3. Financing Green Home
Construction
Avi Jacobson
Senior Sustainable Energy
Coordinator
Image: http://greencanopyhomes.com/our-homes/the-triplets-clara/exterior-2-4
5. • The Commission
• Energy Program
• Sustainable Energy Trust
–Green Home Improvement
Fund
• Solar Update
• Discussion
6. • The Commission
–Founded 1983
–Homeownership,
Affordable Housing, NonProfit Facilities, Beginning
Farmer Rancher… and…
–SUSTAINABLE ENERGY
7. • Sustainable Energy Program
–Authorized 2009
–Energy Efficiency &
Renewable Energy
• Conduit Bond Issues
• Loan Participation/Credit
Enhancement
• Direct Lending
8. • Sustainable Energy Trust (SET)
– Federal Grants & Commission Funds
• Debt Service Reserves
• Loan Participation
• Secondary Loans
– Project Models
•
•
•
•
•
Energy Services Performance Contracts
Energy Service Agreements
Loan Participation/Credit Enhancement
Primary Lender
Developing new programs to test…
9. • SET—Green Home Improvement Fund
– Resource Efficient Home’s Value
•
•
•
•
Lower Operating Costs
Quality
Reduced Mortgage Default Rates
Social/Environmental Benefits
– Obstacles
•
•
•
•
•
Banks don’t finance new/different
No “Green Premium”
Appraisals may not recognize features/value
Education/Familiarity of buyers/realtors
Others?
10. • SET—Green Home
Improvement Fund
– Program Goals
• Increase Supply of Green Homes
– Raise Awareness
– Consumer expectation
• Bring it down market
– Long tail of moderate-average income home
buyers
– Tie in w/our Home Ownership Programs
– Institutional culture of helping
low/moderate income populations
17. • Construction Loans
–Acquire/Rehab/Resell
–New Construction
• Third-Party Verified Efficiency
– Audit in, Audit out
– Improvement relative to
• The house prior to rehab; or
• Code, if new construction
18. Qualifying Project: Assumptions
Income:
Effective Tax Rate:
Mortgage Rate:
Property Tax Rate:
Down Payment:
Payment as % Income:
Target Montly Payment:
Estimated Month Payment
Target Price:
Max Underwriting Price:
$97,000.00
75%
5.50%
0.012
10%
30%
$1,818.75
$1,818.75
$297,662.84
$417,000.00
19. • Rehab Project
– Targeting at least 20% Efficiency
Improvement
– Max incentive at 40% Improvement
• New Construction Project
– Targeting at least 10% Efficiency
Improvement over current code
– Max Incentive at 20% Improvement
• EPS, HERRS, ASHRAE… be consistent in
and out using widely accepted standard
21. Final interest rates on loans issued under the GIF
program are based on a project’s actual performance
meeting energy efficiency and affordability criteria.
More efficient homes will get more advantageous
interest rates, as will more affordable homes. The final
interest rate is the weighted average of the rate that
would be charged under affordability scoring and the
rate that would be charged under energy efficiency
scoring. Affordability criteria are weighted at 70%,
efficiency at 30%.
22. In the affordability category, minimum interest rates will be
available to homes that sell for $297,664.62 or less based on the
assumptions above. That value is subject to change as income
requirements, mortgage rates, etc. change. The minimum rate is
tied to the 10 year US treasury bond rate. That rate increases
linearly according to the following formula: 0.0000001251 x Sale
Price - 0.0100307008. However, if a house sells for $500,000.00 or
more then a rate of 10% will apply. The rate structure is meant to
encourage developers to profitably sell more affordable homes
while not offering windfall profits to those who severely
underestimated market demand for the home being built in the
assessement presented to the Commission.
23. Rehabilitated homes that feature a 40% or greater
improvement in energy efficiency will receive the lowest
rate under the efficiency criteria. Rehabilitation projects
that fail to achieve at least a 20% improvement in the
home’s energy efficiency will be charged a 10% interest
rate. Projects meeting betweena 20% and 40%
improvement in energy efficiency will be charged a rate
calculated as follows: -0.0640* Efficiency Gain + .0528.
24. Newly constructed homes that feature a 20% or greater
improvement in energy efficiency over current code will
receive the lowest rate under the efficiency criteria.
New construction projects that fail to achieve at least a
10% improvement in the home’s energy efficiency will
be charged a 10% interest rate. Projects meeting
betweena 10% and 20% improvement in energy
efficiency will be charged a rate calculated as follows: 0.1280* Efficiency Gain + .0528.
25. Final project rate is calculated by taking the weighted average of the
affordabilty rate based on the average sale price of homes in the project
and the average efficiency performance of homes in the project. If a
project involves both new construction and rehabilitation of houses,
then the rate for rehabilitatio and new construction elements will be
calculated separately and then averaged together.
Given that the final interest rate on the construction loan may not be
known until all of the homes are sold, principal may be paid back first
while a final resolution on interested owed is completed afterwards.
26. Enter Values Under Project Profile and select whether it is a New Contruction or Rehab Project
Assumptions
Project Profile
Income:
$97,000.00
Avg Sale Price:
Effective Tax Rate:
75%
Mortgage Rate:
5.50%
Property Tax Rate:
0.012
Max
40%
20%
Down Payment:
10%
Min
20%
10%
Payment as % Income:
30%
Target Montly Payment:
$1,818.75
Estimated Month Payment
$1,818.75
Avg Efficiency Improvement:
$400,000.00
15.00%
Rehab
New Construction
Target Price: $ 297,662.84
Max Underwriting Price: $ 417,000.00
Lending Rate
slope
x-intercept
Affordability Factors
10 yr Treasury:
2.72%
0.00
(0.01)
FHFA Max Loan: $ 417,000.00
Rate:
-0.010
4.000%
Efficiency Factors
New Contstruction/Rehab:
slope
New
Efficiency Gain:
Rate:
New
15.00% Rehab
3.36%
Weighted Average (70% Affordability, 30% Efficiency)
Rate:
1
3.81%
X-intercept
-0.128
0.0528
0.0528
-0.064
0.0528
0.0528
27. Enter Values Under Project Profile and select whether it is a New Contruction or Rehab Project
Assumptions
Project Profile
Income:
$97,000.00
Avg Sale Price:
Effective Tax Rate:
75%
Mortgage Rate:
5.50%
Property Tax Rate:
0.012
Max
40%
20%
Down Payment:
10%
Min
20%
10%
Payment as % Income:
30%
Target Montly Payment:
$1,818.75
Estimated Month Payment
$1,818.75
Avg Efficiency Improvement:
$320,000.00
22.00%
New
Construction
Rehab
Target Price: $ 297,662.84
Max Underwriting Price: $ 417,000.00
Lending Rate
slope
x-intercept
Affordability Factors
10 yr Treasury:
2.72%
0.00
(0.01)
FHFA Max Loan: $ 417,000.00
Rate:
-0.010
2.999%
Efficiency Factors
New Contstruction/Rehab:
Efficiency Gain:
Rate:
Rehab
slope
New
22.00%Rehab
3.87%
Weighted Average (70% Affordability, 30% Efficiency)
Rate:
1
3.26%
X-intercept
-0.128
0.0528
0.0528
-0.064
0.0528
0.0528
28. • Currently $1 Million Fund for primary
lending
– May increase soon
– Currently have $100,000.00 Available
• Additional $2 Million to provide up to
20% of project capital
• We move fast, but need at least a few
weeks to review
• Contact us early and often
29. • Rates Very Low
– Still experimenting
– Trying to alleviate opportunity
cost of selling lower cost homes
– Understand land and construction
costs somewhat fixed, limits
pricing options
• Looking to operate state wide
• Does this help you?
31. • Solar City Builder Program
– Prepay Lease w/Construction Funds
– Fixed ~$0.10/kwhr for 20 yrs
– $2/watt pre-payment
• How Can Commission Help?
– Dedicated Fund to lend the prepayment?
• Too much hassle?
• Worth it?
– Incentive as part of existing programs?
– Other Ideas?
32. • Disclaimer
–Not endorsing Solar City
–Builder Program Model has
promise
• WSHFC will help model
scale
• Will try to work with anyone
