Fannie Mae Is Persuading A Lot of Owners to Go Green

Fannie Mae’s green lending program is proving to be very popular, according to speakers on the Sustainability, Green Financing & Affordability Outlook panel at RealShare Apartments. Panelists—which included John Powell, EVP at Bellwether Enterprise; Jay Donaldson, President of the Fannie Mae and FHA platform at NorthMarq Capital; Molly Simpson, manager of green financing business at Fannie Mae Multifamily; and Paul Volkoff, national sales manager at Homasote and Tony Liou, president at Partner Energy—discussed the benefits of green lending and why it has become so popular for the agency.

It has been an interesting evolution for the agency. Fannie Mae’s green lending program originally launched in 2012, but it only grew to immense popularity in the last two years. The program requires that property owners reduce energy or water consumption—they can choose—by 25% to qualify, and it comes with major incentives, including the ability to underwrite the utility cost savings and Fannie Me reimburses for 100% of energy audit costs.

While Simpson couldn’t say which utilities had the most savings, water is the more affordable pathway to achieving the requirements for the program. “A lot of our clients choose to do water,” she said, adding that she couldn’t be more specific. “We are looking for ways to incentivize savings on energy. One of the ways is through renewables.” Water savings usually involves switching out fixtures, like faucet and showerheads, while energy savings requires changes to appliances, lighting systems and HVAC systems. “Water is mostly in the bathroom and kitchens, and it is in the fixtures, and those are usually a few hundred bucks,” added Liou. “Those are lower ticket items.”

In addition to Fannie Mae, FHA is trying to pursue a similar green lending program to incentivize utility consumption for residential properties. However, it is focused on reducing the MIP and has a different set of standards. Fannie Mae has already proven the benefits of the program and the popularity. In fact, Simpson said that achieving these goals can mean a savings of $131 per month per unit, which can amount to a significant savings in utility costs.

While these are currently financial incentives to adopt and implement green building strategy, some cities will start making this a requirement. Los Angeles, for example, it planning to require property owners to report and benchmark energy savings on an annual basis. That means owners will have to collect utility bills for the year and return an energy score to the city. Seattle is also looking at similar requirements for property owners.

Fannie Mae is expected to report its 2019 caps within the week, and there was high anticipation about the announcement. Simpson couldn’t comment on her expectations—adding that she was in as much of the dark as anyone else—but said that the agencies are ready to provide support in the event of a change. Donaldson said that he expects the green to go up and green savings to be increased, thanks to the success that the green lending has had in the last couple of years. That success, and the demand for green lending, is expected to continue to grow.