Flexibility = Key to Success for Emerald Cities RENEW Multi-Family Affordable Housing Program
As this year of political and social turmoil draws to a close, Emerald Cities Collaborative’s (ECC) RENEW Seattle Multi-family Program is demonstrating that with flexibility, commitment and alignment of missions, public and private partners can craft programs that lift up low-income communities. Beginning with two affordable multi-family buildings owned by the local nonprofit Plymouth Housing Group, RENEW Seattle will make energy and water efficiency upgrades that cost less than the resulting utility bill savings.
The Washington State Housing Finance Commission (WSHFC) is lending Plymouth the funds for the efficiency measures; and the local public utility, Seattle City Light (SCL), is facilitating on-bill repayment of the financing.
Housing Development Consortium Executive Director Marty Kooistra put the RENEW effort in the context of Seattle’s affordable housing crisis, estimating that at least 20,000 new income- or rent-restricted units are needed in the next decade, representing a tripling of HDC members’ best record to date.
“Coming up with the capital dollars to accomplish this will be a huge undertaking,” Kooistra said. That makes housing preservation strategies – upgrading and maintaining existing affordable units – an importat part of the solution.
“To that end,” he continued, “We must do all we can to immediately stem the loss of existing units while improving operating efficiencies for our members’ buildings.”
Kooistra said the RENEW affordable housing program does that by linking property development and property management functions. Investments in building upgrades meet new energy and water efficiency standards, reducing operating and utility costs while delivering green and healthful housing.
ECC Vice President of Investment Services Kevin Warner agreed. “Nonprofit housing owners like Plymouth Housing are restricted in how much rent they can charge residents,” he noted. “And the operating costs of these aging buildings rises faster than rental income, so reducing their operating costs is ideal. Beyond the environmental benefits of resource conservation, RENEW helps owners upgrade the energy and water systems in multi-family buildings for less money than it presently costs to operate and maintain the them – and that’s a good investment!”
Thanks to its innovative and flexible program design, RENEW Seattle is:
- Enabling Plymouth and other nonprofit affordable housing owners to improve their properties;
- Enabling the WSHFC to deploy some of the $7 million earmarked by its board for energy efficiency; and
- Enabling Seattle City Light to further the reach of its energy efficiency incentives to those most in need of utility bill savings.
Flexibility is Key
What really sets RENEW apart from similar programs, says Warner, is flexibility. Each RENEW project has its own structure, built collaboratively with committed and mission-aligned local stakeholders to ensure that their needs are met.
“We wanted to pilot our Seattle RENEW program with Plymouth Housing because it really wanted to undertake efficiency upgrades but didn’t have the staff capacity or working capital to execute all the necessary steps – and that’s what Emerald Cities and the RENEW technical team do very well. Owner capacity and access to working capital are two barriers that prevent many buildings from being upgraded,” he explained.
“We start with the customer – the affordable housing owner – and match it with the financing that will make the project work,” Warner said. “And we provide the technical and financial development services at no upfront cost to the owner. We say, ‘Let us take a look at your property. We’ll benchmark the energy use and costs, walk through with an engineer, talk to the facilities managers and provide an idea of what is possible.’”
Once all that was done for the Plymouth buildings, he continued, “We took the information to SCL and WSHFC and said, ‘Here is a portfolio of buildings that aren’t being served by your existing programs. Our RENEW program can help SCL reach a population that really needs the savings from energy efficiency, and it can help WSHFC use its dedicated financing to improve and preserve affordable housing with energy and water efficiency upgrades.’”
One Loan, One Bill
Also notable is the aggregation of energy and water improvements into one loan from WSHFC, to be paid back as a line item on Plymouth’s monthly electric bill. SCL not only agreed to on-bill repayment in principal, it also agreed to roll in the water efficiency upgrades, which not all electric utilities allow. SCL will simply collect the monthly loan payments and forward them to WSHFC.
In addition, the customized program structure allows Plymouth to finance needed building upgrades that are not energy-related. WSHFC was willing to go along with that because it served the housing agency’s broad interest of preserving affordable housing, whether through energy efficiency or structural improvements.
Committed Capital, Aligned Capital
Another key to success was the availability of committed capital – funds set aside for energy efficiency – along with aligned capital – money whose mission is to improve nonprofit affordable housing.
“When all parties have both alignment and commitment, the program will work,” says Warner. “And those commonalities reinforce the parties’ determination to solve problems when they arise.”
To date, RENEW Seattle Multi-Family has signed up two owners of 40 affordable buildings to explore energy and water upgrades. The first two, owned by Plymouth and totaling 191 units, have signed construction contracts worth just under $500,000. Next in the pipeline are five buildings owned by Bellwether Housing with a total of 541 units.
EC Seattle Director Steve Gelb hopes to grow RENEW Multi-family to 40 buildings per year in Washington by 2018.
“The launch of the RENEW Program is the culmination of years of collaborative work that realizes our mission of improving our environment with a lens on equity,” he said. “It is critical at this time in Seattle, where we seek to increase the availability of affordable housing, that we have programs like RENEW that help reduce the operating costs of affordable housing through energy and water efficiency. The RENEW Program's portfolio approach and scalable model promise to reach deep into the current affordable building stock in the Puget Sound Region.”
At the RENEW launch event, Plymouth Housing Group Deputy Director Betsy Hunter praised Gelb and the RENEW team for “working relentlessly to develop a program that will work for Plymouth and other nonprofit housing owners to save on operating costs and raise our awareness about energy use to make the city greener.”
She continued, “Steve has been navigating the world of nonprofits and the complex system of how our projects are funded, working with our public and private funders to make the purchase and implementation of energy efforts seamless. We should recoup our investments within just a few years, and we will enjoy the energy benefits much longer than that.
“That’s the right kind of investment for nonprofits, which pledge to operate our properties for many decades,” she noted. “The savings will directly impact our bottom line, and we can think of lots of other things to spend our money on!”
Warner summed up RENEW’s approach as one of “using operating cost savings generated by energy and water retrofits to facilitate capital investments in buildings – whether municipal, as in our Seven Hills project in Cuyahoga County, Ohio, educational or affordable residential.
“We have an approachable, transparent and customer-focused business model,” he said. “With its tri-fold value proposition of environment, economy and equity, RENEW is a unique and compelling business model – and that’s why it works.”
Warner concluded, “It’s also why RENEW has the potential to be taken to scale nationally with the right partners. Every market, every city, every state has the three critical components: utilities, utility customers with unrealized retrofit projects and aligned investors. Our job is to bring them together to collaborate on transactions that generate benefits for all stakeholders.”