Financing Options for Green Affordable Multifamily Housing

Continuing Education Units 1 Hour

Moderator Brett Little Executive Director GreenHome Institute

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Financing Options for Green Affordable Multifamily Housing

Financing Green Affordable Multifamily Housing Green Home Institute January 25, 2017

Rebekah King Policy Associate National Housing Conference [email protected] (202) 466‐2121 x248

@natlhousingconf 

www.nhc.org

About NHC The National Housing Conference educates decision makers and the public  about housing policies and practices to move housing forward together.  NHC convenes and collaborates with our diverse membership and the  broader housing and community development sectors to advance our  policy, research and communications initiatives to effect positive change at  the federal, state and local levels. 

@natlhousingconf 

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Agenda • • • •

Overview of affordable housing finance The Low Income Housing Tax Credit Financing options available through utilities Challenges to financing green affordable housing 

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Affordable housing finance • Three federally subsidized programs account for the bulk of  affordable housing  – Low Income Housing Tax Credits (LIHTC) – Public housing  • owns physical housing and administers housing vouchers

– Privately owned multifamily housing • receives project‐based rental assistance or below market HUD financing

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Low Income Housing Tax Credit • Primary funding for new construction of affordable multifamily  housing • Provides tax credits that developers use to raise capital for the  acquisition, construction, or rehabilitation of affordable housing. • Allocated and administered by state housing finance agencies • Often requires additional funding sources like HOME, state funds,  etc. as well as project‐based rent assistance

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Financing through utilities • Dependent on location; not universally available  • PSE&G, a New Jersey utility, provides upfront interest‐free  financing and grant incentives to cover the cost of eligible energy  efficiency improvements through its Residential Multifamily  Housing Program.  • Other examples: PECO’s Smart Multi‐family Solutions program, PPL  Electric’s Master Metered Low Income Multifamily Housing  Program

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On-bill finance • Allows utility customers to invest in energy efficiency  improvements and repay the funds through additional charges  on their utility bills • Can substantially reduce the cost of and improve access to  financing • Example: PSE&G in New Jersey offers an on‐bill program to  multifamily housing

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For more information: • Partnering for Success: An Action Guide for Advancing Utility Energy Efficiency  Funding for Multifamily Rental Housing  http://energyefficiencyforall.org/sites/default/files/partnering‐for‐success‐ action‐guide‐2013.pdf • Program Design Guide: Energy Efficiency Programs in Multifamily Affordable  Housing  http://energyefficiencyforall.org/sites/default/files/EEFA%20PROGRAM%20G UIDE.pdf • On‐Bill Financing Overview and Key Considerations for Program Design  https://www.nrdc.org/sites/default/files/on‐bill‐financing‐IB.pdf • On‐Bill Financing for Energy Efficiency Improvements  http://aceee.org/sector/state‐policy/toolkit/on‐bill‐financing • To find utility programs in your area, visit http://www.dsireusa.org @natlhousingconf 

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Questions? Rebekah King [email protected] 202‐466‐2121 ext. 248

@natlhousingconf 

www.nhc.org

Financing Options for Green Affordable Multifamily Housing:

Green Mortgage Underwriting

Rebecca Schaaf January 25, 2017 GreenHome Institute Webinar

Stewards of Affordable Housing for the Future A collaborative of 13 exemplary multi‐state non‐profits Provides more than 125,000 units of affordable housing

• • • • • • • • • • • • •

BRIDGE Housing  CommonBond Community Housing Partners The Evangelical Lutheran Good  Samaritan Society Homes for America Mercy Housing National Church Residences National Housing Trust/Enterprise The NHP Foundation  Preservation of Affordable Housing Retirement Housing Foundation The Community Builders Volunteers of America

Financing Efficiency in Mortgage Loans

• In-flux of capital • Project team engaged • Not disrupting the capital stack • Able to accommodate long paybacks • Focus on marginal cost of efficiency options

How Does It Work?

• Underwriting savings increases the amount developers can borrow • Reduced interest rates -> risk to borrowers • Other green lending perks

Existing Programs Fannie Mae

• Green Building Certification Pricing  Break • Green Rewards

Freddie Mac

•Green Certified •Green Up / Green Up Plus

Federal Housing  Administration

• Mortgage Insurance Premium Reduction • Underwriting Savings

Fannie Mae Multifamily Green Initiative Green Building Certification Pricing Break • To Qualify: Meet a recognized green build standard* • The Benefit: Lower interest rate

Green Rewards • To Qualify: Energy and water audit report shows at least 20% reduction in either energy or water • The Benefits: Lower interest rate, underwriting 75% of owner savings and 25% of tenant savings, reimburses cost of audit *LEED, ENERGY STAR, EarthCraft, Greenpoint Rated, National Green Building Standard, Enterprise Green Communities, Green Globes

Freddie Mac Green Advantage Green Certified • To Qualify: Meet a recognized green build standard* • The Benefit: Lower interest rate

Green Up/Green Up Plus • To Qualify: Green Assessment / Green Assessment Plus shows at least a 15% reduction in either energy or water • The Benefits: Lower interest rate, underwriting 50% / 75% of projected savings, reimburses up to $3500 for assessment *LEED, ENERGY STAR, EarthCraft, Greenpoint Rated, National Green Building Standard, Enterprise Green Communities, Green Globes

HUD/FHA Mortgage Insurance Premium Reduction • To Qualify: Meet a recognized green build standard* and achieve and maintain an ENERGY STAR score of 75 or better • The Benefit: MIP reduced to 25 basis points (from ~45-70)

Underwriting Projected Savings • To Qualify: ASHRAE Level II Audit and commit to benchmarking in Portfolio Manager • The Benefit: Underwriting 75% of projected savings *LEED, ENERGY STAR, EarthCraft, Earth Advantage, Greenpoint Rated, National Green Building Standard

Other Financing Resources https://betterbuildingssolutioncenter.energy.gov/financing-navigator

Questions?

Thank you! Rebecca Schaaf [email protected] 650-524-5079

Financing Options for Green Affordable Multifamily  Housing January 25, 2017 Mark Wolfe Energy Programs Consortium

Introduction • Very few programs for multifamily energy efficiency retrofit loans at state level • Lack of programs typically blamed on the major barriers to energy efficiency upgrades in  multifamily buildings: – – – –

Lack of awareness among building owners Split incentives Insufficient data on energy consumption Diversity of multifamily housing stock in different markets

• Are incentive‐based and grant‐based programs than financing programs – Multifamily buildings often included in residential or commercial programs which don’t match up  with their specific needs; leads to low participation

• Of the loan programs that do exist: – Some exclusively target affordable multifamily, others open to all multifamily buildings – Mix between State Energy Office programs, HFA programs and independent programs (e.g. non‐ profit originially financed by state agency)

Program Examples

Connecticut Green Bank – Low-Income Multifamily Energy Loan (LIME) • Supports improvement projects for low‐ and moderate‐income properties – 5 or more units – At least 60% designated affordable to households no greater than 80% of AMI – Preferred consideration given to HUD financed properties (including housing authorities), CHFA‐ financed and FHA‐insured development, properties in LMI geographies and transit‐oriented  developments

• Energy efficiency and renewable energy improvements eligible, up to 25% of proceeds can  be used for non‐EE (structural, health/safety etc.) • Loan specifics: – – – – –

Unsecured Rate: 5‐6% Term: 10‐20 years 1.3x or greater project energy savings coverage ratio (1.1x for solar‐only) Fees can be rolled in to loan

Michigan Saves • Program administered by a non‐profit established in 2009 through a grant from the Michigan Public Service  Commission  – Began with residential/commercial; multifamily program launched in 2014

• Financing available for multifamily properties through a network of lenders that offer favorable terms  • Loans specifics: – – – – –

Unsecured Rates: 6‐10% APR (utility partnerships enable buydown of rate to 0%) Terms: 24, 36, 48 and 60 months Financing amount: $2,000‐$250,000 (for larger entities with multiple properties max is $250,000 per property) Most energy improvements can be financed (most common are LED lighting, HVAC systems, insulation and new  mechanical equipment)

• Works with network of authorized contractors but easy for a building owner to get their own contractor  certified • Tailored marketing – specific marketing for different types of multifamily buildings • 20 projects completed as of August 2016 – average project cost: $556,884 – average annual bill savings: $13,056 – average payback: 6 years

Florida Multifamily Energy Retrofit Program • Began in 2013, relaunched in 2015 • Program administered by Florida Housing Finance Corporation using funs  contributed from Florida Office of Energy ($8.3 million) with aim to support  financing of energy retrofits in older affordable multifamily buildings • Conducted extensive outreach with affordable multifamily owners to come up  with program guidelines • Program specifics: – – – – –

Loans finance energy improvements identified by mandatory energy audit Maximum amount $15,000 per unit (actual amount based on results of energy audit) Portion of loan is forgivable (10% for profit applicants, 15% not‐for‐profit applicants Loan term: 15 years Rate: 1% for‐profit applicants; 0% not‐for profit applicants

• Conducted competitive application process in 2015; received 33 applications;  installations took place in 2016 but data on number of projects and project  specifics not yet available

Nebraska Energy Office- Dollar and Energy Saving Loans • • • •

Loans made in conjunction with local lending institutions Rates set by lender; max of 5% $250,000 for 1‐3 stories, $500,000 for 4+ stories Wide variety of improvements can be financed

HFA Multifamily Energy Efficiency Loan Programs • Washington State Housing Finance Commission (WSHFC): Sustainable  Energy Trust provides low‐interest loans of up to $1milllion for  energy/water efficiency upgrades and clean energy projects for multifamily  buildings • Maryland Department of Housing and Community Development:   Multifamily Energy Efficiency and Housing Affordability –EmPOWER loans  for affordable multifamily properties (tied to utility serivce areas, generally  for improvements which save on electric costs only) • MaineHousing: Multifamily Home Energy Loan Program (Multifamily HELP)  ‐ 4.75% fixed rate financing to improve the energy efficiency of eligible  affordable housing developments and reduce project operating costs

PACE for Affordable Multifamily – DC PACE • DC PACE specifically targets multifamily housing  • Has financed 2 affordable multifamily projects – 400 M Street SE • $340,000 PACE assessment over 10 years (with a 20 years amortization) to reduce  operating costs, lower energy bills, and improve overall building performance • $41,000 in benefits each year from a 37kW solar array, lighting improvements, water  conservation, and other energy efficiency upgrades

– Phyllis Wheatley YWCA • 84 unit building; $700,000 PACE assessment to finance solar panels and water and  energy conservation measures • Estimated net savings of $90,000 over 15 years

CEU Reporting Live Attendees

1. Check email / spam for details 2. Take Survey 3. Report GBCI 4. GHI Reports AIA Watching on demand? Complete 10 question quiz with 80% passing Rate

Thank you! Questions? Rebekah King Policy Associate National Housing Conference [email protected] (202) 466-2121 x248

Mark Wolfe Energy Programs Consortium

Rebecca Schaaf [email protected] 650‐524‐5079