On February 6, the United States Green Building Council announced that Fannie Mae will reward green-built multifamily projects with a lower interest rate. The USGBC’s LEED rating system is one of several recognized certifications, with ENERGY STAR® and Enterprise’s Green Communities Criteria being among the others Fannie Mae considers eligible.
Green-certified multifamily properties will now be granted a 10 basis point reduction in the interest rate of a refinance, acquisition, or supplemental mortgage loan. If the market rate for a multifamily loan is currently 4%, then the new Fannie Mae program will drop that rate to 3.9%, for example. An owner will save $95,000 in interest payments over a 10-year term on any $10 million dollar loan they have which is amortized over 30 years.
United States Green Building Council CEO and founding chair Rick Fedrizzi says that, “This is a great demonstration of leadership from Fannie Mae, and the partnership between the multifamily finance industry and the green building industry.” Fedrizzi emphasizes that, “this is real money and an incentive to not only build green but also for existing buildings to achieve certification. For the first time, Fannie Mae multifamily lenders will be able to reward building owners for their better buildings.”
Fannie Mae’s executive vice president for multifamily Jeffrey Hayward echoes Fedrizzi’s enthusiasm. “Fannie Mae is leading the way in financing by offering new lower interest rates for green building certified multifamily properties,” he says, adding that “We clearly see the value in the triple-bottom line of certified green buildings: financial benefits of lower operating costs for owners and tenants; social benefits of better quality housing for renters; and environmental benefits for everyone.” Fannie Mae’s lenders “are ready with financing solutions to help multifamily owners make their properties more energy and water efficient for today and for the future.”
All loans financed by Fannie Mae under this lower interest rate will be securitized by Green MBS, a move that will grow the total volume of Green Bonds in the market which socially responsible investors can include in their portfolios. As the leading provider of multifamily financing in the U.S., Fannie Mae’s portfolio is valued at over $200 billion.
LEED buildings combine lower utility costs with higher energy and resource conservation metrics. LEED building occupants have more disposable income due to the energy savings, and the eco-conscious designs emphasizing non-toxic materials create healthier living environments. A U.S. Department of Energy report demonstrated that LEED buildings consume an average of 25% less energy, 11% less water, and have 19% lower maintenance costs, with 27% higher occupant satisfaction and 34% lower greenhouse gas emissions.