Boston Community Capital (BCC), a Roxbury-based community development group, is partnering with MassHousing on a pilot program to reduce energy costs by at least 20 percent at between five and 10 affordable apartment communities in the Boston area.
"We know that older apartment buildings could be more energy-efficient, and we very much want to provide loans to make that happen, but it is difficult to underwrite a loan based on projected energy savings," MassHousing executive director Tom Gleason said in a statement. "What was really needed was a third party who was willing to guarantee that energy savings could be achieved, and who could mitigate some of the risk for us."
BCC and MassHousing will jointly identify eligible properties. BCC will then analyze current energy usage at the properties, determine a scope of work and select and oversee contractors. Most importantly, they will provide the up-front funds to pay for the energy improvements.
Management companies will make interest-only payments to BCC at a rate of 6 percent during a two-year period during which BCC will monitor utility usage. Once the property has demonstrated that energy costs have been reduced, MassHousing will advance funds to the property, which will then be used to pay BCC for the costs it incurred to make the upgrades. Management companies will then make amortizing loan payments to MassHousing for a term of up to 20 years at an interest rate not more than 4.5 percent. Loan amounts will range from $50,000 to $500,000, with the possibility for larger loans in some special cases.
"This is an ideal scenario for MassHousing because BCC is taking much of the risk, and our financing only comes in once significant savings have been demonstrated," said MassHousing’s Gleason. "If the savings don’t materialize, BCC is also providing guarantees that provide an additional hedge against our risk."
If a 20 percent energy savings does not materialize after two years, BCC will provide a guarantee equal to 25 percent of the loan. And if after two years the savings are less than half of what they were projected to be, BCC will reduce the principal amount to ensure that the properties are still saving money.
Loan funds can be used for insulation, HVAC system upgrades, energy efficient lighting, system controls and water conservation measures. Expenses related to the upgrades are also eligible, such as building permit costs, architectural and engineering costs, energy audits and legal fees, as well as education for management staff and tenants on how to use and maintain new equipment.
