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Apr 22, 2022

Making Sustainability Improvements on your Apartment Community? Access Finance Incentives While Reducing Impacts on the Earth

Apartment property retrofits aimed at making communities environmentally friendly are on the rise. Not only are these improvements more affordable to complete than they were even just a decade ago, but they may help attract tenants. A growing number of renters today are seeking units and communities with a reduced environmental footprint. The good news for borrowers purchasing or refinancing sustainable communities is the agencies providing financing for existing apartment communities are offering valuable incentives.

Demand for Earth-friendly Rentals

Research points to the marketability of sustainable apartments. Eighty percent of apartment residents believe that living in green multifamily communities is good for their health and 61% of renters say they are willing to pay more in monthly rent to live in an eco-friendly apartment. Notably, younger generations of renters are increasingly concerned about the environment. Gen Z and Millennials are two of the biggest cohorts supporting sustainability today.[i]

Climate Change Awareness

Climate change likely plays a big role in the sustainability concerns of renters. The issue is now widely discussed across the news, political stage, in entertainment and in schools, leading to a greater awareness among consumers about its effects. In the scientific community, most scientists agree the phenomenon is progressing at an alarming speed. Greenhouse emissions originating from human activity are now higher than ever and the resulting warming of the earth has led to numerous catastrophic effects, including increased frequency and intensity of hurricanes, tsunamis, droughts and fires, as well as ocean acidification and a significant decline in non-human species.[ii] 

The primary cause of human-induced greenhouse gas emissions is the burning of fossil fuels, specifically for electricity, heat and transportation. Real estate plays a leading role in this. Buildings use about 40% of energy produced in the U.S. and are responsible for approximately 30% of the nation’s carbon dioxide emissions[iii]. Reducing that energy consumption, and the emissions resulting from it, is a priority.

Available Agency Finance Solutions

Apartment owners that reduce the environmental impacts of their properties benefit from lower energy bills, increased marketability and helping protect the earth. Loans for sustainable apartment properties are available at lower-than-market rates through both Freddie Mac and Fannie Mae and can help offset improvement costs. Each agency offers a package of incentives designed for owners whose properties demonstrate sustainability metrics and/or certifications.

Freddie Mac’s Multifamily Green Advantage® program is ideal for owners reducing the consumption of energy and water by 30% or more within workforce apartment communities. Two paths to finance are offered, Green Up® and Green Up Plus®, providing qualifying borrowers with better loan pricing and increased funding for the enhancements.Borrowers must complete a Green Assessment® property analysis demonstrating how property enhancements will enable energy and water savings. Freddie Mac reimburses up to $4,000 for the assessment cost. Borrowers must engage a third-party data collection firm. Another plus? Tenants of qualifying properties save $114 per year in utility bills, on average.

Fannie Mae’s green loan products are also available to borrowers driving energy and water efficiencies within their properties. Program benefits for affordable apartment owners include preferential loan pricing, additional loan proceeds to cover the cost of energy and water retrofits and a free Energy and Water Audit Report. Borrowers with green certified properties, or who are investing in Active Design and/or Resident Services, may also qualify for a lower rate.

Common Sustainability Enhancements

Freddie Mac reports that showerheads and kitchen and bath aerators are top selections because of their low cost and dual energy- and water-saving potential. The agency notes that the top four energy improvements include exterior and common area LED lighting, unit interior LED lighting, HVAC thermostats and insulation.[iv] Fannie Mae provides borrowers with Green Rewards Guidance[v], and its program’s High Performance Building Report offers suggestions for energy and water efficiency measures that are tailored to meet the needs of the property in question.

About the Author

Ed Hussey is Head of Agency Lending for Sabal Capital Partners, LLC, a wholly-owned subsidiary of Regions Bank, and oversees production across the nationwide lender’s Freddie Mac and Fannie Mae loan programs. Visit www.Sabal.com.


[i] ApartmentData.com, Multifamily Data Research: Renters Want Sustainability, February 5, 2021, https://apartmentdata.com/blog/multifamily-data-research-sustainability/#:~:text=About%2080%25%20of%20apartment%20residents,is%20good%20for%20their%20health.&text=In%20fact%2C%2061%25%20of%20renters,the%20desire%20for%20sustainable%20apartments.

[ii] Intergovernmental Panel on Climate Change (IPCC), Climate Change 2014 Synthesis Report Summary for Policymakers, https://www.ipcc.ch/site/assets/uploads/2018/02/AR5_SYR_FINAL_SPM.pdf

[iii] Lee Paddock, associate dean for environmental law studies, and Caitlin McCoy, associate professor of law and environmental program fellow, George Washington University Law School, Deep Decarbonization of New Buildings Report, 2018

[iv] Freddie Mac Multifamily, Green Improvements in Workforce Housing, December 2021, https://mf.freddiemac.com/docs/2021_freddie_mac_multifamily_duty_to_serve_green_report.pdf

[v] Fannie Mae, Green Rewards Guidance, https://multifamily.fanniemae.com/media/12436/display