Albert Berriz wouldn’t have invested just under $6 million to use green construction to rehabilitate an affordable property without an incentive.

As part of the U.S. Department of Housing and Urban Development’s Green Retrofit program, Berriz’s team at Ann Arbor, Mich.-based McKinley was able to secure a $5.99 million loan with 1 percent interest to make the property environmentally friendly.

The competitive loan called for creative proposals from developers across the nation and awarded Berriz, CEO, and the team at McKinley with the second largest retrofit loan in 2012 for a rehabilitation project in Taylor, Mich. called the Ponds at the Villages of Taylor.

“The Ponds is a Section 8 subsidized community, and the rents wouldn't justify the level of investment we made via the Green Retrofit program,” Berriz said. “HUD recognized this nationally as an issue, which is why they set forth with the competitive loan program. What I think is good about what HUD did, was that they forced creative thinking.”

With a large HUD loan within his reach, Keith Hayward, McKinley’s COO, put together a plan to renovate the property using green products and giving the property a facelift from the inside out.

Eco-friendly products were used from the cabinets inside the 511-units all the way to the asphalt in the parking lot during construction.

“When you walk through this property with us, you will look at it and say, ‘this is Section 8? It doesn’t look like it.’,” he said. “If you take a drive around Taylor or downriver Detroit, you won’t see a nicer property.”

While the loan awarded covered $5.9 million worth of renovations within one year, Hayward was able to complete all of the proposed upgrades about $300,000 under budget.

In addition to scoring a low interest rate, McKinley also found bonus savings to help economize properties by working through a partnership developed with the local energy company, DTE Energy.

DTE offers a rebate program that offers incentives to multifamily operators looking to help become more eco-friendly. McKinley used the program for all of their local eligible properties and were able to help residents save money by making the small changes required by the energy company such as switching out light bulbs and installing low flow fixtures.

Par for the Course
But as opportunities to collaborate with government programs and companies grow for affordable developers, the supplemental funding for market rate developers is almost non-existent, Crescent Communities President of Multifamily Brian Natwick said.

“We have heard of programs out there, but when you really investigate them, they’re primarily geared for non-market rate,” he said. “It just doesn’t fit in the box for us. But we certainly look under every rock for an offset of cost.”

Despite the limited amount of additional funding, Charlotte-based Crescent Communities still pushes to build eco-friendly because it’s the right thing to do, Natwick said.

By the end of this year, the company will have 15 properties under construction and each one will have certified environmental components integrated into their building plans.

“If you had asked me a decade ago, a sustainable certification target was more of an option,” he said. “Now, it’s more of a norm.”

Building toward certifications and creating sustainable communities has gained widespread popularity throughout all types of development industries over the last decade.

“Really, the conversation is, what level of green are you going to build to,” Natwick said.

Some states and cities are pushing builders to build green by adopting statutes, laws and regulations for new construction.

“In today’s environment, just by designing to code you’re substantially on the path to achieving a certification,” he said.