse gas emissions. Portfolio Manager generates a score that is a simple indicator of the energy performance of a multifamily property compared with its peers from across the country.
“Getting the score is not difficult to do,” Resnick says. “You put in your utility usage information and it will pump out a score.”
Resnick says the Web-based application might take 30 minutes at first, but that after a couple of uses it will take only five to 10 minutes.
“The bottom line is how much energy you are using,” Resnick says. “We decided to skip all of the [individual energy-saving elements] and focus on the bottom line. We’ll let them manage it so they can get their energy usage down.”
Multiple Benefits
Freddie Mac plans to eventually report the Energy Star scores in its K-Deal multifamily mortgage-backed securities and is encouraging industry adoption of the tool.
“At some point, I want people to look at the green score for that pool,” Resnick says. “I want that to be of importance to an investor. Given that we are the largest CMBS issuer, I figured we can push something forward that makes sense.”
Ultimately, investor adoption benefits Freddie, as well. “If I can get another pocket of money out of a particular investor to invest with my product, that will help with pricing and reduce the cost of funds that I have, meaning that I could potentially pass that along to those environmentally efficient properties,” Resnick says.
Resnick says a 10% decrease in energy use can result in a 1.5% increase in net operating income for a multifamily property. Consumers, as well, can benefit from more energy-efficient properties.
“Energy usage could be a large part of an individual payout each month, which could make apartments less affordable,” Resnick says. “If you have a more energy-efficient building, living there could become affordable. That’s really a big thing for us, with our focus on affordability.”
In its press release announcing the rebate, Freddie also mentioned that rental housing is home to a majority of the nation’s lower-income households who are struggling with housing costs such as rent and utilities.
