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Financing Energy Efficiency Retrofits of Multifamily Buildings

Financing Energy Efficiency Retrofits

Apartment buildings are home to more than 17 million households nationwide, yet they remain a significant and mostly untapped opportunity for energy efficiency gains. Energy efficiency upgrades in multifamily buildings could save building owners and residents up to $3.4 billion annually.1 Many cities and states that have embraced energy retrofitting as a job creator and boon to both the environment and economy have yet to address potential savings in multifamily properties, primarily because of obstacles not faced by single-family and commercial properties. The need for multifamily energy retrofits is clear, but two barriers—a lack of information and financing—stand in the way. Before a retrofit program can be effectively marketed, financed, and implemented, there is an information gap to close. First, it is necessary to determine how much retrofit measures cost, how much they save, and whether they are cost-effective. Accurate estimates on the payback period also inform loan underwriting. To ensure that the retrofits result in predicted savings, programs must identify qualified contractors, monitor construction quality and costs, and confirm savings. Even if a program addresses the information gap, financing energy efficiency improvements in the multifamily market remains a challenge. Stakeholders, including both subsidized and unsubsidized building owners, lack access to capital for retrofits. When financing programs are available, most lenders will not consider future energy savings in loan underwriting, thereby limiting the size and sometimes the availability of a loan. Challenges are exacerbated in the subsidized multifamily housing market, as properties face very long refinance and rehabilitation cycles and complicated, multilayered financing structures.