December 19, 2014

MEDIA RELEASE: 


New Energy Efficiency Financing Tool for Low-Income Rental Housing Closes in California

 

 First On-Bill Repayment Using Energy Savings Participation Agreement 

 

Contact:

Matt Schwartz, California Housing Partnership, (415) 203-7158 (cell), mschwartz@chpc.net

Sarah Letts, Community Corp. of Santa Monica, (310) 699-4233 (cell), sarah@communitycorp.org

Eva Wingren, Mercy Loan Fund, (202) 495-7403 (office), ewingren@mercyhousing.org 

 

December 19, 2014 | A little more than a year ago, the California Public Utilities Commission authorized the California Housing Partnership Corporation to test the use of On-Bill Repayment (OBR), a financing mechanism where the owner of a property can pay for an energy retrofit out of the savings generated on the utility bill, to help nonprofit low-income rental properties improve their energy efficiency without going through costly refinancings. Today, Sarah Letts, Executive Director of nonprofit housing provider Community Corporation of Santa Monica (CCSM) announced that CCSM has begun energy retrofits on five properties with a total of 170 affordable rental homes. Lett's said, "CCSM is excited to be part of this innovative financing program and to work with the team of talented professionals brought together by the California Housing Partnership. Not only will our buildings be environmentally sustainable, they will be economically sustainable so we can continue to fulfill our mission for decades to come."

 

When completed in 2015, the retrofit is projected to reduce utility consumption by an average of more than 20% across all five developments, saving approximately 8,000 therms, 53,000 kWh and 841,000 gallons of water annually. The annual savings to CCSM is projected to be $27,000. Because the savings were estimated through a performance-based whole-building investment grade energy audit and CCSM has complete control of the quality of construction through its general contractor and the use of the finished product through its maintenance and management staff, CCSM was willing to invest nearly $200,000 of its own working capital through a special affiliate to provide the OBR financing to the five properties. Future OBR financings will not require 100% owner financing.

 

The properties will repay CCSM over 10 years with a projected 5% return on capital. Monthly payments will be collected through a special fee placed on the utility bill by SoCalGas, which transmits all monthly payments of the OBR fee to Mercy Loan Fund acting as servicer, which in turn transmits payments back to CCSM's affiliate on an annual basis. "Mercy Loan Fund is excited to be part of bringing to market this innovative financing tool to provide a boost to affordable housing owners to finance energy improvements," said Julie Gould, President of Mercy Loan Fund. "The true beneficiaries are the residents of these affordable apartments."

 

The key to leveraging the savings through the utility bill via OBR was the California Housing Partnership's development of the Energy Savings Participation Agreement (ESPA), which occurred with the participation of national partner Stewards of Affordable Housing for the Future (SAHF) and attorneys at Manatt, Phelps & Phillips, who spent nearly two years helping the Partnership and SAHF work through complicated legal issues on a pro bono basis. Previous financing of energy improvements in low-income housing have been debt-based and required approvals from existing investors. The ESPA is not debt and requires only normal approvals for new capital improvements. This is important because California nonprofit housing owners have made it clear that the time and cost involved in getting existing investor and lender approvals, when combined with the risk of energy savings not materializing, was too burdensome to be worth pursuing through loans.    

 

The ESPA innovation addresses two issues that have prevented OBR from taking hold in HUD-assisted and Low Income Housing Tax Credit financed properties. First, the ESPA adopts the principal of "bill neutrality" limiting OBR payments on an annual basis to no more than the actual value of utility savings; since both the savings and the payments flow through the utility meter, there is no impact on residual cash flow. Second, the ESPA increases the likelihood of positive return on investment by allowing a five-year extension on repayment in the event that energy savings are lower than expected. 

 

The California Housing Partnership is now working with officials at the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) and private financing sources to further develop the OBR ESPA model so that it can be made available to an additional 5,000 nonprofit owned low-income rental homes, as authorized by the CPUC. 

 

"When combined with an aggressive, coordinated approach to identifying and using available utility incentives and rebates, OBR financing done through the new ESPA structure gives owners of low-income rental housing a much needed means to pay for a significant portion of energy retrofits without the need to refinance the property. We salute the Community Corporation of Santa Monica for the courage to be the first to test this innovative form of financing, and we thank all of the parties who made this test possible, especially Living Cities and the John D. and Catherine T. MacArthur Foundation, which provided critical seed funding and operating support during the last three years," said Matt Schwartz, President and CEO of the California Housing Partnership.

 

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The California Housing Partnership is California's expert on affordable housing financing, advocacy, and policy. The Partnership has helped more than 100 nonprofit and local government housing organizations leverage more than $5 billion to finance the construction and preservation of more than 20,000 affordable rental homes. Learn more at www.chpc.net.

 

The Community Corporation of Santa Monica (CCSM) is a nonprofit organization that has been committed to developing and managing affordable housing since 1982. CCSM currently serves over 4,000 residents in almost 1,700 units of multifamily rental housing. Learn more at www.communitycorp.org.

 

Mercy Loan Fund makes loans for affordable housing developments when conventional financing is not possible or affordable. Since 1985, the organization has made 454 loans in 38 states totaling $245 million, resulting in 19,400 affordable homes for over 52,200 residents.  Learn more at www.mercyloanfund.org.

 

Stewards of Affordable Housing for the Future (SAHF) is a 501(c)(3) network of eleven social enterprise nonprofits. SAHF's members provide high quality, affordable rental homes to over 100,000 households in 49 states, the District of Columbia, Puerto Rico, and the Virgin Islands.  Learn more at www.sahfnet.org.

 

Manatt Phelps and Philips is a national law and consulting firm with offices in San Francisco, Los Angeles, Orange County, Sacramento, New York City, Albany and Washington, DC.  Learn more at www.manatt.com.
For more information about the California Housing Partnership,
please visit our website at www.chpc.net
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