Freddie Mac Incentivizes Green Upgrades

Freddie Mac “went back to the lab” after introducing the Green Rebate program, says Peter Giles.

MCLEAN, VA—Building on its Green Rebate program introduced last year for multifamily borrowers that provide Energy Star scores with their loan documents, Freddie Mac on Monday introduced its Freddie Mac Multifamily Green Advantage suite of offerings. Intended to finance resource-efficient improvements to older building stock, the Green Advantage suite is available with most Freddie Mac multifamily loan products. Under Green Advantage, borrowers can choose either Green Up or Green Up Plus to get better pricing and increase their Freddie loan amounts to finance energy and water efficiency improvements on multifamily properties. The GSE will reimburse all or part of the cost of the energy audit borrowers used to identify cost-saving features and improvements for their approved loan. For better pricing under Green Advantage, buildings must be Green Certified under any of eight industry standard certifications, the best known of which is the US Green Building Council’s LEED program, and include at least one affordable rental unit. Green Up enables borrowers with qualifying properties to increase the amount of their eligible Freddie Mac Multifamily loan by up to 50% of projected energy and water savings; it increases to 75% under Green Up Plus. However, Green Up Plus requires a more detailed analysis, based on an ASHRAE Level 2 assessment. “We launched the Green Rebate program in 2015, and then went back to the lab in terms of how we can meet the marketplace and get improvements on older workforce housing,” Peter Giles, VP of multifamily production and sales at Freddie Mac, tells GlobeSt.com. “About five or six weeks ago, we came out with our Green Certification program, which gives some pricing advantage to properties that have received industry-recognized certifications, most notably LEED. But those properties had already received those certifications, so we wanted to think about how we could affect the marketplace, in particular on older housing stock that may not have been improved, and how we could get those owners to upgrade the assets.” The Green Up incentive “really fits within our current suite of products,” says Giles. “It’s a report that we’re going to receive back in two weeks from a third-party vendor, with a menu of possible improvements and what those improvements will mean in terms of savings on utilities, water and sewer. We’re very focused on that because it fits within our time typical time frames. “Green Up Plus, for which the borrower can achieve more recognition of expense savings, is a deeper dive,” he continues. “It’s about four to five weeks. It’s also more expensive. What that time frame doesn’t allow us to do is fit it into our current product time frames. We’re not able to hold spread on Green Up Plus; the tradeoff is that the borrower may be able to receive more proceeds.” Freddie Mac’s projection is that about 200 properties per year across the US will be able to go under Green Up or Green Up Plus. “We’re really targeting workforce housing—ideally, assets that are 20 years older or older and may not have had improvements over the past 20 years,” says Giles. He cites specific examples: “Thinking about Arizona assets that have single-pane windows, by helping the borrower upgrade to double-pane it’s savings for the borrower, savings for the tenant and savings for the environment because all that air conditioning isn’t flying out the windows. Or in drought-stricken California or Central Texas, moving from five-gallon toilets to low-flow toilets, along with new shower heads and aerators—we think those additions will have significant savings on water use for owner, tenant and environment.” Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What’s driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.