The Rewards of Green Financing

Fannie Mae’s multifamily chief explains how dedicating capital to measures that save energy and water pay off, especially in the affordable sector.

Fannie Mae Executive Vice President & Head of Multifamily Jeffery Hayward

Fannie Mae Executive Vice President & Head of Multifamily Jeffery Hayward

Harvard University’s Joint Center for Housing Studies says utility costs represent some 15 percent of income for renters with incomes below $15,000, but just one percent for those with incomes of $75,000 or more.

Green financing allows owners to cut operating expenses and extend the life of the property. Over 80 percent of the units we finance are affordable for working families, and greening those buildings can mean lower utility bills for tenants.

Steady Improvement

Fannie Mae’s green financing business supports loans for properties that will reduce their annual energy or water consumption by 20 percent or more by upgrading to energy- or water-efficient equipment. The financing also is available for multifamily homes with a green building certification such as LEED, ENERGY STAR or National Green Building Standard.

The U.S. Environmental Protection Agency recently recognized Fannie Mae as an ENERGY STAR Partner of the Year for the third year running. Additionally, this year we received the Sustained Excellence recognition because of our long-term success in this category. It is an honor to receive this award, which confirms that we are accomplishing what we set out to do. We are continuing to lead and innovate in the green financing space.

Retrofitting to Compete

Green properties are attracting institutional investor interest, and some developers have found a profitable niche in retrofitting multifamily properties.

In August, Moody’s Analytics said that green building features are becoming an important factor in maintaining property valuations. The credit rating agency also noted in its report that multifamily commercial property loans resold into CMBS will be better assets when the underlying property is green.

In addition to addressing environmental concerns and improving NOI for affordable apartment properties, the refitting and construction of green properties is sure to play an important role in the broader economy.

Over 2.1 million green construction jobs were created in the U.S. between 2011 and 2014, and another 3.9 million are expected to be created between 2015 and 2018, according to the Green Building Council.

Our program is one example of how financing from Fannie Mae improves the quality of the nation’s affordable housing, a space in which our organization will continue to flourish.

Hungry for more multifamily insights from Jeffery Hayward? Take a look at this exclusive interview featuring a bird’s-eye view industry analysis.

Image courtesy of Fannie Mae

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