© 2016 Fannie Mae. Trademarks of Fannie Mae. 11.18.2016 1 of 5

Multifamily Market Commentary – November 2016

Green Multifamily Housing Update

In the last 15 years, businesses across all sectors and industries have been engaging in discussions and activities that focus 

on how buildings, cars, and people can use fewer natural resources while maintaining profitability and customer 

satisfaction. In the last five years, green building, sustainability, and energy efficiency principles have become increasingly 

integrated into the multifamily housing sector. A prime driver for developers, owners, operators, and even tenants toward

sustainability is cost reduction, rather than natural resource use reduction; yet sustainability principles achieve both. 

Given the multitude of benefits realized through implementing sustainability measures, even lenders are now offering 

programs to incentivize investment in green property improvement in the multifamily housing sector.

What is Sustainable or Green Multifamily Housing?

There has been strong market demand for sustainability by all industry players in the multifamily housing sector over the 

last several years. Developers and owners are looking for ways to save money when it comes to building and maintaining 

multifamily housing; property managers see sustainability principles as reducing tenant turnover and increasing tenant 

satisfaction with building temperatures and overall quality; and tenants are attracted to the lower costs in their utility bills 

while also living in a healthier home. 

Sustainable or green multifamily housing can be identified when it has at least one of these three features: energy- or 

water-efficient systems and equipment, renewable energy system, or a green building certification. There are other

broader definitions of sustainability or green housing; however these three are the most common today. 

Energy and Water Efficiency features include additional insulation, heat-reflecting roofs, and ENERGY STAR® 

appliances and systems. 

Renewable Energy systems include solar 

power and combined heat/power systems 

that recycle otherwise wasted heat put out 

by systems. Solar and renewable energies 

are incorporated into buildings through the 

installation of rooftops on buildings in an 

effort to use sunlight as a renewable energy 

that transfers into electricity or heat for the

building. The use of these various forms of 

sustainability leads to lower expenses for 

owners and lower rents for tenants. Solar 

and renewable energies also help generate 

revenue as their use authorizes owners to 

gain Solar Renewable Energy Credits 

(SREC). SRECs are tradeable credits that 

represent all the clean energy benefits of 

electricity generated from a solar energy 

system.

Lastly, green building certifications are recognitions through a third-party certification system that uses a consistent, 

transparent rating system of a property’s energy- and water-efficient features, management of waste material, and other 

environmental considerations.
© 2016 Fannie Mae. Trademarks of Fannie Mae. 11.18.2016 2 of 5

How Multifamily Properties are Certified, Scored, or Rated as Green

Sustainable features may not always be visible immediately at a property. One sustainable activity is to set timers on all 

systems, such as garage lighting and water irrigation systems, to minimize or eliminate unnecessary use. Similarly, 

additional insulation in walls and energy-efficient doors and roofs may not be conspicuous. To capture the green features 

and summarize the “amount” or “level” of sustainability embodied by a property, green building certifications have been 

created. There are internationally and nationally recognized certifications, such as Leadership in Energy and 

Environmental Design (LEED) and ENERGY STAR®, to regional and local certifications such as Earthcraft, used mainly 

in the Southeast U.S. and Build It Green used primarily in California. Through these systems, third-party organizations 

verify that a property was designed and constructed with the intention of improving performance through various green 

qualifiers such as energy savings, water efficiency, carbon dioxide emission reductions, etc. 

For example, LEED – which was developed and maintained by the U.S. Green Building Council – certifies across all 

building types including both commercial and residential. LEED grants buildings with four different types of ratings: 

certified (40-49 points), silver (50-59 points), gold (60-79 points), and platinum (80+). The certifications also include five 

categories: sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental 

quality. In parallel, the ENERGY STAR 1-to-100 score and resulting certification was created by the Environmental 

Protection Agency (EPA) and has existed for 15 years. The ENERGY STAR Score and certification for Existing Multifamily 

rating system was launched in 2014 with the assistance of Fannie Mae. In contrast to LEED, the EPA focuses on energy 

use and carbon emissions rather than water efficiency, materials, and resources for example. On a scale of 1 to 100, an 

ENERGY STAR score of 50 indicates the property is performing better than 50 percent of peer buildings in the U.S., and a 

score of 75 or above also grants eligibility to a building to receive an ENERGY STAR certification. 

These rating systems and others are increasingly being applied to multifamily new construction and existing properties. 

Below is a table of the top 10 states ranked by their per capita square footage of LEED certified projects in 2015.

State Listed With Ranking # of Projects Per Capita Sq. Ft.

1. Illinois 161 3.43

2. Maryland 127 3.06

3. Massachusets 112 3.03

4. Washington 101 2.60

5. Colorado 95 2.43

6. Nevada 30 2.42

7. California 618 2.34

8. Texas 237 2.09

9. Virginia 121 1.63

10. Utah 31 1.63

Washington, D.C.* 84 19.30

Top 10 States with the Highest LEED Certifications Issued in 2015 for All Asset Types 

*Note – Since D.C. is not a state, it is not ranked. Source: USGBC
© 2016 Fannie Mae. Trademarks of Fannie Mae. 11.18.2016 3 of 5

Fannie Mae’s Green Products

Fannie Mae’s multifamily housing business currently offers three green financing products for its customers. The Green 

Rewards, Green Building Certification Pricing Break, and Green Preservation Plus products offer customers a myriad of 

options and savings for incorporating green and sustainable features in their properties. Each product is unique in the 

rewards it offers by being dependent on the type of green and sustainable implementation that a property contains. A 

chart highlighting the characteristics of each multifamily green product is below. 
© 2016 Fannie Mae. Trademarks of Fannie Mae. 11.18.2016 4 of 5

The Significance of Green Housing

With all the talk about green and sustainable implementation in commercial real estate, a relevant and easy question to 

consider is why should anyone care about green? From a pure business and economic standpoint, green is important 

because of the money it saves for both property owners and tenants. The implementation of energy- and water-efficient 

features in a property helps owners save money and can qualify the property for various tax breaks and specialty products. 

When owners save money, it reduces the pressure to raise rents while it extends the useful life of the property. Most 

importantly, the biggest significance of green is the positive outcome on the environment. There have been numerous 

studies that have concluded that green multifamily housing properties can decrease overall energy use by 10 percent, 

decrease building operating costs by 11 percent, and also reduce water consumption by 15 percent annually. Furthermore, 

buildings that have been certified to a LEED Gold certificate consume 25 percent less energy, 11 percent less water, and 

have maintenance costs that are 19 percent lower than buildings without the gold certificate. The tenants in LEED Goldcertified buildings are also 27 percent more satisfied than living in other buildings as a result of the sustainable features. 

Below is a map highlighting the annual potential savings from green multifamily building in each state.

The Future of Green

The benefits of green and sustainability in the multifamily sector are plentiful. All industry players benefit from energy 

efficiency, water efficiency, and renewable energies. With more multifamily buildings being rated using ENERGY STAR, 

LEED, and other certifications, the desire to incorporate green and sustainability is higher than ever before. However, 

even though there are numerous benefits, sustainability and green do not come without their challenges. Since both are

relatively new to the multifamily sector, the sector as a whole has not fully absorbed the benefits of green and 

sustainability, especially in older buildings. The future of green and sustainability in multifamily is very bright. With more 

awareness about the benefits of savings and effectiveness, we expect that green will become more widespread in the 

multifamily housing sector.
© 2016 Fannie Mae. Trademarks of Fannie Mae. 11.18.2016 5 of 5

Francisco Nicco-Annan

Economist

Chrissa Pagistas

Director of Multifamily Green Refinancing Business

Karyn Sper

Program Manager, Green Refinancing Business

Multifamily Economics and Market Research

November 2016

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Multifamily Economics and Market Research 

Group (MRG) included in these materials should not be construed as indicating Fannie Mae's business prospects or 

expected results, are based on a number of assumptions, and are subject to change without notice. How this information 

affects Fannie Mae will depend on many factors. Although the MRG bases its opinions, analyses, estimates, forecasts and 

other views on information it considers reliable, it does not guarantee that the information provided in these materials is 

accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these 

views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published 

by the MRG represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie

Mae or its management.