A Freddie Mac program offering better pricing on loans that finance energy and water efficiency improvements to rental properties has surged to more than $6 billion in the first half of 2017. That brings total loan volume to $9 billion since the initiative’s August 2016 launch.
Why are so many respected local, regional, and national apartment owners racing to install LED lights, low-flow toilets, reduced-water showerheads and kitchen faucets, and limited-range thermostats? Part of the spiking trend may be explained by public sentiment and owners’ recognition of the affordable housing benefits such products present.
Rising Tide
For example, nearly eight out of 10 renters would rather lease an environmentally friendly property. Consumer tastes may not be wholly guided by sustainability: Basic energy and water conservation improvements reduce renters’ utility bills by up to 40%. Industry leaders have noted this rising tide of consumer opinion. Multifamily professionals identified “enhancing the energy efficiency of properties” as the industry’s No. 1 attribute in a recent survey.
An attractive financing solution was needed for owners and developers to meet the demand for affordable, green-friendly rental housing. An easier funding path for sustainability improvements would not only help renters seeking reduced utility bills, but also owners seeking an improved return on their affordable housing investment.
Funding Path
Enter Green Advantage®. The 14-month-old Freddie Mac program helps make it easy, fast, and efficient for owners and developers to make energy and water conservation upgrades.
“It’s no secret rising energy and water costs put pressure on net operating income, profitability, and marketability,” explains Peter Giles, vice president, production and sales, at Freddie Mac Multifamily. “For tenants, rising utility rates are regressive and hurt lower-income renters most of all. We came up with a way to make the cost of housing more affordable for renters and property owners. What’s more, it also protects our environment.”
Fast Payback
Consider this example: The owners of a 27-year-old, 430-unit Texas apartment community recently used Green Advantage to fund water conservation improvements of about $500 per unit. That investment reduced annual operating costs by $105,000 and saved 5 million gallons of water. The property is on track to post a full return on investment in two years.
Win–Win Performance
Giles says Green Advantage presents borrowers with a range of reduced-rate options. The program also offers:
- A two-year window to make improvements—twice as long as the leading competitor;
- An interest rate spread for 60 days, unlike the competition;
- Free property assessment, which identifies the most productive green improvements; and
- Loan closing speed consistent with conventional financing.
In Giles’s view, incentivizing green-friendly borrowing is a win for everyone, especially tenants and the environment. “The borrower secures better pricing and terms to finance energy and water conservation improvements. The tenant gains more-affordable rental housing thanks to reduced utility bills. It’s not surprising this program has grown exponentially since we offered it. We are optimistic it will continue growing for years to come.”
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