The Department of Housing and Urban Development (HUD) announced a new program that will allow owners of existing affordable rental housing developments to refinance into new mortgages that include funding for energy-efficient upgrades. Under Green Refinance Plus, the Federal Housing Administration (FHA) and Fannie Mae will share the risk on loans to refinance existing rent-restricted projects while allowing owners to borrow additional funds to make the green retrofits.

HUD Secretary Shaun Donovan and Ken Bacon, vice president for multifamily business at Fannie Mae, announced the new program May 31 at Eden Issei Terrace, a 100-unit affordable seniors housing development in Hayward, Calif. Owned by Eden Housing, the nearly 30-year-old property recently underwent a rehab that included the addition of water-saving fixtures and solar panels. Green Refinance Plus is intended to refinance the expiring mortgages of low-income housing tax credit and other affordable projects and to lower annual operating costs by reducing energy consumption. Fannie Mae and HUD anticipate approximately $100 million in initial refinance volume with an average loan amount of $3.5 to $5 million.

FHA will insure up to an additional 4 percent to 5 percent of the loan amount, or an average of approximately $150,000 to $250,000 per loan, to provide additional loan funds to pay for property improvements that save energy and water costs for owners and tenants, such as energy-efficient windows and Energy Star appliances, as well as other needed property renovations. In addition to helping affordable housing owners and residents save money on their utility bills, the green retrofit work will create valuable jobs in many communities, Donovan said.

Beginning in June, Fannie Mae and its participating lenders will begin accepting applications to refinance owners’ debt as well as improve the energy efficiency of their properties. Eden Housing used federal stimulus funds and California solar rebates to make the recent improvements at Eden Issei Terrace. As a result of the work, the property has reduced gas usage by 22 percent, electricity usage by 40 percent, and water consumption by 21 percent, said Executive Director Linda Mandolini.

The nonprofit wanted to look beyond what it could do when building new developments and launched a portfoliowide initiative to green its existing properties, she said. Since its beginnings in 1968, Eden has developed or acquired 85 developments. Donovan said he met a 78-year-old resident of the Hayward property, who described the development as a “paradise.”

HUD and Fannie Mae officials hope the new program will generate the same energy improvements and feelings at other affordable housing communities.