Bill Morris in Green Ideas on October 7, 2021
If you serve on the board of a small co-op or condo and you’re terrified by the looming expenses – and possible fines – under the city’s Climate Mobilization Act (CMA), take heart. There are groups and individuals scrambling to find ways for co-ops and condos to finance building retrofits without busting their budgets.
One of those individuals is Jeanne Wilcke, vice president of the board in her 22-unit co-op in Manhattan’s Noho neighborhood and a longtime innovator in co-op financing. At a recent roundtable convened by state Assembly member Deborah Glick and attended by U.S. Senate majority leader Chuck Schumer, Wilcke called for the federal government and financial institutions to throw a life-line to smaller co-ops and condos that are struggling to comply with the CMA.
“I told Schumer that the government needs to work with banks and with Fannie Mae and Freddie Mac to come up with new guidelines for financing retrofits that would entail longer-term, low-cost financing and would allow second liens beyond primary mortgages,” Wilcke says of her presentation at the roundtable, which was held on the campus of New York University and attended by about two dozen advocates from Glick’s Lower Manhattan district. “Specifically, Fannie Mae and Freddie Mac need more flexibility on the types of loans they can buy.”
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Her remarks addressed two aspects of the current lending landscape. Property Assessed Clean Energy (PACE) loans, which are available to co-ops but not to condos, allow building owners to finance up to 100% of the cost of energy-saving retrofits through a lien on the property tax bill that runs for the duration of the retrofit’s life, up to 20 years. But there’s a catch. Since most mortgages preclude the borrower from voluntarily placing a lien on the property that’s ahead of the mortgage lender’s position, applicants for PACE loans will need approval from their mortgage lender.
The second hurdle on the lending landscape is that banks are doubly wary of PACE loans because they’re paid off through additional charges on the property tax bill. This may make it difficult for banks to sell the mortgage on the secondary market, either to the Federal National Mortgage Association – better known as Fannie Mae – or to banks that create mortgage bundles for resale, known as Commercial Mortgage Bank Securities (CMBS). To complete the circle, buildings that have Fannie Mae or CMBS mortgage loans will also have a hard time securing PACE financing.
Roughly three-quarters of the buildings that fall under the CMA won’t have to do anything to comply with the first round of carbon emission caps in 2024; but in 2030, roughly three-quarters will fail to comply without some sort of retrofit. Those could range from simple upgrades to major system overhauls. “When you talk about going from natural gas to electrification,” Wilcke says, “you’re talking about much bigger costs. The necessary increase in monthly maintenance would put many smaller co-ops at the risk of financial instability.”
As for her motivation for expressing her views at the roundtable, Wilcke says, “You’ve got to start the conversation somewhere. Banks can’t go on with business as usual. They need to address how they’re going to help finance this once-in-a-lifetime shift on energy efficiency. We’re entering a whole new age of looking at how every aspect of a building adds to its carbon emissions.”
The key, according to Wilcke, is this: “Low-cost, longer-term financing through federal loan guarantees or other mechanisms should be coordinated with financial institutions. This assistance would go a long way toward helping lower- and moderate-income buildings achieve necessary retrofits, reduce carbon emissions and maintain financial stability.”
Wilcke is a volunteer at NYC 2030, a nonprofit dedicated to confronting climate change. The group’s chair, Haym Gross, heartily endorses Wilcke’s remarks at the NYU roundtable. “She did it independently,” he says. “I think her presentation was right on point. She was asking for the right stuff – either dedicated loans for energy efficiency, or reduced obstacles to financing.”
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