Perspectives
June 17, 2019

Investing in Greener Multifamily Housing

Peter Giles
By
Peter Giles, Vice President, Production & Sales

More than three-quarters of the multifamily housing in the United States was built prior to 2001 and lacks many of today’s water and energy-efficiency features. As a result, most apartment homes around the country use more energy and water than they need to. The consequences are higher utility costs for both property owners and tenants, as well as an unnecessary use of resources. This is a real concern in drought-prone parts of the country, and areas with high heating and cooling costs. It also disproportionately impacts working households on tight budgets.

Freddie Mac is financing upgrades to multifamily housing that save money, energy and water resources. Our Green Advantage program, which requires that borrowers make energy and water efficiency improvements, has financed more than 450,000 homes across more than 1,600 properties.

Through these investments, these properties are projected to save enough water to do 155 million loads of laundry—not just this year, but every year into the future. The properties are projected to save enough energy to power 48,000 homes across America—every single year, too. That’s 4.7 billion gallons of water per year, and nearly 1.8 billion kBtu per year in energy. And don’t forget—we’ve only been at it since the summer of 2016.

But we’re even more proud of the savings projected for tenants. As green improvements are completed, renters in Green Advantage buildings can expect to see their utility costs fall by an average of $138 per year. That might not seem like much to some, but as rents continue to creep up, it’s one of the few areas where residents have the potential to see relief. Even better news is that our program is continuing to evolve—it’s more focused on renter savings today than it ever has been.

At its inception, Green Advantage was in many ways a water-based program. That’s because replacing toilets and installing new shower heads and aerators are cost-effective and easy to implement. Now that the program is in its third year, Freddie Mac has implemented new requirements that half of all savings be achieved through reductions in energy use. Whereas the program originally required a minimum 15 percent reduction in total energy and/or water consumption, today it requires a minimum 30 percent reduction in total energy and/or water consumption, with at least a 15 percent reduction in energy consumption savings. New innovations like smart thermostats and LED lighting can go a long way toward meeting these goals. And although tried-and true methods of reducing energy use—like new windows, appliances and insulation—have a higher upfront cost, they also come with higher long-term benefits. Our Green Advantage financing helps make these upgrades more cost-effective too.

These cost savings are important, because Green Advantage is targeted primarily at boosting workforce housing. Freddie Mac strongly believes that the vital members of our community—our firefighters, nurses, teachers, line workers, mechanics and others—deserve affordable housing that is reasonably close to their places of work. This missing middle often gets left out of the housing policy discussion, but it’s front and center when it comes to Green Advantage.

In fact, nearly 90 percent of the units we have financed through the green initiative are affordable to tenants making area median income (AMI) or less. Almost all the units are affordable to those making 120 percent of AMI—a benchmark Freddie Mac often used to characterize workforce housing.

The reason is simple—the buildings most in need of water and energy upgrades aren’t luxury, newly-built high rises. They’re the 30-year-old garden apartments in communities large and small. They dot the country and provide good homes to working people.

Finally, there is also another advantage to Green Advantage which often goes unnoticed and that’s the treasure trove of data we’re collecting on how multifamily properties use water and energy. We’re learning more every day about what actions we can take to help lower utility costs for these properties.

Every building in our portfolio is required to report this energy saving information into an Environmental Protection Agency database. And the data we pull together will later be used by policy makers, academics, engineers, and builders to improve the overall efficiency of rental housing—not just in the United States but globally. We’ve created a real-life laboratory to investigate the question of what happens when thousands of properties work to make cost-effective efficiency improvements.

We at Freddie Mac Multifamily are proud of the work we have done to ensure that our precious natural resources aren’t squandered, and that workforce housing has the support it needs. Call it a hat-trick—it’s a score for tenants, a score for property owners, and a score for the environment—and we’re going to continue leading the way.

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