Given New York State’s  and New York City’s  ambitious greenhouse gas emission reduction targets in the coming years, it is clear that most buildings will need to consider implementing substantial energy efficiency retrofits, reaching Passive House and other high-performance standards, to achieve the level of energy savings needed to reach those targets. Traditionally, owners have pursued energy efficiency retrofits to achieve the resulting savings on their utility bills.  Utility bills can make up almost 30 percent of operating expenses for multifamily buildings. If rental income is capped by the market or rent regulations, efficiency presents an opportunity to lower expenses and improve net operating income (NOI). Efficiency improvements can also reduce maintenance costs, lower vacancy losses, and improve resident comfort and safety — all items that will significantly affect the economics and financial health of a building, including its ability to take or a pay for loans.

While investing in energy efficiency retrofits provides significant financial benefits to owners and de-risks loans for potential lenders, leveraging those financial benefits by underwriting to energy savings is still not a widespread practice in the lending community.  As a result, millions of private investment dollars are left off the table. The goal for this Capstone project is to increase the private capital available for lending to high-performance and Passive House projects by enabling underwriting to savings.  This work will coincide with recent NYC legislation, the Climate Mobilization Act, that mandates greenhouse gas emission reductions in buildings over 25,000 square feet and help identify opportunities for private lenders to be a pivotal resource in driving the necessary transformation of the building sector.