National Real Estate Investor (06/07/16) Anderson, Bendix
Lenders such as Fannie Mae and the U.S. Federal Housing Authority (FHA) have begun to reward less energy-consumptive apartments with lower interest rates and larger loans. Apartment buildings featuring green design elements usually have lower utility bills that can make them more profitable and less risky for lenders. To be eligible for an FHA loan program, an apartment property must be certified to meet one of the recognized sustainable development standards, such as the Leadership in Energy and Environmental Design (LEED) standard. FHA reduces its mortgage insurance premium for such properties, often lowering the overall interest rate by as much as 45 basis points, according to CBRE. Fannie Mae offers reduced interest rates for apartment properties that can meet high green building standards by realizing savings of at least 20 percent in energy or water consumption, and CBRE's Mitchell Kiffe says recent deals show substantial savings, frequently 30 to 40 basis points lower than standard pricing. These various incentives translate into larger loans for energy-efficient apartment properties. Apartment communities that gain green building certifications tend to be new construction or extensive rehabs, and Fannie Mae's Green Rewards program is helping make loans for these new properties. Properties that qualify as affordable housing properties also can obtain additional loan proceeds to cover improvements that save energy and water via Fannie Mae's Green Preservation Plus program.