FM Commentary

FM Commentary

Using Sustainability Principles to Improve Rental Housing and Preserve Affordability

Chrissa PagitsasThe nation’s stock of affordable multifamily housing is aging. Half of all multifamily properties are now more than 30 years old. More than one property in 10 was built before 1940. At that age, properties will require small to significant investments to preserve the quality of the property and to keep them affordable for owners to operate and tenants to rent.

At the same time, property owners and tenants alike are facing rising utility rates, resulting in higher costs to heat, cool, and provide water to common areas and units. In an effort to encourage better management of energy costs and consumption, cities and states in the U.S. have enacted or are proposing laws requiring property owners to track and report energy consumption and associated costs to the locality or to prospective tenants.

Fannie Mae launched our Multifamily Green Initiative to tackle these and other sustainability challenges. We focused first on finding practical ways to help rental property owners improve the energy and water efficiency of their properties. Fannie Mae, which owned or guaranteed approximately 20 percent of the outstanding debt on multifamily properties as of June 30, 2011, is committed to helping owners identify opportunities to save on energy and water costs while improving housing quality and extending the useful life of affordable and workforce housing properties. That makes good business sense.

Better insulation, lighting retrofits, and ENERGY STAR® qualified appliances typically pay for themselves in five years or less, but property owners need upfront capital to invest in such improvements. To provide access to that capital, we collaborated with the U.S. Department of Housing and Urban Development to release Green Refinance Plus.

Green Refinance Plus allows owners who acquire or refinance their loans on an apartment building with rent or income restrictions to borrow additional money and to re-invest that money into the property for energy- and water-saving improvements to the property. These improvements are intended to result in better quality apartments for renters, lower utility costs for owners and renters, and reduced environmental footprint of multifamily properties.

We offer Green Refinance Plus through our network of Delegated Underwriting and Servicing (DUS®) and Special Affordable lenders.

Fannie Mae is also leading the industry effort to identify energy and water efficiency improvements by including the Green Property Needs Assessment in its Multifamily Delegated Selling and Servicing Guide. This report, prepared at the time of applying for a Green Refinance Plus loan, will help borrowers identify cost-effective improvements that are expected to yield energy and water savings. Borrowers may also request a Green Property Needs Assessment when obtaining financing under any other Fannie Mae multifamily loan product.

We have partnered with the U.S. Environmental Protection Agency to explore the development of an ENERGY STAR® 1 to 100 rating system and certification for existing multifamily properties. With this rating, property owners will be better able to measure, compare, and track the energy performance of individual properties and their entire portfolio and to lower their energy costs.

These and future efforts are part of Fannie Mae’s commitment to create a more financially and environmentally sustainable rental housing market that is affordable to low- and moderate-income families. We are grateful for the regular guidance provided by our Green Rental Housing Task Force, which includes borrowers, lenders, non-profit advocacy organizations, and industry groups, on the scope and implementation of the Multifamily Green Initiative.

Chrissa Pagitsas
Green Initiative Program Manager

January 17, 2012

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