Home Innovation Insights

For multifamily builders, the financial benefits of NGBS Green far outweigh the costs.

Michelle Foster
August 9, 2021

$o Many Rea$on$ to Get NGB$ Green Certified

Some multifamily developers forego seeking green building certification because they believe the costs are too high. It can cost a lot – but not for the reasons they may be thinking. Ultimately, it’s not that the costs are too high to earn the green certification – rather, it is the opportunity cost of leaving tens of thousands of dollars of incentive financing on the table when they don’t have a green certification. As these developers finalize their permanent financing, they realize how green certification would have more than paid for itself (many times over) if only they had added it as a design objective prior to construction.

Over the past few months, the NGBS Green team at Home Innovation Research Labs has fielded at least one call a day from either a developer or lender with a project facing one of two scenarios:

  • Either the building is ready to close on financing and the developer or lender just realized the significant financing incentives available for buildings with a green certification.
  • Or, a developer just recently completed a project and has a potential buyer, but the buyer is only interested in the building if it has earned a green certification.

Unfortunately, after construction is complete and/or upon resale, it’s not an ideal time to seek green building certification. Most buildings are unable to demonstrate compliance at that stage with any green certification program. And, while some may be able to earn a certification at that point, it will always be more costly than if the project had been designed and constructed with an intention to earn green certification. In most circumstances, developers will find the costs to earn NGBS Green certification – including the cost of sticks and bricks for compliance; verification costs; and the certification fee – are far less than the potential financial benefits.

Below are some known financial benefits for multifamily buildings that achieve NGBS Green certification:

  • HUD provides a significant mortgage insurance premium (MIP) reduction for NGBS Green Certified buildings whose owners commit to reporting use through EPA’s Portfolio Manager. The MIP reduction is available for almost all HUD FHA financing and can be used for new construction or moderate to gut renovations.
  • USDA offers multifamily incentives for energy-efficient and green properties.

Consider the following multifamily project that recently earned NGBS Green certification. The developer received a 40bps reduction on the $25 million, 40-year loan. NGBS Green compliance and certification for the project cost $15,000. The developer said air sealing was the costliest upgrade required for compliance – it was a green practice they didn’t typically employ on other similar projects. The developer is now enjoying a $60,000/year benefit from the green financing alonenot to mention the additional savings from lower utility costs in the building’s common areas from increased energy and water efficiency! These numbers are not atypical, so it’s easy to see how frustrating it would be to complete construction without a green certification, then have a lender quote them to you at the financing table. Talk about being green with envy!

Developers new to NGBS Green certification can use the Quick Start Guide for a fast and simple overview of the program and compliance requirements. For a more in-depth summary and helpful resources, the Builder’s Resource Guide is really useful. If you’re interested in exploring NGBS Green for your next construction project, speak with an accredited NGBS Green Verifier as early in the design process as possible. And don’t be discouraged if you don’t see a Verifier located close to your building site – most verifiers who specialize in multifamily building verification often provide cost-effective services nationwide.

If you have a project already under construction or nearing completion, don’t give up hope on getting green certification. Home Innovation offers the option to file an NGBS Green Appeal seeking a waiver of or alternative to the rough inspection. [See the Builder’s Resource Guide for details.] Questions? Get in touch.

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