The multifamily housing stock across the country is aging; of the 20.8 million units, over 77 percent were built prior to 2000. As such, these units are likely to be using more energy or water than is reasonably necessary, and the tenants living in them are, on balance, paying more in utility costs than they need to. A typical 100-unit multifamily apartment requires over 7,400,000 kBtu of energy per year and consumes nearly 6,000,000 gallons of water per year, costing tenants roughly $1,150 in energy and $700 in water per unit annually. The opportunity to improve this housing stock by implementing energy and water efficiency improvements is great, with real opportunities for savings for property owners and tenants.
In August 2016, Freddie Mac Multifamily introduced the Green Advantage® suite of energy and water efficiency financing offerings to the marketplace with an objective to lower expenses for workforce housing tenants. The offerings provide financing incentives for borrowers who choose to make energy and water consumption reduction improvements at their properties, and require the borrowers to monitor and report on energy and water consumption over time. The offerings have been extremely well received in the market. From the inception through the end of the third quarter of 2018, nearly 367,000 units across nearly 1,300 properties have been financed with Green Up or Green Up Plus loans for a total of over $36 billion. In addition to the energy and water savings they project to generate, these loans generate valuable data for study.
This paper analyzes a portfolio of loans where borrowers elected to pursue green improvements and provide property level data on improvements made. The intention of this analysis is to fill a gap in the current lack of energy and water efficiency data in the market, strengthen and improve green practices in the broader multifamily market, and provide broad insights into the types of improvements that can cost-effectively reduce both consumption and tenant expenses.
Below are key highlights from our analysis:
Market adoption of Freddie Mac Green Advantage has been strong, with over $36 billion in loans purchased financing nearly 367,000 units.
The properties financed are typically workforce housing, garden-style apartments. They are an average of 33 years old with 89 percent of units being affordable to households making 100 percent of area median income (AMI) or less.
Borrowers have overwhelmingly focused on water-savings improvements. Borrowers met program requirements by pursuing water improvements on 77 percent of loans.
The most common water-saving improvements are showerheads, bathroom aerators, kitchen aerators and toilets.
The most common energy-saving improvements are LED lighting for interior, exterior and common areas and HVAC thermostats.
The projected average cost for improvements was $470 per unit.
Properties are projected to save on average $220 per unit per year.
Water improvements across all loans are projected to save 3.6 billion gallons in water per year, and energy improvements are projected to save 1.4 billion kBtu per year.