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Considerations For Affordable Green Multifamily Housing

Founder of Vive Funds, a unique multifamily investment firm specializing in curating high-quality assets for our investors.

As we move into the second half of 2021, it’s important for business leaders to pay attention to affordable green housing to keep up with current trends in the priorities of many Millenials and members of Gen-Z. Not only are these generations incorporating their ideals into their chosen living situations, but they are also bringing a wave of change to various industries, including housing and development.

In my personal experience, renters often enjoy being a part of the green initiative within our multifamily projects. For example, we often run energy-saving contests within the community where utilities are included in rent each month. These contests are won by having the lowest energy and water usage that month. Competitions like these encourage renters to be cognizant of things like turning off lights when they leave a room or shortening their showers, which translates to lower costs for us as well.

Factors To Consider When Incorporating Green Initiatives

While green initiatives can seem like a slam-dunk investment for developers, it is important to keep in mind that not all markets may support these changes at this time. It is important to evaluate processes to ensure costs will be recouped and create positive cash flow in the future.

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Occasionally, going green will increase overall costs long-term, which are then passed on to the consumer. If your market cannot support higher costs to the consumer, I recommend holding off on that project until the market demands it.

Benefits To Housing Developers When Going Green

There are some additional benefits when opting to use green financing. For instance, some mortgage companies offer preferential pricing, free energy and water audits and additional loan proceeds for energy and water efficiency retrofits. Some products may require an approved green certification before lenders will lock your rate. After you have secured green financing, you may be able to gain access to a broader mortgage-backed security investor market.

By incorporating green technology, developers may experience substantial savings in operating costs. Developers should look at the long-term perspective from the viewpoint of the life of the building and staying competitive. Incorporating green technology can be a win-win situation for both developers and investors.

Benefits For The Owners And Renters Of Multifamily Units

When a building is certified as green, the operating costs can go down, and this filters down to the owners and renters. They also get the benefit of knowing that they are reducing the carbon footprint of the unit.

In my experience, when a building has a reputation for being green, it may attract more renters. Owners looking to rent their units may find it easier to rent units out again when one renter shifts out. This can lead to an easier time repaying mortgage dues, and the value of the investment is more likely to stay the same or go up. This can be a big plus point when looking to invest in multifamily units.

Challenges Of Going Green

The upfront cost of upgrading features like lighting may seem daunting when you are thinking in terms of a 100+ unit community, but it’s important to think in terms of long-term gains when it comes to investments. A small investment into energy-efficient systems can translate into a much greater return over the life of the asset.

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Be aware of green projects that do not add value to your investments. Some trends, such as rooftop gardens, are wonderful aesthetically, but it’s important to ensure they do not end up negating other eco-friendly programs, such as water conservation. Plus, these gardens can take a huge amount of consistent effort to allow them to thrive and may not be in line with your value-add plan.

Overall, green commitments in the multifamily space can be very beneficial to both the investor and the renters. While balancing the initial investment in going green and the long-term financial health of the asset may seem daunting, it can be worthwhile to consider jumping in sooner rather than later to capture value.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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