A new lending programs hold promise to open the doors for financing improvements to the energy efficiency of existing multifamily properties.
Commercial lenders see potential to originate loans for that purpose under a program launched by Fannie Mae and HUD’s Federal Housing Administration (FHA) called Green Refinance Plus.
The Green Refinance Plus program will allow owners of existing affordable rental housing properties to refinance into new mortgages that include funding for energy- and water-saving upgrades, along with other needed property renovations.
FHA and Fannie Mae will share the risk on loans to refinance existing rent-restricted projects while permitting owners to borrow additional funds to make energy-saving improvements to their properties.
Every 10-to-15 years, owners of existing multifamily affordable properties typically refinance their mortgages. In older apartment buildings, however, owners are hard-pressed to find additional financing to maintain or improve the physical condition of their properties, including making energy-efficient upgrades.
Fannie Mae and HUD anticipate approximately $100 million in initial refinance volume with an average loan amount of $3.5 to $5 million. FHA will insure up to an additional four to- five percent of the loan amount, or an average of approximately $150,000 to $250,000 per loan, to provide additional loan funds to pay for property improvements that save energy and water costs for owners and tenants, such as energy efficient windows and Energy Star appliances.
Property owners will be able to select the energy-efficiency upgrades that make the most economic sense for their properties. However, properties must go through a “Green Physical Needs Assessment” by an authorized provider to identify property improvements that both reduce energy and operating costs.
This article appears in the July/August issue of Sustainable Communities magazine. To receive 6 issues a year of Sustainable Communities magazine become a member today for only $49.
