Making a Measurable Impact
Our Impact Bonds provide continuous support for underserved communities — throughout all economic cycles. As it becomes harder to find quality, affordable housing, the capital we provide is essential for ensuring liquidity in the market and funding these much-needed properties.
Since 2019, we’ve issued over $15 billion in Impact Bonds. This means we’ve helped reduce energy and water consumption, while lowering costs for tenants and borrowers. We’ve provided funding to support underserved groups considered to be the most vulnerable. We’ve contributed to creating sustainable communities that support economic mobility and growth for its residents. And we are just getting started.
In our 2022 Impact Bonds report, I’m glad to share we’ve begun including borrower savings realized from energy- and/or water-efficiency improvements financed through Green Bonds. We understand the increased demand for disclosure of impact investments, and this is our first step to providing it.
Our Green Bond reporting includes quantification of the property’s energy and water consumption reduction and cost savings through a process called measurement and verification (M&V). To date, 22 Green Up®/Green Up Plus® loans backing Green Bonds have received either an energy, water or combined M&V analysis.
Out of 15 properties receiving an energy M&V analysis, 11 properties realized positive savings compared with reported baseline utility usage prior to improvements. The average energy-efficiency improvement across those 11 properties was 15.9%.
Out of 19 properties receiving a water M&V analysis, 12 properties realized positive savings compared with reported baseline utility usage prior to improvements. The average water-efficiency improvement across those 12 properties was 18.2%.
Multifamily property owners have limited control over occupancy density and tenant behavior. As the needs of tenants change so do their energy and water usage. With this data ever changing, properties might not realize savings that match the projected savings. However, projected findings can offer a clearer picture of the impact without the added variable of changing energy or water consumption to paint a picture of how we are having a measurable impact on tenants and borrowers.
This is only the beginning for providing transparency. As more properties complete their improvements and report the minimum six months’ utility data, they will be eligible for an M&V analysis. We aim to offer the best possible data to our investors and look forward to continuing our data collection efforts to fully understand the extent of our impacts.
Redefining Social Impact
Social impact is at the core of what we do at Freddie Mac. We’re constantly thinking of ways to confront persistent housing challenges through innovations that help expand access to housing. Our Social Bonds seek to push boundaries and redefine what social impact means.
One notable example from 2022 was a $92.8 million Social Bonds transaction (P013) financing four affordable seniors housing properties in Arizona. We were recently awarded the 2023 Social Bond of the Year — Agency award by Environmental Finance for this transaction.
The proceeds from this transaction helped provide affordable housing for seniors with fixed incomes who are low to middle income. In addition to more than half the units being affordable to seniors with incomes at or below 50% of area median income (AMI), all four properties were compliant with regulatory agreements. Regulatory agreements play an important role in preserving affordability, which is especially critical for aging populations. Many seniors need the extra care provided by a seniors housing facility and cannot meet the costs, which are frequently prohibitive.
When screening collateral for Freddie Mac’s Social Bonds, we look for properties that preserve affordability. We hope that by raising our social impact standards with this Social Bonds transaction, it will serve as motivation and inspiration for the market to redefine social impact.
Growing Intersection of Social and Environmental Impacts
Our Sustainability Bonds highlight the importance of not only having a social impact on communities but also having a positive effect on our environment. As we issue Sustainability Bonds, we look for properties that foster both of those important pillars.
In 2022, one of our Sustainability Bonds helped finance The Renaissance at West River in Tampa, Florida. The property has 100% of the units affordable to tenants making at or less than 60% AMI. Further, the property reserves units for the aging population, persons with disabilities and elderly persons experiencing homelessness. The Renaissance at West River installed energy- and water-efficiency improvements at the property, helping lower utility costs for its residents.
Efficient and sustainable housing is important to preserving affordable communities. Through transactions like these, we hope to emphasize the importance of the intersection between social and environmental impacts.
More Work to be Done
I’m proud of the progress so far — but there’s more work to be done to tackle tightening supply and rising costs. Our Impact Bonds platform is a great execution for investors to provide support for targeted environmental and social causes. We continue to evaluate our programs, market challenges and what we can do as a company to have the best possible impact. Together, we can make a measurable impact on tenants’ lives.
Seniors Housing Underwriting Adapts to Market Shifts
Kathy Ryser, Senior Underwriting Director
Enhancing Our Focus on Property Due Diligence
William Buskirk, Senior Vice President, Multifamily Chief Operating Officer