Owners of affordable rental apartments have a financial incentive to capture energy and water savings under the terms of Fannie Mae’s Green Refinance Plus program, created in partnership with the U.S. Department of Housing and Urban Development. Now they also have a model of success.
In April, City Gardens Apartments in Santa Ana, CA, became the first property to refinance under the Green Refinance Plus program. City Gardens is a vital source of affordable housing in the area, with rents generally 22 percent below market average. LINC Housing Corp., the owner of City Gardens, is a nonprofit that operates 59 affordable housing communities in California. LINC sought to refinance its current mortgage by using Green Refinance Plus to provide additional funds for updating the 274-unit complex and to help rein in energy and water costs.
Since closing the $19.4 million loan, which included $1.5 million for improvements, LINC Housing has been replacing older, less efficient gas-fired furnaces with ENERGY STAR-rated furnaces and is installing low-flow plumbing fixtures, energy efficient lighting, and a passive solar hot water heating system. Landscaping irrigated with reused grey water will provide green space for relief from the Southern California heat and lower water bills.
The improvements are expected to reduce operating costs for the owner, lower utility bills for tenants, and contribute to a healthier living environment, while extending the useful life of the property.
Affordable multifamily properties are aging all across the country at a time when demand is growing for apartments that are affordable to low- and moderate-income families. Typically, owners refinance such properties every 10-15 years, but they may find it difficult to arrange the additional financing necessary to make needed property improvements.
To encourage owners to both preserve affordable properties and to reduce the environmental impact of their properties, Fannie Mae joined forces with HUD to launch Green Refinance Plus, a variation on our other risk-sharing products. The loan product offers flexible underwriting to allow borrowers to refinance rent-restricted properties while realizing additional funds available to make energy- and water-efficient improvements.
Green Refinance Plus is one component of Fannie Mae’s Multifamily Green Initiative, our comprehensive effort to improve the energy and water efficiency and sustainability of the multifamily properties we finance. With such improvements, properties are less costly to operate, more affordable to tenants, and less vulnerable to fluctuations in energy and water costs.
Green Refinance Plus is available for refinance and new acquisitions of multifamily properties through Fannie Mae's network of Delegated Underwriting and Servicing (DUS®) and Special Affordable lenders. More information about the loan product and Fannie Mae’s Multifamily Green Initiative is available at www.fanniemaegreeninitiative.com.
Multifamily Green Initiative Program Manager
August 28, 2012
The views expressed in these articles reflect the personal views of the authors, and do not necessarily reflect the views or policies of any other person, including Fannie Mae or its Conservator. Any figures or estimates included in an article are solely the responsibility of the author.