In the ambitious task of retrofitting existing structures with the latest energy-saving technologies, one critical area is the nation’s aging stock of affordable housing. One of the biggest obstacles to making the needed improvements is the lack of adequate financing.
Recently, two federal authorities joined forces to address both issues. The Federal Housing Administration (FHA) and Fannie Mae—two government powers that are closest to the problem and in the best position to solve it—announced a new program that will allow owners of existing affordable rental housing properties to finance energy-saving upgrades.
The “Green Refinance Plus” program will allow owners to refinance into new mortgages that include the cost for these improvements. FHA and Fannie Mae will share the risk on the refinancing loans while permitting owners to borrow additional funds for the building retrofits.
The program is designed to provide a stable funding source for owners of older, affordable rental properties who need to refinance and find the additional financing to maintain or improve the physical condition of their properties. Typically, those funds are hard to come by.
Green Refinance Plus is intended to achieve the dual objectives of helping to secure a healthy and financially stable supply of affordable rental housing, while also minimizing operating costs by reducing energy consumption.
Fannie Mae and FHA’s parent organization, the U.S. Department of Housing and Urban Development, anticipate approximately $100 million in initial refinance volume with an average loan amount of $3.5 to $5 million. FHA will insure up to an additional 4 to 5 percent of the loan amount, or an average of approximately $150,000 to $250,000 per loan, to provide funds for energy- and water-saving retrofits.
Property owners will be able to select the upgrades that make the most economic sense for their properties.