We've created a whole new industry that does good by doing well (really well)
Last week, Fannie Mae announced funding of our 500th Multifamily Green Financing loan. That’s an important milestone, especially for a market that didn’t exist just seven years ago and was considered by many a tough nut to crack.
When I’m asked how we made this happen, I credit the three Ps: patience, protocols, and people.
First, innovation demands patience. We launched our first green product in 2011 and had only funded 19 loans by the end of 2015. We asked ourselves if the effort was worth it, and we knew it was. So we sought counsel from the Environmental Protection Agency, Natural Resources Defense Council, the U.S. Green Building Council and many more experts in the green building market. They inspired us to rethink the program and make the changes that would eventually lead to success.
Second, we built protocols to measure the impact of these loans. Fannie Mae worked with the EPA to develop the ENERGY STAR® Score for Multifamily Housing (from 1-100), which measures changes in energy use over time. We required borrowers to target a 20 percent or more reduction in the energy or water usage of their property, a meaningful reduction, and developed the High Performance Building Report, an energy and water audit that projects annual savings with greater accuracy. For our Green Rewards portfolio, for example, through Q2 2017, enough electricity will be saved annually to power 31 million cell phones; enough fuel is saved to heat hot water for 9.5 million 10-minute showers; and enough water is saved to fill 15.6 billion glasses, two glasses for every human on the planet.
Finally, we focused on people. Living in green buildings helps tenants not only with their monthly expenses but also their health. Energy accounts for a substantial share of the cost of living in rental housing, especially among low-income tenants. When green improvements are made and the tenants pay the utility bills, tenants may see their utility bills decrease by about $125 annually – money they can spend on other expenses like education, transportation, healthcare, or child care.
We also focused on our network of 25 Delegated Underwriting and Servicing® (DUS®) Lenders. The lenders committed to learning about the value of green buildings and how to underwrite opportunities to save energy and water costs at their borrowers’ properties appropriately. This investment of time by our lenders has been the secret sauce of the program, making the impact of the $15 billion in loans tangible and real for the tenants and the environment.
The three Ps, taken together, drive the acceptance and growth of our Multifamily Green business. It’s a great example of doing good by doing well. For more information on Fannie Mae’s Multifamily Green business, visit our website.
Director, Fannie Mae Multifamily Green Financing Business
October 16, 2017