Freddie Mac Introduces Green Advantage

Blog posted On October 19, 2016

Rising utility costs negatively impact both renters and owners.  For tenants, especially those with lower incomes, utility costs can add up to 15-21% of total income.  For rental home owners and property developers, rising utility costs impact net operating incomes, profitability, and marketability.  From 2000 to 2012, average water rate increases surged at twice the inflation rate each year.

Looking to alleviate the stress of utility costs, Freddie Mac launched a plan to lead developers to resource-efficient multifamily rental homes called the Green Advantage.  The Green Advantage aims to create better pricing, larger proceeds, and improved energy savings.  The plan rewards borrowers who choose to reduce energy usage by adjusting loan offerings to finance energy and water efficiency improvements.

Borrowers have the choice between Green Up and Green Up Plus.  Those who choose the Green Up path commit to making improvements based on a straight-forward property analysis called the Green Assessment.  When they cut energy or water usage by 15% they qualify for better pricing and more funds, Freddie Mac will underwrite up to 50% of projected energy savings.  With Green Up Plus, borrowers must complete a highly-detailed property analysis based on ASHRAE level 2 energy audit.  When they are able to reduce energy or water usage by 15% they qualify for better pricing and more funds, Freddie Mac will underwrite up to 75% of expected savings.  Additionally, Freddie Mac reimburses up to $3500 of the cost of the report when the borrower closes a Freddie Mac loan.

Improvements like modern windows and low-flow water appliances can greatly reduce energy usage.  Adding these amenities to affordable housing is projected to generate an economic savings of 28-38% while saving the renter as much as 40%.

Through the Green Advantage program, Freddie Mac aims to incentivize homeowners to “go green” for economic gains while simultaneously improving the environment.  If you have any questions about this new program, please let me know. 

Sources: Freddie Mac, Freddie Mac