Freddie Mac today expanded its “green” portfolio, launching the Freddie Mac Multifamily Green Advantage, which offers borrowers an avenue to obtain better pricing and increase their Freddie Mac loan amounts to finance energy and water improvements on multifamily properties.
Those with Freddie Mac loans can choose either Green Up or Green Up Plus to finance the improvements. Under Green Up, borrowers with qualifying properties can increase the amount of their eligible Freddie Mac Multifamily loan by up to 50% of the projected energy and water savings. With Green Up Plus, borrowers can increase the loan amount by up to 75% of the projected savings.
Savings are calculated through a Green Assessment, whereby a third-party assessor evaluates a property to weigh its green opportunities, estimated costs, and projected savings. For Green Up Plus, borrowers must provide a Green Assessment Plus, which is a more detailed analysis, based on an ASHRAE Level 2 assessment, that can potentially lead to greater savings opportunities.
Under both Green Up and Green Up Plus, a minimum projected savings of at least 15% (water or energy usage) is required, and borrowers are given up to two years to complete the improvements.
“That’s a real number,” Peter Giles, vice president of multifamily production and sales, told Multifamily Executive regarding the 15% requirement. “What we don’t want is for a borrower to just put a showerhead on and say, ‘I reduced my water by 3%.’ But if he does the suite of the bathroom—the aerator, showerhead, and toilets—and significantly reduces the water consumption, then we feel like we’ve been able to do something that works.”
Freddie Mac will reimburse all or part of the cost of the energy audit borrowers use to identify cost-saving features and improvements for their approved loan.
According to Giles, this new offering will complement Freddie Mac’s green portfolio, which includes the GSE's Green Rebate program, under which borrowers who get their Energy Star score from the EPA can obtain a $5,000 rebate for new loans when the property’s score is reported, regardless of the score achieved.
Also, under the new offering, a borrower can get a pricing break on a loan without Green Up or Green Up Plus if their project is Green Certified—meaning it has any of eight industry standard green building certifications and at least one affordable rental unit.
“We’re targeting the older housing stock in the United States that hasn’t been upgraded,” Giles says of Green Advantage. “Our hope is that it affects the owners, the workforce tenants who are susceptible to rising utility rates, and that, ultimately, it helps the environment. We're really super pumped to be able to assist in the financing of these loans.”
Plus, he adds, there’s a market for this type of product. Owners and managers from across the country have expressed interest in green programs and said it’s part of their mission statements to reduce water and energy costs.
“This could be $3 billion to $3.5 billion in business in 2017,” Giles says. “We’re hopeful to do maybe $1 billion by the end of this year.”
According to Freddie Mac, recent studies have found that energy and water efficiency improvements can generate potential economic savings of 28% to 38%, energy savings of 22% to 31%, and tenant utility cost reductions of as much as 40%. A separate, 2015 analysis of Freddie Mac multifamily loans determined that if all units paid 10% less in utilities, 10% more units would be affordable at 50% of the area median income.
“Green Advantage is designed to give our industry a better way to make America’s rental housing more resource efficient,” says David Leopold, vice president of multifamily affordable housing production at Freddie Mac. “One important reason why we developed Green Advantage is to give the multifamily industry a better way to help hardworking households manage their rent and utility costs.”