About: Stephen is the Managing Director of Energy and Sustainability for Dominion Due Diligence and an accredited NGBS Green MASTER Verifier. He served on the NGBS 2020 Remodel Task group and is a member of the NGBS Green Verifier Advisory Panel, which provides recommendations to Home Innovation on technical and verification issues related to NGBS Green certification.
Dominion Due Diligence (D3)is a full-service environmental, engineering, and energy due diligence firm specializing in affordable housing and healthcare. D3G was one of the original HUD Multifamily Accelerated Process (MAP) third-party consultants, and over its 25-year history the company has helped shape the FHA mortgage insurance industry. The firm has guided many lenders, borrowers, general contractors, design professionals, and equity partners through the due diligence and green financing processes.
D3G often recommends NGBS Green Certification for multifamily projects because the NGBS is a robust and credible green standard, while still offering flexibility to the project team.
I wanted to take an opportunity to build on Michelle’s recent post about NGBS 2020 for Existing Buildings and the recent release of HUD’s new Green Mortgage Insurance Premium (MIP) guidance.
My firm, D3G, has decades of experience helping lenders, owners, and developers navigate HUD’s engineering, environmental, and energy rules, and we have led hundreds of clients through the HUD Green MIP process since the program launched in 2016. In that role we have had the opportunity to see many varieties of multifamily projects, and we believe there are always opportunities to improve the performance of existing buildings.
For building owners and developers unfamiliar with HUD’s Green Mortgage Insurance Premium (MIP) reduction, this program offers a decrease in the MIP from the typical 60-65 basis points (bp) to 25 bp. With a 35-40 bp drop in the MIP, a $20MM refi would save about $80,000 per year over the life of the loan (typically 30-40 years). When owners approach this green financing in a strategic manner, they can secure a phenomenal ROI (paybacks of 2 years or less).
Described in its most basic form, the Green MIP discount requires:
The Green MIP can be used for both new construction and existing buildings with proposed renovations. Over the past few years, we have seen a tremendous increase in the number of existing buildings seeking to earn the Green MIP reduction. For existing buildings, the Green MIP process usually starts by benchmarking the property’s energy usage in ENERGY STAR Portfolio Manager. One of the first hurdles clients face in accomplishing this requirement is securing tenant energy consumption data. To help overcome this hurdle, our company has worked and partners with many utilities across the United States to secure whole-building, aggregated tenant energy consumption data that protects tenant data privacy while still providing the data necessary to benchmark the project’s energy use. Processes can vary significantly based on the utility, so I’d advise that you get started on this step as soon as possible and pursue any direct contacts you have with the utility.
Based on the project’s energy benchmark, D3G’s team of energy professionals conducts a full ASHRAE Level 2 Energy Audit on the building(s) to assess energy and water efficiency renovation options that can improve the benchmark score, as well as help the building comply with the required green building certification requirements. D3G often serves as the NGBS Green Verifier to help the project team assess the most cost-effective path to secure the green building certification.
For those not familiar with NGBS Green remodel path, there are basically four compliance requirements:
Buildings must meet the NGBS Mandatory Practices for the renovated portions of the building, systems, or features. The NGBS typically incudes exemptions from the Mandatory Practices for unaltered portions of the building.
For the energy requirements, projects have the choice to pursue the Performance Path, by achieving at least a 15% reduction in energy consumption, or earning at least 30 points from the Prescriptive options that award points for energy-efficient appliances, lighting, and HVAC systems. For the reduction in water consumption , projects can select the Performance Path by showing a path to a 20% reduction in water usage or earning at least 25 points for the Prescriptive Path with water-efficient appliances, plumbing fixtures, and landscaping. And, finally, projects must earn at least 88 NGBS points from practices such as site considerations (e.g., walkability, native landscaping, etc.), material and design selections (e.g., green materials, recycling, accessibility, etc.), indoor environmental quality (e.g., low-VOC paint, ENERGY STAR exhaust fans, etc.), and green operations and maintenance practices. Whether considering a more significant rehab or a modest refresh of a property, this process can align well with an owner’s development and maintenance plans.
Given D3G’s vast experience, we have a few suggestions to help streamline the process.
Have questions about how to use this process for your project? Feel free to reach out to me.
Thanks for your insights, Stephen! Check back for more “Verifier Takeover” posts in the Home Innovation Insights blog in the coming weeks.