Perspectives

Transforming Multifamily Housing: Fannie Mae’s Green Initiative and ENERGY STAR® for Multifamily

Chrissa Pagitsas ImageEnergy performance has a major impact on the quality and affordability of multifamily housing. Rising utility rates create financial risk for owners of multifamily properties and reduce affordability for tenants. Unfortunately, there has been very little information and key metrics available to the multifamily industry regarding the energy performance of multifamily properties ... until now.

In the newly released white paper Transforming Multifamily Housing: Fannie Mae's Green Initiative and ENERGY STAR® for Multifamily, Fannie Mae provides insight into the objectives of our Green Initiative, our partnership with the U.S. Environmental Protection Agency (EPA), and our leadership in compiling comprehensive multifamily energy and water data – the first of its kind – which serves as the basis for the EPA's ENERGY STAR Score for multifamily.

The Fannie Mae Multifamily Energy and Water Market Research Survey data provide insight into energy and water use in relation to specific property characteristics, such as building age, occupant density, building type, building location, and climate. In Fannie Mae's Transforming Multifamily Housing white paper, we share valuable information and metrics collected through the survey. Important findings include:

  • The least efficient property may end up spending $165,000 more in annual energy costs than a similar property operating the most efficiently.
  • Affordable units are 29 percent smaller in square footage than Market Rate units, on average, and Affordable properties have a higher density of units: 1.29 vs. 0.91 units per 1,000 square feet. As a result, the smaller unit size results in 28 percent lower energy use per unit, but the higher number of units per square foot results in higher energy cost and use per square foot.
  • When owners paid for all energy costs, median annual energy use was 26 percent higher than when tenants were responsible for paying the energy costs.

Fannie Mae will also continue to lead efforts to support green activities and provide greater transparency for investors by disclosing Multifamily Energy Metrics on Fannie Mae MBS. In June 2014, Fannie Mae collected the Source Energy Use Intensity (EUI), an energy performance metric, for properties securing multifamily loans in cities with ENERGY STAR reporting requirements. Beginning in 2015, Fannie Mae will collect the Source EUI and the ENERGY STAR score for the associated properties and will disclose the EUI metrics. Investors will be able to view the metrics for properties located in Boston, Massachusetts; Cambridge, Massachusetts; Chicago, Illinois; New York, New York; Seattle, Washington; and Washington, DC. This gives investors greater insight into the energy consumption of multifamily properties and the financial performance of the associated loans.

ENERGY STAR® Score for Multifamily
In 2011, Fannie Mae became aware of the need for multifamily owners to understand the energy performance of their properties.  Concerned that a single, nationally recognized simple metric did not exist, we collaborated with the EPA to develop the 1 - 100 ENERGY STAR® score for multifamily properties. As a result of this partnership, Fannie Mae is proud to announce that EPA has made the ENERGY STAR score available for the multifamily industry use as of September 16, 2014.

The ENERGY STAR score will enable owners and operators of multifamily properties – with 20 or more units – to quantify energy performance and better assess the relative risk of each property. The score represents a property’s percentile ranking compared with similar multifamily properties. For example, a property with a score of 25 performs better than only 25 percent of other similar properties, but a property with a score of 75 performs better than 75 percent of its peers. Additionally, properties that earn an ENERGY STAR score of 75 or higher may be eligible for ENERGY STAR certification, a designation of top energy performance. On average, ENERGY STAR certified buildings use approximately 35 percent less energy and emit 35 percent fewer greenhouse gases than typical buildings, according to the EPA ENERGY STAR program. Multifamily owners can calculate their score by entering their properties’ information in ENERGY STAR Portfolio Manager®.

Fannie Mae Multifamily Energy and Water Market Research Survey
The ENERGY STAR Score is a product of the Fannie Mae Multifamily Energy and Water Market Research Survey. In 2012, Fannie Mae surveyed more than 1,000 multifamily properties across the U.S., including Market Rate, Affordable, and seniors housing properties, for statistically relevant and comprehensive energy and water information. The EPA used the resulting survey data to create the ENERGY STAR Score for multifamily.

The Fannie Mae survey also provides a greater understanding of multifamily energy and water performance, trends, and metrics.  For example, smart investments in high performance property improvements, sometimes called "green" or "energy and water efficient," can help combat risks and transform a multifamily property to a higher level of performance, quality, and affordability by reducing energy and water costs for the owner and tenants.

Multifamily Green Initiative
Fannie Mae’s Transforming Multifamily Housing white paper also highlights our Multifamily Green Initiative. Through this initiative, Fannie Mae enhances its leadership role on energy and water efficiency for the multifamily industry by offering Green Financing loans for smart property improvements and delivering innovative tools to measure and capture the value of energy and water efficiency.

Fannie Mae currently offers two Green Financing options for multifamily borrowers. Green Preservation Plus, which was launched in partnership with the U.S. Department of Housing and Urban Development, provides financing to owners of affordable rental housing who want to refinance expiring mortgages, reduce energy consumption, and lower annual operating costs. Fannie Mae’s newest Green Financing product, Multifamily Property Improvements to Reduce Energy (M-PIRE), is a mortgage loan for owners of New York City cooperative properties and rentals to improve property performance and conditions. 

Learn More about Fannie Mae’s Multifamily Green Efforts
I encourage you to read our new Fannie Mae white paper Transforming Multifamily Housing: Fannie Mae’s Green Initiative and ENERGY STAR® for Multifamily, to learn more about Fannie Mae’s multifamily green efforts, including the Fannie Mae Multifamily Energy and Water Market Research Survey – an important milestone for the industry. By understanding how efficiently properties use energy, property owners and managers can make strategic decisions in developing energy management plans and identifying opportunities for cost savings. Our partnership with the EPA resulted in a national rating system that is publicly accessible, nationally recognized, and built on statistically-based quantifiable data. Fannie Mae will continue to support the EPA and other industry partners to help increase the use of financing options and tools that will enhance the energy-efficiency and affordability of rental housing.

Chrissa Pagitsas
Director, Fannie Mae Multifamily Green Initiative

September 11, 2014