As lenders have become more comfortable with financing energy efficient new construction or building retrofits owners of multifamily properties now have a variety of mechanisms to choose from.
Financing Mechanisms and Resources
Fannie Mae Multifamily Green Financing Business provides financing to enhance the financial performance, environmental sustainability and quality of the country’s multifamily housing stock.
Freddie Mac offers several financing tools to improve energy and water use on multifamily properties.
Property Assessed Clean Energy Loans (PACE)
Property assessed clean energy (PACE) is a means of financing energy efficiency upgrades or renewable energy installations for buildings.
On bill financing is a mechanism whereby a utility provides a loan to retrofit a property and then is repaid through a monthly assessment on the buildings occupants.
Federal Housing Administration (FHA)
FHA program highlights reduction in multifamily insurance rate to encourage capital financing of affordable and energy-efficient apartments.
Energy Performance Contracting
Energy performance contracting uses the savings generated from an energy efficiency retrofit to repay a loan or lease on the retrofit.
Green leases (also known as aligned leases, high performance leases, or energy efficient leases) align the financial and energy incentives of building owners and tenants so they can work together to save money, conserve resources, and ensure the efficient operation of buildings.
Green Banks are public finance authorities that use limited public dollars to leverage greater private investment in clean energy. Several States have green banks: others are in development.
Tax-exempt bonds issued by federally qualified organizations or certain municipalities to spur the development of qualified green buildings.
Utility Rebates and Incentives
Database of State Incentives for Renewable Energy (DSIRE)
- State-by-State Map of regulatory and incentive policies
- State-level summary tables based on type of energy incentives
- Federal-level programs
- It Still Ain’t Easy Being Green – for a REIT
A discussion of selected tax developments and considerations
Valuing Energy Efficiency
Appraisals and Lending
Proper valuation of green features and performance are essential for investment decisions. The following resources demonstrate the evolution in appraisal standards.
- Appraisal Institute addendum and training
- Appraisal Foundation:
- Guidelines: APB Valuation Advisory #6: Valuation of Green and High-Performance Property: Background and Core Competency
- Real Estate Industry Letter
- Better Building Alliance
The Department of Energy’s Better Building Alliance has developed resources on High-Performance Property Valuation and Mortgages.
- NMHC Energy Efficiency Financial and Tax Incentives News Feed
- Energy Efficiency Tax Breaks Fact Sheet
- Financial and Tax Incentives Resources
- Bank of America Energy Efficiency Finance Program