How Multifamily Buildings Can Achieve Green Building Certification and Reduce Mortgage Costs

How Multifamily Buildings Can Achieve Green Building Certification and Reduce Mortgage Costs

Sustainable building practices have become a cornerstone of real estate investment, not only to reduce environmental impact but also to enhance financial incentives. One such financial benefit is the potential for lower mortgage rates through green building certifications. Programs offered by Fannie Mae and Freddie Mac reward property owners with lower interest rates and better loan terms for investing in energy- and water-efficient buildings. For multifamily property owners, securing a green building certification can lead to significant cost savings while also improving environmental performance.

Understanding the Green Building Certification Program

Fannie Mae’s Green Building Certification program is tailored for newer buildings that have already been constructed with energy and water efficiency in mind. Unlike retrofit-based programs, this certification does not require additional modifications to qualify for financial incentives. Instead, buildings must demonstrate existing sustainable practices through certification programs like ENERGY STAR, LEED, NGBS, and Green Globes.

For example, a recent project Current Partners worked on was an ideal candidate for this program. With an ENERGY STAR score of 85, this building was already operating at a high efficiency level. However, to meet certification requirements, Fannie Mae requires the purchase of Renewable Energy Certificates (RECs) to offset energy consumption and align with program standards. The goal is to bring net energy usage to at least half of the 50th percentile of ENERGY STAR-certified properties. This strategic use of RECs ensures compliance without the need for expensive structural modifications while securing the financial benefits of a reduced mortgage rate.

The Financial Benefits of Green Globes Certification

If you decide to proceed with the Green Globes Certification, Fannie Mae will reduce the rate spread on your loan by 0.10%, translating to an annual savings of approximately $17,500 for the project mentioned. Additionally, the lower interest rate enabled the client to secure an extra $204,000 in loan proceeds.

The total cost of obtaining the Green Globes Certification was $28,255, meaning the investment pays for itself in just 1.6 years. Notably, the $204,000 in additional loan proceeds from Fannie Mae’s Green Pricing more than covered the upfront certification costs.

For the specific mentioned project, here is a breakdown of the $28,255 total cost for Green Globes Certification:

• $19,475 paid to the Green Building Initiative, a Fannie Mae-recognized organization that issues the certification for your property. (Payable upfront at engagement, outside of loan closing.)
• $3,780 for Renewable Energy Certificates (RECs) required to achieve the “net zero” designation.
• $5,000 to the Green Globes consulting company, This firm conducted the initial analysis to confirm the projects eligibility. (Payable at loan closing.)

The Green Rewards Program: Upgrading Older Multifamily Properties

For older buildings that require modifications to enhance energy and water efficiency, Fannie Mae offers the Green Rewards Program. Unlike the Green Building Certification program, Green Rewards focuses on financing property improvements that will yield measurable efficiency gains. Borrowers receive preferential loan terms in exchange for implementing specific upgrades, such as:

• Improved insulation and sealing to reduce heating and cooling costs
• Energy-efficient HVAC systems and LED lighting installations
• Low-flow water fixtures and water recycling systems

How to Qualify for Green Mortgage Discounts

To take advantage of these programs, property owners should follow these key steps:

1. Assess Current Energy & Water Efficiency – Determine whether your building qualifies for the Green Building Certification program or if modifications are needed for the Green Rewards Program.
2. Obtain an ENERGY STAR Score – Buildings with a high ENERGY STAR score have a streamlined path to certification.
3. Purchase Renewable Energy Certificates (RECs) – Purchasing Green-e certified RECs can help meet certification thresholds without physical upgrades.
4. Implement Efficiency Upgrades – For older properties, executing the recommended energy and water-saving improvements will ensure eligibility for Green Rewards financing.
5. Apply for Certification – Obtain an official green building certification such as LEED, ENERGY STAR, NGBS, or Green Globes to unlock lower mortgage rates.

Conclusion

For multifamily property owners, leveraging Fannie Mae and Freddie Mac’s green financing programs provides a win-win opportunity—reducing environmental impact while securing lower mortgage rates. Whether through immediate certification of an efficient building or by implementing strategic upgrades under the Green Rewards Program, property owners can capitalize on these initiatives to drive long-term financial and environmental benefits.

By aligning real estate investments with sustainability goals, multifamily property owners can increase property value, reduce utility expenses, and access lower financing costs, making green building certifications an essential tool for today’s real estate market.

How Current Partners Can Help

With over 15 years of experience supporting green building certifications, Current Partners has helped numerous projects achieve their sustainability goals through RECs. Our team has extensive expertise working with various green building rating systems, including:

– FGBC
– LEED
– Green Globes
– ENERGY STAR NextGen
– Other sustainability certifications

Current Partners has provided RECs to high-rise, commercial, and residential projects, helping them earn valuable certification points while integrating renewable energy solutions in the most cost-effective and efficient way possible.

By partnering with Current Partners, your project can seamlessly incorporate RECs into its sustainability strategy.

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