The new guide helps lenders calculate potential savings of energy improvements and add capital to mortgages to cover costs
New York, NY, May 17, 2017 –– The Community Preservation Corporation (CPC), along with a consortium of private and public partners, today announced the launch of “Underwriting Efficiency: A Mortgage Lender’s Handbook for Realizing Energy and Water Efficiency Opportunities in Multifamily Housing.” CPC created the handbook to serve as a free resource for lenders in their efforts to incorporate energy and water efficiency features into the financing of first mortgages for multifamily building owners. Underwriting the potential savings and providing additional low-cost, long-term capital in the mortgage, can help break down the financial barriers that building owners of all sizes currently face in implementing sustainable property improvements. The launch of this new industry tool took place at a panel discussion on the benefits of sustainability in multifamily housing that was hosted this morning by the Sallan Foundation.
The Underwriting Efficiency handbook provides an overview of how energy and water efficiency financing tools benefit lenders, owners, and residents. It also offers examples of ways to improve building efficiency based on financing goals and a step-by-step framework for integrating efficiency measures into the mortgage lending process. With this resource in hand, mortgage lenders can demonstrate to building owners the financial impact of investing in efficient multifamily buildings and remove barriers to financing high performance buildings and major retrofits. The creation of the handbook was a collaboration between CPC and its partners: Energy Efficiency for All, Association for Energy Affordability, Bright Power, Enterprise Community Partners, Environmental Defense Fund, Rocky Mountain Institute, and The Sallan Foundation.
“The savings from energy efficient property improvements can play a major role in the long-term economic stability of multifamily buildings, which is critical to the preservation of affordability in our communities,” said Sadie McKeown, Executive Vice President & Chief Operating Officer, The Community Preservation Corporation. “CPC’s Underwriting Efficiency handbook gives lenders a resource of information on the benefits of efficiency improvements, how to discuss it with owners, and how to incorporate the savings into the underwriting process so they’re accessible for everybody. We believe that Underwriting Efficiency is a replicable model that can be a game-changer for how the multifamily lending industry does business.”
With such prevalent influence over the economics and condition of our housing stock, the lending industry has a tremendous opportunity to take the lead in advancing measures that will not only improve loan performance and mitigate risks, but also improve the financial and physical quality and sustainability of the buildings and communities in which we live and work.
“Increasing energy and water efficiency is critical to New York State meeting the state’s aggressive climate and energy goals, and until now lenders’ reluctance to underwrite the savings has been a major barrier,” said Greg Hale, Senior Advisor to the Chairman of Energy & Finance, New York State. “CPC’s Underwriting Efficiency handbook is a perfect complement to the Integrated Physical Needs Assessment announced by state and city housing agencies earlier this month. Now building owners will not only be presented with an analysis of available efficiency opportunities when they buy or refinance a building, but also with the financing means to take advantage of those opportunities.”
“Through Housing New York, we aren’t just working to keep our city more affordable, but also more sustainable for future generations,” said HPD Commissioner Maria Torres-Springer. “Through the Green Housing Preservation Program and new energy benchmarking and assessment tools, HPD is committed to helping owners reduce utility and operating costs, and keeping rents affordable for residents. CPC’s new handbook, Underwriting Efficiency, offers an important new resource for the affordable housing community, and we thank CPC for their continued leadership in promoting energy efficiency improvements to the city’s housing stock.”
”For advocates of the idea that economic and environmental sustainability are two sides of the same coin, the new Underwriting Efficiency handbook shows us just how smart mortgage lending and underwriting proves the concept,” said Nancy Anderson, Executive Director, the Sallan Foundation.
The cost savings associated with energy efficient construction and retrofits play a key role in ensuring the long-term economic stability of multifamily properties, which is critical to the preservation of rental affordability in our communities. “Greener” buildings cut down on energy consumption, have smaller carbon footprints, and provide a host of long-term benefits for owners, residents, and communities.
However, significant barriers exist for many owners who may be interested in including energy efficient measures in their properties. From systems to maintenance, size, and location, there are a multitude of factors that can make it difficult to figure out the most effective way to increase a building’s energy efficiency. The Underwriting Efficiency handbook provides lenders with a resource of information on the tangible benefits of efficiency measures, how to discuss the topic with owners, and how to incorporate the potential savings into the underwriting process.
“This guidebook helps to bridge a critical knowledge gap that can free up capital for energy and water efficiency improvements in affordable housing,” said Lindsay Robbins, senior advocate in the Urban Solutions program at the Natural Resources Defense Council. “Efficient buildings save money for owners and reduce the risk of delinquency for lenders, while improving living conditions for residents and reducing carbon pollution. This guide can serve as a model for mortgage lenders nationwide to extend the benefits of efficiency to millions of low-income families across the country.”
“CPC has demonstrated real leadership in developing this invaluable resource that will help lenders and their customers realize the significant benefits of investing in energy efficiency — to improve affordability, comfort and health, while reducing greenhouse gas emissions and improving the environmental sustainability of our community,” said Susan Leeds, CEO of NYCEEC, a non-profit financier specializing in energy efficiency and clean energy. “Using mortgage finance to fund efficiency measures is a powerful and cost-effective way to unlock the value of energy efficiency that NYCEEC enthusiastically supports. CPC is at the forefront of the mortgage lending industry in advancing a tool that will help ‘de-mystify’ the process of making multifamily buildings more efficient, affordable and sustainable.”
“Energy expenses are the largest variable operating cost in our 4,000-unit portfolio. We hope owners of affordable multifamily housing will take advantage of this unique lending product,” said Michael Bodaken, President, National Housing Trust.
“Energy and water efficiency keeps operating costs down, lowers emissions and promotes healthier living spaces for residents, making it critical for affordable housing,” said Judi Kende, vice president and New York market leader, Enterprise Community Partners. “Enterprise is proud to lend our expertise to this handbook in order to help lenders better understand its value, making it easier for building owners to improve sustainability features and pass the benefits on to residents. We thank CPC for its leadership in creating this important resource.”
“The Underwriting Efficiency handbook gives developers the tools to properly leverage energy savings into unique financing options,” said Michael T. Rooney Sr., founding principal of MDG Design and Construction. “By incorporating efficiency into the financing structures of our projects, we are able to produce and preserve high-quality, sustainable, and long-term affordable housing for New York City’s most vulnerable communities.”
A growing body of research shows that approximately 25 percent or more of a building’s energy and water is wasted through inefficiencies that could be corrected through efficiency upgrade programs for multifamily housing.
This could be especially important in helping small building owners control their maintenance and operations expenses, and maintain the affordability of their properties. Throughout New York, small buildings are the backbone of our housing stock. As a haven of natural affordability they are where most low- and moderate-income renters live, often renting well below market. They also tend to be older, operate in thinner margins, and lack access to capital and other resources needed to implement efficient upgrades and retrofits.
Energy and water efficiency upgrades are beneficial for both borrowers and lenders. Borrowers who use mortgage loan proceeds to finance efficiency improvements gain access to low-cost, long-term capital; better loan terms; and marketability and retention. Lenders play an integral role in educating borrowers about the benefits of efficiency, helping identify opportunities, financing upgrades and improvements, and connecting borrowers to resources. Furthermore, by improving the physical and financial health of a building, efficiency helps lenders to mitigate risk and reduce delinquency.
Maintenance and operational costs for multifamily buildings are expensive, and energy and water efficiency improvements can reduce annual energy bills by 15-30 percent and water bills by 15-50 percent. While the long-term financial benefits are important, energy and water efficiency measures also cut down on fossil fuel consumption and shrink carbon footprints. CPC has long been committed to incorporating sustainability and green initiatives in their work in underserved neighborhoods across New York State. With this handbook, CPC and other mortgage lenders have the unique opportunity to promote the financial and environmental benefits of energy-saving improvements to building owners of all sizes. The Underwriting Efficiency handbook can be found on CPC’s website at: http://communityp.com/resources/underwriting-energy-efficency-lender-handbook/