The FINANCIAL — Deutsche Bank announced the results of a new study that sets the foundation for what could be an unprecedented change in multifamily lending: the ability to incorporate energy savings projections into underwriting practices, according to Deutsche Bank.
The innovative approach would allow for larger loans to multifamily owners, increasing the availability of capital required to unlock billions of dollars of energy savings potential in the nation’s multifamily building stock. The report, “Recognizing the Benefits of Energy Efficiency in Multifamily Underwriting,” is a comprehensive analysis of energy efficiency retrofits of affordable multifamily housing in New York City.
A research team composed of Steven Winter Associates and HR&A Advisors was retained by the Deutsche Bank Americas Foundation with support from Living Cities, a philanthropic collaborative, to aggregate and analyze a data set of 230 affordable multifamily housing projects that had undergone energy efficiency retrofits in New York City. This data set, comprising 21,000 units, is the most comprehensive of its kind.
The study addresses a key bottleneck for private capital flowing to the sector: the lack of confidence in projecting energy savings against which lenders can underwrite loans. The authors found that energy savings across the building portfolio examined were real, and that the fuel savings were more predictable and of greater magnitude than electricity savings. The study also suggests an underwriting methodology that would allow lenders to compare an auditor’s savings projections for a particular building with empirical data from past retrofits, to assess whether the auditor’s projections should be discounted when making an energy efficiency loan.
On the heels of the study’s release, Living Cities announced a grant to the New York City Energy Efficiency Corporation to develop a multifamily mortgage enhancement product that would put the concept into action.