Green financing programs are picking up the pace in multifamily lending, says Drew H. McCreery, technical director at energy consulting firm Partner Engineering and Science.
Fannie Mae and Freddie Mac have continually updated their green-financing incentives and guidelines to make the programs more streamlined and enticing to new borrowers, says McCreery, making them one of the most robust lending programs in the commercial real estate industry.
In a sign the industry is shifting toward a greater focus on wellness and healthy living, Fannie has also introduced Healthy Housing Rewards for affordable housing new construction, Real Estate Weekly reports. The program provides basis point interest-rate reduction on properties with health-promoting designs (15 basis points) or enhanced resident services (30 basis points). Qualifying features include playgrounds, fitness equipment, tobacco-free environments, green spaces, day care facilities, food access, youth and education programming, and job training.
Green financing comes with many benefits to developers, including preferred pricing, higher underwritten net operating income (NOI) and value (such as tenant and owner paid utility bill savings), additional loan proceeds, and energy study cost reimbursement (up to $3,500 for Freddie Mac and Cost of High Performance Building Module for Fannie Mae).
Improvements financed through the program must result in more water or energy efficiency savings (borrower can pick either) than previously required. Fannie Mae has increased savings thresholds from 20 to 25 percent.
For both programs, there is no minimum spend requirement per unit, and partial implementation is possible, but 100 percent of selected energy and water efficiency measure (EWEM) costs must be escrowed and improvements completed within 12 months.Read More