Non-profit finances smarter apartment buildings in New York

I would imagine that many mortgage and financing companies are still reluctant to hand out loan money for retrofits, just because they are of a greener, smarter nature or because they subscribe to notions of sustainable living. But the non-profit Community Preservation Corp. (CPC) in New York is doling out up to $1 billion in construction and mortgage loans for multifamily home owners (aka apartment building landlords) looking to complete energy efficiency or sustainability property improvement.

The money is rolled up from a variety of public and private sources ranging from Freddie Mac to Deutsche Bank, HBSC and Morgan Stanley. The funds are being backed by insurance from the State of New York Mortgage Agency.

The idea makes sense in the context of a smart city initiatives: After all, commercial and multiunit dwellings are a big source of greenhouse gas emissions. The CPC program figures it can, realistically, help increase the energy efficiency in buildings it finances by 20 percent. It is aiming to help support the retrofit of up to 15,000 apartments in “the next few years.” Since being founded 35 years ago, CPC has financed more than 136,000 units.

CPC has turned to IBM to help process its loan applications for the program, replacing a spreadsheet based system. It aims to reduce the processing review time from two days to one hour, along the way.

CPC plans to monitor the impact of the building retrofits so that it can be used to help model and inform similar programs in other regions of the country. The non-profit figures it will cost approximately $80,000 to $100,000 per apartment for renovations; anywhere from $5,000 to $50,000 of that amount could be focused on energy retrofits and related improvements. CPC has a model that takes into account the total state of the renovations needed: it will back more extensive “rehabilitation” with a different financing structure than it will fund more basic energy-focused renovations.

Examples would include:

• Right-sizing the heating system
• Installing more efficient heating and water controls
• Upgrading ventilation systems
• Investing in better showerheads or low-flush toilets
• New window, wall or roof installations
• Replacement of certain appliances with Energy Star models

Should be intriguing to see how quickly the fund become subscribed and whether or not other metropolitan areas can duplicate the efforts. Certainly, however, funding mechanisms like these will become more common as the economy begins to right itself. Let’s just hope that the mortgage industry is smarter about smart planet retrofits than it has been over the past decade with other sorts of loans.