- Oct 03, 2017
“A billion here, a billion there, and pretty soon you’re talking real money,” Everett Dirksen once said, and the legendary lion of the Senate would have to admit that $3.4 billion is a nice chunk of change. That’s how much multifamily property owners could save every year through energy efficiency upgrades, according to a 2016 estimate by the American Council for an Energy-Efficient Economy.
While you contemplate what that means for your company’s or clients’ bottom line, let’s also consider what it would take to turn that estimate into reality. As this month’s focus on energy makes clear, we’ve already figured out the basics. Creative financing, persistence and forward-thinking public policy are the ingredients of success, proven by thousands of cases around the country.
Fannie Mae can claim the title of energy efficiency champion. As Robyn Friedman reports in “High-Voltage Incentives,” the volume of loans provided through the GSE’s two new programs zoomed from $3.2 billion in 2016 to $10.8 billion during the first half of this year. At that pace, Fannie Mae will log a 600 percent year-over-year increase before the year is out.
Speaking of picking up the PACE, another priority should be expanding property assessed clean energy programs. The model typically requires no upfront outlays from sponsors and allows repayment of the long-term, low-interest loans via property tax bills. Considering that only some 160,000 buildings nationwide have participated to date, the PACE model appears to offer virtually unlimited promise for financing retrofits. As we were preparing this issue in mid-September, New York City threw its considerable weight behind the PACE movement, rolling out a proposal to authorize the low-cost loans in the nation’s largest city.
For further examples of fresh strategies, stakeholders should look into the efforts of the Community Preservation Corp., a New York City-based affordable housing organization and community development financial institution. The Institute for Market Transformation notes in a recent white paper that CPC factors as much as 50 percent of anticipated energy savings into its mortgage underwriting.
IMT cites a $1.4 million loan provided by CPC for the renovation of a six-story, 35-unit community in upper Manhattan. Among other upgrades, the makeover trimmed $23,000 from the community’s yearly energy and water expenses. What’s more, underwriting the projected reduction bestowed an extra $194,174 in proceeds on the sponsor. As even
Sen. Dirksen would have to agree, that’s real money.
Originally appearing in the October 2017 issue of MHN.