With the passing of New York State’s historic Climate Leadership and Community Protection Act (CLCPA) and New York City’s Climate Mobilization Act, buildings will need to consider implementing substantial energy efficiency retrofits in order to reach ambitious greenhouse gas emission reduction targets. This Capstone studied how to unlock private capital available for lending to high-performance and Passive House projects through underwriting to savings. The team provided recommendations based on the investigation of the barriers to underwriting to energy savings for high-performance projects; policy or technological solutions; and innovative financial structures or different lending practices.

Traditionally, property owners have pursued energy efficiency retrofits to achieve the resulting savings on their utility bills – with utility bills making up almost 30% of operating expenses in multifamily buildings. If rental income is capped by the market or rent regulations like in affordable housing, efficiency upgrades are an opportunity for building owners to lower expenses and improve net operating income. Efficient buildings also provide a host of long-term benefits for investors, tenants, and the environment not limited to decreased fossil fuel consumption and smaller carbon footprints.

However, underwriting loans to the cost-savings associated with energy efficiency retrofits is still not a widespread practice in the lending community. Given the influence a lender can have on the economics and conditions of building stock, the lending industry has a unique opportunity to promote the incorporation of energy saving measures into the traditional financing mechanisms for high-performance projects.