Meeting New York City’s Sustainability

Goals through Lending + Utility Incentives

June 10, 2019

HPD OVERVIEW

HPD is the largest municipal affordable housing agency in the nation and our

mission is threefold.

2. To improve and expand our efforts to preserve the quality and stability

of all our housing stock.

HPD both responds to complaints regarding housing conditions (such as

heat or hot water issues) and proactively identifies troubled residential

properties for prevention efforts. Between 2002 and 2013, inspectors made

5.4 million total visits in response to complaints.

3. To use our investments in housing, in code enforcement, and in asset

management strategically to help reinvigorate neighborhoods, while

ensuring the stability and affordability of the neighborhoods’ housing.

In addition to administering numerous affordable housing development

programs, HPD administers the country’s fifth largest Section 8 Housing

Choice Voucher program to provide a rental subsidy to over 32,000 low

income households.

1. To implement Mayor de Blasio’s plan to preserve or develop 300,000

units of affordable housing by 2024.

In 2014, the City launched Housing New York: A Five-Borough, Ten-Year

Plan, the most extensive affordable housing development plan in the

country.

HPD PRESERVATION FINANCE

HPD’s Preservation financing programs typically combine direct subsidy with tax

exemptions/abatements to help with the acquisition, construction / rehabilitation,

refinancing, and / or operations of buildings to ensure long term financial viability

and affordability. In exchange for HPD’s financing, owners enter into long-term

regulatory agreement.

Loans

• Lien Priority: Senior or subordinate loans per terms of HPD programs

• Source: City Capital / City Council Discretionary Funds (Reso A)

• Repayment Terms: Self-amortizing, partially amortizing, balloon, interest only

• Extension or modification of existing City loans

• HDC subsidy and/or bond financing

Regulatory Agreement

• Executed at closing

• Runs with the property (i.e., unaffected by sale)

• Describes requirements for affordability, including term, mix, rent limits, income

limits, and compliance

SUSTAINABILITY IN PRESERVATION FINANCE

Assessment

• All projects receiving HPD subsidy or tax exemption are required to obtain an

Integrated Physical Needs Assessment (IPNA; combines physical needs

assessment and energy audit)

• IPNA used by HPD, HDC, HCR

Energy Efficient Scopes of Work

• Low-cost energy efficiency and water conservation measures (i.e. LED

lighting, low-flow fixtures, efficient appliances)

• On-Site Renewable Energy: Solar PV and Thermal

• Oil to gas or electricity conversion

• High performance HVAC and/or DHW systems

• Insulation (pipe and roof)

IPNA: Scope and Preliminary Cost Estimates

• Efficiency assessors are urged to include both low-cost/no-cost improvements and deeper energy improvements, as well as identify at least 30% in energy savings

• Buildings with an existing EUI below 50 kBtu/SF/year are exempt from the 30% energy savings goal

Potential

Health

Benefit

Impact

SITE WORK Critical /

Short TermUnit Type Qty

Cost Per

Unit

Total

Cost

Incr. Cost

Per Unit

Total

EEWC Incr.

Cost

Cost Per

Unit

Total

EEWC-Only

Cost

TOTAL

COST SIR

Simple

Payback

Projected

Annual Energy

Savings

(kBTU)

Projected

Annual Cost

Savings

($)

High/

Med/

Low/ NA

-$ -$ -$ -$

-$ -$ -$ -$

-$ -$ -$ -$

-$ -$ -$ -$

-$ -$ -$ -$

-$ -$ -$ -$ Total - Site Work -$ -$ -$ -$ 0 -$

BUILDING ENVELOPECritical /

Short TermUnit Type Qty

Cost Per

Unit

Total

Cost

Incr. Cost

Per Unit

Total

EEWC Incr.

Cost

Cost Per

Unit

Total

EEWC-Only

Cost

TOTAL

COST SIR

Simple

Payback

Projected

Annual Energy

Savings

(kBTU)

Projected

Annual Cost

Savings

($)

High/

Med/

Low/ NA

-$ -$ -$

-$

-$

-$ -$ -$ -$

Total - Building Envelope -$ -$ -$ -$ 0 -$

INTERIOR COMMON SPACECritical /

Short TermUnit Type Qty

Cost Per

Unit

Total

Cost

Incr. Cost

Per Unit

Total

EEWC Incr.

Cost

Cost Per

Unit

Total

EEWC-Only

Cost

TOTAL

COST SIR

Simple

Payback

Projected

Annual Energy

Savings

(kBTU)

Projected

Annual Cost

Savings

($)

High/

Med/

Low/ NA

-$ -$ -$

-$ -$ -$

-$ -$ -$

-$ -$ -$

-$ -$ -$

-$ -$ -$ Total - Interior Common Space -$ -$ -$ -$ 0 -$

Capital EEWC Incremental EEWC-Only / Health EEWC Calculations

SUSTAINABILITY IN PRESERVATION FINANCE

Financing

• Green Housing Preservation Program:

• Small-to-mid-size buildings (3-50 units)

• 0% interest, forgivable financing up to threshold amount dependent on building

size for EEWC

• Low-interest, repayable financing (up to 3%) for rehab work

• Access to pre-development loan and technical assistance services

• All Programs:

• Low-interest financing for EEWC and rehab work

• HPD Sole Lender: Underwrite to 50% of savings based on IPNA projections

• HPD Participation Lender: Underwrite to 20-50% of savings based on IPNA

projections and modeling

• Integrate utility incentives

Evaluation

Benchmarking

• Since 2016, all buildings receiving HPD financing required to benchmark during loan

term

HPD SUSTAINABILITY INITIATIVE: LEVERAGING UTILITY INCENTIVES

Reduce HPD subsidy by working with NYSERDA, National Grid and Con Edison

Challenges Strategies

Determining Incentives Calculator determines which and how much of an

incentive a project qualifies for based on the scope

of work for the project

Most incentives are only available to owners after a

system is installed

Bridge Loan issued to cover items that will only be

reimbursed by the utility companies after work is

complete

Incentives only available for calendar year Worked with Con Edison to earmark incentives for

project construction period

Solar incentives are only available to for-profits Worked with NYSERDA to create an additional

incentive for affordable housing projects

Assessing for solar capacity Partnership with Here Comes Solar (part of Solar

One) to conduct free on-site assessment and

provide TA services (provide guidance to owners

on what to look for in a solar contractor and

manage bidding process)

IPNA includes light solar assessment and

calculator to determine financial cost of solar

project

GREEN HOUSING PRESERVATION PROGRAM (GHPP)

Program and Policy Objectives

• Launched in May 2015, the Program stems from two Mayoral commitments: One

City: Built to Last climate plan and the Housing New York plan

• Reduce barriers to entry for small- to mid-size building owners

• Assist small property owners control operating expenses

• Projects required to reduce energy usage by at least 20%

• All participating lenders must underwrite 50% of savings

• Work with Mayor’s Office of Sustainability on dedicated outreach program to

develop pipeline for GHPP

GHPP CASE STUDY

RB HARMAN HDFC

Location: Brooklyn

# of Units: 18

• 2012: Received $332k HPD loan

for mod rehab + Weatherization

Assistance Program (WAP)

funding for EEWC measures

HPD SCOPE

Asbestos abatement

Masonry work

Door replacement

Window replacement

Roof replacement and insulation (on one

building)

WAP SCOPE

Hot water + boiler pipe insulation

Low-flow fixtures

New boiler +TRVs

CFL lighting

Weatherstripping

• 2014: Construction Complete

GHPP CASE STUDY

PROJECTED VS ACTUAL UTILITY EXPENSES

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

2016 2017 2018

Projected Actual

HEATING EXPENSES (ON AVERAGE, 68% DECREASE BETWEEN 2016-2018)

2016 2017 2018

Projected $57,827 $59,562 $61,349

Actual $22,300 $17,202 $17,859

ELECTRICITY EXPENSES (ON AVERAGE, 31% DECREASE BETWEEN 2016-2018)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2016 2017 2018

Projected Actual

2016 2017 2018

Projected $3,786 $3,900 $4,017

Actual $2,402 $2,363 $3,309

GHPP CASE STUDY

2019:• HPD will lend $1.1M for mod rehab + more EEWC measures• A private lender will lend $434k to cover much needed deferred maintenance (i.e.

bathroom upgrades, floor re-tiling, painting)• 20% energy savings modelled• Building projected to save $6,725 in annual utility expenses

73 Linden 251 Harman Projected Annual Cost Savings

% of Total (Annual Cost Savings)

Capital Items

Roof Replacement + Insulation X $277 4.1%

Masonry re-pointing X

Condensing DHW X X $2,453 36.5%

Bathroom Upgrade X X

EEWC Items

Solar PV X X $2,243 33.4%

Low-flow fixtures X X $24 .35%

Pipe insulation X $22 .33%

Weatherstripping doors X X $241 3.6%

Air sealing in basement X X $1,034 15.38%

Clean and tune boilers X X $431 6.4%

Total $6,725 100%

GHPP CASE STUDY

Underwriting Projected Savings

2019 CPC Standard

Underwriting

Modified Underwriting –Incorporating Savings

INCOME

Total Gross Income $268,518 $268,518

Vacancy Loss (8%) -$21,481 -$21,481

Effective Gross Income $247,037 $247,037

EXPENSES

Water & Sewer $16,900 $16,900

Heat $18,200 $14,370

Gas & Electric $7,800 $2,148

Energy Expenses Subtotal $42,900 $33,419

Per Unit $2,383 $1,856

% of EGI 17.36% 13.5%

Other Expenses $142,768 $142,768

TOTAL ANNUAL PROJECT EXPENSES

$185,688 $176,187

NOI $61,349 $70,850

21% below standards

72% below standards

GHPP CASE STUDY

Mortgage Sizing

Private Loan (Leviticus Fund)

Not UW to Savings

Private Loan (Leviticus Fund)

UW to Savings

NOI $61,349 $70,850

Loan Term 10 years 10 years

Amortization Term 10 years 10 years

Repayment Term Self-amortizing Self-amortizing

Interest Rate 5.75% 5.75%

Max. Loan Amount $404,993 $434,392

DSCR 1.20 1.24

Income to Expense 1.08 1.05

• Reduce HPD subsidy by $30k• Able to leverage more private financing to pay for deferred maintenance HPD is

unable to use funds towards